Indirect Tax Update for week ending 24 January 2014. Two important Court decisions this week. Firstly, the Court of appeal unanimously rejects Reed Employment Ltd's appeal relating to unjust enrichment. Secondly, the First-tier Tribunal finds that an 'agreement to settle' entered into with a taxpayer was a binding compromise agreement which precluded HMRC from issuing a recovery assessment.

1. Indirect Tax Update 04/2014
Indirect Tax Update for week ending 24 January 2014
Two important Court decisions this week. Firstly, the Court of appeal unanimously rejects
Reed Employment Ltd's appeal relating to unjust enrichment. Secondly, the First-tier
Tribunal finds that an 'agreement to settle' entered into with a taxpayer was a binding
compromise agreement which precluded HMRC from issuing a recovery assessment.
In Reed Employment Ltd (Reed), the Court of Appeal has unanimously ruled that the
2005 amendments to the UK's law on unjust enrichment (which equalised the
treatment between payment and repayment traders) did not infringe the EU principles
of equal treatment, fiscal neutrality and effectiveness. In this long running case, Reed
had originally argued that the claim it submitted in 2009 was an amendment to a
previous claim submitted before 2005. Unfortunately, both the First-tier and the Upper
Tribunal dismissed that argument. The claim submitted in 2009 was a fresh claim and,
as a consequence, the unjust enrichment defence was available to HMRC.
In the Court of Appeal, Reed abandoned that argument but claimed that the effect of
the 2005 amendment was to treat the later claim differently to the earlier claim even
though the period covered by the claims were the same. According to Reed, this
different treatment offended the above EU principles. Unfortunately, the Court of
Appeal rejected that view. The previous cases of Weber's Wine World and Marks &
Spencer confirm that Member States are entitled to introduce new laws having
retrospective effect even where this has the effect of treating separate claims for the
same period differently. The important factor for unjust enrichment purposes is the
date that any claim is paid – not the date the claim was made or the period it covers.
The Court was satisfied that EU law on the issue was clear enough for it to refuse to
submit questions to the Court of Justice.
For further information in
relation to any of the
issues highlighted in this
Indirect Tax Update
please contact:
London/South East
Karen Robb
karen.robb@uk.gt.com
The Regions
Stuart Brodie
stuart.brodie@uk.gt.com
The Midlands
Mike Sheppard
mike.sheppard@uk.gt.com
Comment – this is a major, but, perhaps, not unexpected blow for Reed. Given the
unanimous verdict from the Court of Appeal, it may be difficult to obtain leave to
appeal the matter further to the Supreme Court. However, given the value of Reed's
claims (circa £139M), a further hearing cannot be ruled out.
In Southern Cross Employment Agency Ltd, the First-tier Tribunal has confirmed that
when HMRC settled a Fleming claim submitted by the taxpayer, the settlement
agreement amounted to a compromise agreement. The Tribunal concluded that, in the
circumstances, having regard to the valid and enforceable compromise agreement
between Southern Cross and HMRC under which the payment of both the principal
amount and interest were made, HMRC had no power to assess to recover the amounts
repaid under s 80(4A) or s 78A(1) VATA.
Comment – This is useful. In cases where HMRC have agreed to settle a dispute, the
Tribunal confirms that it cannot revisit the matter and issue recovery assessments.
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