His opinion is persuasive but does not bind the Court. The Court of Appeal referred the case to the ECJ for a preliminary ruling on points of Community law. It will come back to the UK Courts for final judgment.
If the ECJ rules for Marks & Spencer there may still be further debate and litigation. Clearly taxpayers who submitted claims between the announcement of the cap and the introduction of the legislation would have an argument and Customs may find it difficult to hold the line there. EU VAT law requires that member states must not make it unduly difficult to make repayment claims. Businesses that were frightened off by Customs’ statement that the cap would be introduced and would be backdated might have an argument as well.
Customs may try to argue that the current legislation on the three-year cap should apply prospectively – ie that the UK Courts should just not give it effect in relation to claims made prior to 19 March 1997. Even this may be open to challenge. Because the legislation on the three-year cap seems to be inherently retrospective there is not a separate retrospective part that can be ring fenced and disapplied by the UK Courts. To give effect to the legislation in some cases and not others would conflict with the concept of legal certainty and might itself be regarded as a breach of Community law.
There is no doubt that the UK can introduce a legally effective three-year time limit, but if the ECJ rules for Marks & Spencer it may be necessary to introduce new legislation. If an argument on legal certainty were accepted there could be a free for all period before the amended legislation comes into effect.
Of course all this is just speculation until we have the decision of the ECJ. Nevertheless, businesses with claims or potential claims should be assessing their positions now. Even if the ECJ rules against Customs, there will be an effective time limit sometime and taxpayers should take advice now to put themselves in a position to protect their rights.
- Frank Hartley is a VAT partner at Grant Thornton.