Littlewoods Retail Ltd and Others v Her Majesty’s Commissioners of Revenue and Customs.

• Jurisdiction: European Union
• Celex Number: 62010CJ0591
• ECLI: ECLI:EU:C:2012:478
• Date: 19 July 2012
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Docket Number: C‑591/10

JUDGMENT OF THE COURT (Grand Chamber)

19 July 2012 (*1 )

‛Second and Sixth VAT Directives — Input tax — Refund of excess — Payment of interest — Procedures’

In Case C-591/10,

REFERENCE for a preliminary ruling under Article 267 TFEU from the High Court of Justice of England and Wales, Chancery Division (United Kingdom), made by decision of 25 November 2010, received at the Court on 14 December 2010, in the proceedings

Littlewoods Retail Ltd and Others

v

Her Majesty’s Commissioners for Revenue and Customs,

THE COURT (Grand Chamber),

composed of V. Skouris, President, A. Tizzano, J.N. Cunha Rodrigues, K. Lenaerts, J.-C. Bonichot and A. Prechal, Presidents of Chambers, R. Silva de Lapuerta, K. Schiemann, E. Juhász, G. Arestis, A. Borg Barthet (Rapporteur), D. Šváby and M. Berger, Judges,

Advocate General: V. Trstenjak,

Registrar: A. Impellizzeri, Administrator,

having regard to the written procedure and further to the hearing on 22 November 2011,

after considering the observations submitted on behalf of:

— Littlewoods Retail Ltd and others, by D. Anderson and L. Rabinowitz QC, and S. Elliott, Barrister,

— the United Kingdom Government, by C. Murrell, acting as Agent, and D. Wyatt QC,

— the German Government, by T. Henze, K. Petersen and J. Möller, acting as Agents,

— the French Government, by G. de Bergues and N. Rouam, acting as Agents,

— the Cypriot Government, by K. Lykourgos and E. Symeonidou, acting as Agents,

— the Netherlands Government, by C. Wissels, acting as Agent,

— the Finnish Government, by H. Leppo, acting as Agent,

— the European Commission, by R. Lyal and C. Soulay, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 12 January 2012,

gives the following

Judgment

1 The reference for a preliminary ruling concerns the interpretation of EU law on compensation for financial loss suffered by a taxpayer through overpayment of value added tax (‘VAT’).

2 The reference has been made in the context of a dispute between the companies in the Littlewoods Group (‘Littlewoods’) and Her Majesty’s Commissioners for Revenue and Customs (‘the Commissioners’) concerning procedures for compensating Littlewoods for loss suffered through an overpayment of VAT.

Legal context

EU law

3 Article 8 of and Annex A, point 13, to Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967(I), p. 16), define the taxable amount for value added tax as regards, inter alia, deliveries and supplies of services.

4 Article 11C(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1; ‘the Sixth Directive’) provides: ‘In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States. However, in the case of total or partial non-payment, Member States may derogate from this rule.’

United Kingdom law

5 The Value Added Tax Act 1994 (‘the VATA 1994’) contains national legislative provisions relating to the administration, collection and enforcement of VAT and concerning the appeals which may be brought before a specialist tribunal. That act allows the Commissioners to recover VAT due but not paid by taxpayers, and allows taxpayers to recover sums paid by way of VAT when they were not due. It also contains provisions concerning the payment of interest on sums owed by taxpayers to the Commissioners and on sums owed by the latter to taxpayers.

6 Section 80 of the VATA 1994 provides: ‘Credit for, or repayment of, overstated or overpaid VAT (l) Where a person - (a) has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and (b) in doing so, has brought into account as output tax an amount that was not output tax due, the Commissioners shall be liable to credit the person with that amount ... (lB) Where a person has for a prescribed accounting period (whenever ended) paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as a result of - (a) an amount that was not output tax due being brought into account as output tax, ... ... the Commissioners shall be liable to repay to that person the amount so paid. (2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose. (2A) Where - (a) as a result of a claim under this section by virtue of subsection (l) or (lA) above an amount falls to be credited to a person, and (b) after setting any sums against it under or by virtue of this Act, some or all of that amount remains to his credit, the Commissioners shall be liable to pay (or repay) to him so much of that amount as so remains. ... (7) Except as provided by this section, the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them.’

7 Where a claim under section 80 of the VATA 1994 is successful, the taxable person may also be entitled to interest on the sum overpaid calculated in accordance with the provisions of section 78 of the VATA 1994. That section provides: ‘Interest in certain cases of official error (1) Where, due to an error on the part of the Commissioners, a person has - (a) accounted to them for an amount by way of output tax which was not output tax due from him and, as a result, they are liable under section 80(2A) to pay (or repay) an amount to him, or (b) failed to claim credit under section 25 for an amount for which he was entitled so to claim credit and which they are in consequence liable to pay to him, or (c) (otherwise than in a case falling within paragraph (a) or (b) above) paid them by way of VAT an amount that was not VAT due and which they are in consequence liable to repay to him, or (d) suffered delay in receiving payment of an amount due to him from them in connection with VAT, then, if and to the extent that they would not be liable to do so apart from this section, they shall pay interest to him on that amount for the applicable period, but subject to the following provisions of this section. ... (3) Interest under this section shall be payable at the rate applicable under section 197 of the Finance Act 1996 ...’

8 Interest under section 78 of the VATA 1994 is computed by reference to section 197 of the Finance Act 1996 and the Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998. The broad effect of the provisions is that, since 1998, for the purposes of section 78, rates are fixed by a formula referable to the average base lending rates of six clearing banks, which is called the ‘reference rate’. For periods between 1973 and 1998, the rates are specified in Table 7 to the 1998 Regulations. The interest rate applicable under section 78 is the reference rate minus 1%. Section 78 defines the ‘applicable period’ for which interest is payable. In the circumstances of the main proceedings it begins with the date on which the Commissioners received the overpayment and ends on the date on which the Commissioners authorise payment of the amount on which interest is payable.

The actions in the main proceedings and the questions referred for a preliminary ruling

9 According to the referring court, since the introduction of VAT in the United Kingdom in 1973, the applicants in the main proceedings, save for the holding company, Littlewoods Limited, carried on catalogue-based home shopping businesses. Those businesses involved Littlewoods distributing catalogues and selling the goods shown in those catalogues through networks of persons known as ‘agents’. The agents earned commission on sales made by or through them (‘third party purchases’), which commission might be taken in cash, applied in respect of past purchases made by the agents themselves or (at an enhanced rate)...