Neutral Citation Number: [2017] EWCA Civ 1982
Case No: A3/2016/3783
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
UT/2014/0037
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 01/12/2017
Before :

LADY JUSTICE SHARP
LORD JUSTICE HENDERSON
and
LORD JUSTICE NEWEY
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Between :

	IVECO LIMITED	Appellant	
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	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS	Respondents	

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Mr Andrew Hitchmough QC and Miss Barbara Belgrano (instructed by PricewaterhouseCoopers LLP) for the Appellant
Miss Eleni Mitrophanous (instructed by the General Counsel and Solicitor to HM Revenue and Customs) for the Respondents

Hearing dates : 8-9 November 2017
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Judgment Approved
Lord Justice Newey: 
1.	The appellant, Iveco Limited (“Iveco”), is the representative member of a value added tax (“VAT”) group that includes companies engaged in the sale of commercial vehicles. These proceedings arise out of promotional payments (or rebates) that the companies appear to have made to customers between the beginning of 1978 and the end of 1989. According to Iveco, the rebates served to reduce the price of the relevant vehicles, but it did not make any VAT adjustment in respect of them. On that basis, it claims to be entitled to the repayment of £73,361,865.
2.	The present appeal is concerned with whether Iveco’s claim is time-barred. The First-tier Tribunal (“FTT”) directed that the point should be determined as a preliminary issue. Judge Roger Berner, sitting in the FTT, ruled on the issue in decisions released on, respectively, 6 December 2013 and 13 May 2014 (one aspect having been deferred to await the Court of Appeal’s judgments in another case). He ruled in favour of Iveco, taking the view that its claim was not subject to either a domestic time limit or any requirement under European Union (“EU”) law for a claim to be brought within a reasonable period after a price reduction.
3.	HM Revenue and Customs (“HMRC”) appealed to the Upper Tribunal, which, in a decision of Warren J and Judge Greg Sinfield released on 13 June 2016 (and corrected on 18 July of that year), disagreed with Judge Berner and concluded that Iveco’s claim was time-barred. Iveco, however, now challenges that ruling in this Court.
4.	The proceedings have thus far been conducted on the basis of assumed facts. HMRC have reserved the right to dispute these in the future if Iveco’s claim is held not to be time-barred.
5.	The appeal raises issues as to whether claims to recover VAT overpaid as a result of price reductions made when article 11C(1) of the Sixth Council Directive of 17 May 1977 (77/388/EEC) (“the Sixth Directive”) ought to have been implemented by the United Kingdom but had not been (i.e. between 1978 and 1989) are still maintainable.
The legislative framework
6.	The Sixth Directive provided for the harmonisation of VAT across the European Economic Community. Article 1 of the Directive stipulated that Member States were to modify their VAT systems in accordance with the Directive by no later than 1 January 1978. Article 11C(1) provided:
“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.”
7.	The United Kingdom did not introduce legislation to give effect to article 11C(1) of the Sixth Directive (“Article 11C(1)”) until the end of the 1980s. In the intervening years, HMRC’s VAT Notice 700 (revised September 1975) allowed the parties to a price reduction to make VAT adjustments by mutual agreement. Thus, paragraph 118 of the Notice stated:
“When a supplier allows a credit or contingent discount to a customer who is a fully taxable person, he is not obliged to adjust the original VAT charge provided that both he and the customer agree not to do so. If they do not agree, the original VAT charge must be adjusted by both; the supplier must issue a credit note to the customer and keep a copy of it.”
As was noted by Mr Andrew Hitchmough QC, who appeared with Miss Barbara Belgrano for Iveco, the mechanism required both parties to a transaction to be fully taxable.
8.	Domestic legislation implementing Article 11C(1) first took effect on 1 January 1990. On that date, the Value Added Tax (Accounting and Records) Regulations 1989 (“the 1989 Regulations”) came into force. Regulation 7 of those Regulations was in these terms:
“(1) This regulation applies where–
(a) there is an increase in consideration, or
(b) there is a decrease in consideration
which includes an amount of tax and the increase or decrease occurs after the end of the prescribed accounting period in which the original supply took place.
(2) Where this regulation applies the taxable person shall adjust his value added tax account in accordance with the provisions of this regulation.
(3) The maker of the supply shall–
(a) in the case of an increase in consideration, make a positive entry; or
(b) in the case of a decrease in consideration, make a negative entry
for the relevant amount of tax in the tax payable portion of his value added tax account.
(4) The recipient of the supply, if he is a taxable person, shall–
(a) in the case of an increase in consideration, make a positive entry; or
(b) in the case of a decrease in consideration, make a negative entry
for the relevant amount of tax in the tax allowable portion of his value added tax account.
(5) Every entry required by this regulation shall, except where paragraph (6) below applies, be made in that part of the value added tax account which relates to the prescribed accounting period in which the increase or decrease is given effect in the business accounts of the taxable person.
(6) Where any entry required by this regulation is to be made in the value added tax account of an insolvent person then any such entry shall be made in that part of the value added tax account which relates to the prescribed accounting period in which the supply was made or received….”
9.	Regulation 7 of the 1989 Regulations was later replaced in identical terms by regulation 38 of the Value Added Tax Regulations 1995 (“the 1995 Regulations”), which revoked and remade, with certain amendments, a variety of regulations relating to VAT. For convenience, I shall use the shorthand “Regulation 38” in this judgment to refer to both regulation 7 of the 1989 Regulations and regulation 38 of the 1995 Regulations. It is common ground that, as drafted, Regulation 38 did not apply to rebates paid before 1 January 1990.
10.	Like the 1989 Regulations, section 24 of the Finance Act 1989 (“FA 1989”) came into force on 1 January 1990. The section provided as follows:
“(1) Where a person has paid an amount to the Commissioners by way of value added tax which was not tax due to them, they shall be liable to repay the amount to him.
(2) The Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose.
(3) It shall be a defence, in relation to a claim under this section, that repayment of an amount would unjustly enrich the claimant.
(4) No amount may be claimed under this section after the expiry of 6 years from the date on which it was paid, except where subsection (5) below applies.
(5) Where an amount has been paid to the Commissioners by reason of a mistake, a claim for the repayment of the amount under this section may be made at any time before the expiry of 6 years from the date on which the claimant discovered the mistake or could with reasonable diligence have discovered it.
…
(7) Except as provided by this section, the Commissioners shall not be liable to repay an amount paid to them by way of value added tax by virtue of the fact that it was not tax due to them.
(8) The preceding provisions of this section apply to an amount paid before, as well as to an amount paid after, the day on which this section comes into force, except where the Commissioners have received a claim for repayment of the amount before that day….”
A claim for repayment could thus be made within six years of the original payment or, where the payment had been made as a result of a mistake, the date on which the mistake was or could reasonably have been discovered.
11.	Current Law Statutes Annotated, in its commentary on section 24 of FA 1989, noted that the House of Lords had held in Customs and Excise Commissioners v Fine Art Developments plc [1989] STC 85 that a taxpayer had a statutory right to repayment of overpaid VAT. Section 24, it explained, “puts the right to repayment on a new basis, giving the Customs and Excise a defence of unjust enrichment” and with a six-year time limit.
12.	With the passage of the Value Added Tax Act 1994 (“VATA 1994”), section 24 of FA 1989 became section 80 of that Act. In its original form, section 80 of VATA 1994 corresponded precisely to section 24 of FA 1989. However, section 47 of the Finance Act 1997 (“FA 1997”) amended section 80 to set a three-year time limit for claims, with no possibility of extension for mistake. Following the decision of the House of Lords in Fleming (trading as Bodycraft) v Revenue and Customs Comrs [2008] UKHL 2, [2008] 1 WLR 195, section 80 was revised again, by the Finance Act 2008. This stated that the time limit contained in section 80 was not to apply to claims made before 1 April 2009 (during what has been termed “the Fleming window”) and, for the future, substituted a four-year limit for the three-year one.
13.	At the time Iveco submitted its claim to HMRC (9 November 2011), section 80 of VATA 1994 took this form:
“(1) 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.
…
(1B) 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, or
(b) an amount of input tax allowable under section 26 not being brought into account,
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. 
…
(4) The Commissioners shall not be liable on a claim under this section—
(a) to credit an amount to a person under subsection (1) or (1A) above, or
(b) to repay an amount to a person under subsection (1B) above,
if the claim is made more than 4 years after the relevant date. 
…
(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.”
14.	For convenience, I shall use the shorthand “Section 80” in this judgment to refer to both section 24 of FA 1989 and section 80 of VATA 1994.
15.	It is also relevant to mention section 5 of the Limitation Act 1980, which lays down a six-year limitation period for an “action founded on simple contract”. It is common ground that this period applies by analogy to common law restitutionary claims to recover overpaid tax.
The FTT decisions
16.	In the first of his decisions in this case, Judge Berner arrived at these conclusions (in paragraph 65):
“(1) Section 80 VATA [1994] does not apply to Iveco’s claim of 9 November 2011. Accordingly, the time limit for the making of such a claim contained in s 80(4) does not apply.
(2) Regulation 38 of the 1995 Regulations is to be construed, in the circumstances of Iveco’s claim, without regard to regulation 38(5). Accordingly, Iveco may make an adjustment under regulation 38 to give effect to its directly-effective right under EU law in respect of any reduction to be made pursuant to article 11C(1) of the Sixth Directive consequent upon the making of bonus payments in the period 1 January 1978 to 31 December 1989.
(3) This tribunal has jurisdiction to determine this preliminary application.”
17.	With respect to the first of these points, Judge Berner said this:
“[38] Although the effect of article 11C(1) [of the Sixth Directive] is that a price reduction after the time of the supply results in a reduction in the taxable amount, in the absence of implementation of that article so as to give it effect under domestic law, the most the Directive can give rise to is a directly-effective right in favour of the taxable person…. Unless or until the taxable person exercises that right, there is no basis for saying that the VAT accounted for by the taxable person was not ‘due’, which is the state of affairs required by s 80 [of VATA 1994]….
[39] Even if it were possible for HMRC to rely on the Directive itself in this respect, I do not consider that article 11C(1) could operate, independently of domestic legislation implementing it, so as to have the consequence that Iveco would have overpaid output tax in the accounting period in which the bonus payments were made. Article 11C(1) provides only for a reduction in the taxable amount; it says nothing of the consequences, in terms of the amount of output tax for which the taxable person must account, of that reduction. Those consequences can only flow from the domestic legislation that gives effect to the reduction of the taxable amount in those circumstances….”
18.	In his second decision, Judge Berner concluded (in paragraph 10) that there was “no requirement under EU law that Iveco’s claim be brought within a reasonable period after the assumed price reduction that led to the overpayment of VAT”.
The Upper Tribunal decision
19.	As I have said, HMRC appealed against Judge Berner’s decisions. HMRC contended that the FTT had erred (see paragraph 7 of the Upper Tribunal decision):
“(1) in holding that 
(a) section 80 [of VATA 1994] does not apply to Iveco’s claim; and 
(b) if section 80 applied, a section 80 claim was made within the applicable time limit; 
(2) in seeking to interpret regulation 38 [of the 1995 Regulations] in such a way as to give effect to any reduction pursuant to article 11C(1); 
(3) in concluding that it had jurisdiction to determine the preliminary issue; and 
(4) in holding that there is no requirement under EU law that Iveco’s claim be brought within a reasonable period after the assumed price reduction.”
20.	At the suggestion of the parties, the Upper Tribunal deferred consideration of ground 4 (whether EU law required Iveco to bring its claim within a reasonable period) pending the decision of the Court of Appeal in GMAC UK plc v HMRC (in the event, [2016] EWCA Civ 1015, [2017] STC 1247).
21.	As regards the other issues, the Upper Tribunal arrived at these conclusions:
i)	Unless and until domestic legislation provided otherwise, Article 11C(1) gave rise to a reduction in the “taxable amount” when a reduction in price took place (paragraph 72 of the decision);
ii)	That being so, when Iveco accounted to HMRC without making any deduction for price reductions, it paid an “amount to the Commissioners by way of value added tax which was not due to them” (within the meaning of section 24(1) of FA 1989 and section 80(1) of VATA 1994, as originally enacted) or, once section 80 of VATA 1994 had been revised, “brought into account as output tax an amount that was not output tax due” (within the meaning of section 80(1)) or “paid to the Commissioners an amount by way of VAT that was not due to them” (within the meaning of section 80(1B)) (paragraphs 51 and 67-69 of the decision);
iii)	Iveco could have advanced all its claims during the Fleming window (paragraph 70). That window having closed, it is now too late for Iveco to make any claim (paragraph 73 of the decision);
iv)	If it is not possible to achieve this result as a matter of conventional construction of Section 80 and there is a need to mould a legislative provision so as to provide taxpayers with a means of enforcing their rights under Article 11C(1), the moulding should be of Section 80 rather than Regulation 38 (paragraphs 71, 76 and 77 of the decision);
v)	As regards price reductions dating from 1983 or earlier, any claim would anyway be precluded because (i) Iveco would have had a restitutionary claim to recover overpaid VAT, (ii) that claim would have become time-barred by 1 January 1990 and (iii) such claims will not have been revived when regulation 7 of the 1989 Regulations and section 24 FA 1989 came into force on that date (paragraph 95 of the decision).
The issues
22.	Iveco contends on this appeal that the Upper Tribunal erred in law in these respects:
i)	In concluding that, notwithstanding that it had not yet been implemented, Article 11C(1) reduced the “taxable amount” when a rebate was paid;
ii)	In concluding that Section 80 (or a moulded Section 80) provided the means for Iveco to enforce the directly effective rights conferred by Article 11C(1) and that Regulation 38 could not, or should not, instead be moulded for that purpose; and
iii)	In concluding that “all of Iveco’s claims based on price reductions occurring before the beginning of 1984 (six years before section 24 FA [1989] came into force) were time barred by 1 January 1990”.
23.	The issues to which the three grounds of appeal (taken in conjunction with HMRC’s Respondent’s Notice) give rise were referred to as “The When Issue”, “The How Issue” and “The Restitution Issue”. I shall take these in turn.
The When Issue
24.	Article 288 of the Treaty on the Functioning of the European Union distinguishes between the effects of regulations and those of directives. The article states that an EU regulation is “binding in its entirety and directly applicable in all Member States” without the need for further national legislation. In contrast, a directive “shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods”. Member States are thus expected to take steps to implement a directive. However, in Van Duyn v Home Office (Case 41/74) [1975] Ch 358, the European Court of Justice (“ECJ”) concluded (at paragraph 156 of its judgment) that the directive at issue “confers on individuals rights which are enforceable by them in the courts of a member state and which the national courts must protect”. In Marshall v Southampton Health Authority (Case 152/84) [1986] QB 401, the ECJ explained (at paragraph 46 of its judgment):
“wherever the provisions of a directive appear, as far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may be relied upon by an individual against the state where that state fails to implement the directive in national law by the end of the period prescribed or where it fails to implement the directive correctly”.
“[A] member state which has not adopted the implementing measures required by the directive within the prescribed period may not,” the ECJ said, “plead, as against individuals, its own failure to perform the obligations which the directive entails” (paragraph 47 of the judgment).
25.	While an individual can sometimes rely on a directive against a Member State that has not implemented it, the converse is not true. “[A] directive may not of itself impose obligations on an individual and … a provision of a directive may not be relied upon as such against such a person” (paragraph 48 of the judgment in Marshall).
26.	On the other hand, it is open to a Member State to limit the time within which proceedings arising from its failure to implement a directive can be brought. In Rewe-Zentralfinanz eG v Landwirtschaftskammer für das Saarland (Case 33/76) [1976] ECR 1989, where charges were said to have been levied in breach of the EEC Treaty and a regulation, the ECJ concluded (in paragraph 6 of its judgment):
“in the present state of Community law there is nothing to prevent a citizen who contests before a national court a decision of a national authority on the ground that it is incompatible with Community law from being confronted with the defence that limitation periods laid down by national law have expired, it being understood that the procedural conditions governing the action may not be less favourable than those relating to similar actions of a domestic nature”.
That approach was applied in relation to a directive in Fantask A/S v Industriministeriet (Case C-188/95) [1998] All ER (EC) 1, which involved a claim to recover charges levied in breach of a directive. The ECJ’s answer to one of the questions that had been referred to it was (in paragraph 52 of its judgment):
“Community law, as it now stands, does not prevent a member state which has not properly transposed the directive from resisting actions for the repayment of charges levied in breach thereof by relying on a limitation period under national law which runs from the date on which the charges in question became payable, provided that such a period is not less favourable for actions based on Community law than for actions based on national law and does not render virtually impossible or excessively difficult the exercise of rights conferred by Community law”.
27.	There is, moreover, “no rule of EU law requiring the running of a limitation period to be deferred until the existence of a right to recover [a] payment has been judicially established” (Leeds City Council v HMRC [2015] EWCA Civ 1293, [2016] STC 2256, at paragraph 43). “Ignorance of one’s legal rights is not a ground for disapplying a limitation period” (Leeds, at paragraph 43, relying on British Telecommunications plc v HMRC [2014] EWCA Civ 433, [2014] STC 1926, at paragraphs 106 and 123).
28.	It is common ground that the key provision of the Sixth Directive for present purposes, Article 11C(1), had direct effect. Authority for that can now be found in the recent decision of the Court of Justice (“the CJEU”) in Lombard Ignatlan Lízing Zrt v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatóság (Case C-404/16). That case concerned article 90 of Council Directive 2006/112/EC (“the Principal VAT Directive”), which corresponds to Article 11C(1). The CJEU said in its judgment (at paragraph 38):
“Although that provision [i.e. article 90 of the Principal VAT Directive] grants the Member States a certain degree of discretion when adopting the measures to determine the amount of the reduction, that does not alter the precise and unconditional nature of the obligation to allow the reduction in the taxable amount in the cases referred to by that provision. It therefore fulfils the conditions for it to have direct effect.”
It follows, as is again common ground, that Iveco became entitled to rely on Article 11C(1) against HMRC as regards the period between 1 January 1978 (the date by which the United Kingdom ought to have implemented Article 11C(1)) and 1 January 1990 (when it in fact did so).
29.	The parties differ, however, as to what this means. Mr Hitchmough argued that, contrary to the view of the Upper Tribunal, the “taxable amount” in respect of a supply was not automatically reduced when the price was reduced by a rebate. The position is rather, he maintained, that Iveco had a directly effective right to bring about a reduction in the “taxable amount” at a time of its choosing. In the event, it did not exercise this right until, at the earliest, November 2011, when it wrote to HMRC seeking repayment. There can accordingly, Mr Hitchmough said, be no question of any part of Iveco’s claim being time-barred.
30.	In contrast, Miss Eleni Mitrophanous, who appeared for HMRC, submitted that the “taxable amount” fell to be reduced when a rebate was paid. It was open to Iveco, she observed, to reflect that reduction in its VAT account at the time. If it failed to do so, she contended, its entitlement was to seek to recover the VAT overpaid in consequence, not to reduce the “taxable amount” later on.
31.	Each side sought support for its arguments in United Kingdom authorities. The earliest such case is the decision of the VAT and Duties Tribunal (Chairman: Mr Theodore Wallace) in General Motors Acceptance Corporation (UK) plc v HMRC [2007] VTD 19989, where VAT had come to be overpaid as a result of hire-purchase agreements being terminated early. Counsel for HMRC argued that it was “implicit in Article 11C.1 that the reduction in the taxable amount is at the time when the price is reduced rather than at a time of choice” (paragraph 58 of the decision), but the Tribunal does not appear to have agreed, expressing the view that “the Appellant did not overpay VAT as a result of not making adjustments before 1990” (paragraph 77 of the decision). However, the decision is not, of course, binding on this Court.
32.	The next decision to which we were taken was that of the Upper Tribunal (Warren J and Judge Charles Hellier) in GMAC UK plc v HMRC [2012] UKUT 279 (TCC), [2012] STC 2349. The Upper Tribunal there had before it two matters, one relating to General Motors Acceptance Corporation (UK) plc (“GMAC”) and the other to British Telecommunications plc (“BT”). Both included claims to recover overpayments of VAT on the basis that bad debts had arisen on supplies made between 1978 and 1990, with effect from which time section 39(5) of the Finance Act 1997 (“FA 1997”) purported to bar claims for bad debt relief under section 22 of the Value Added Tax Act 1983 (“VATA 1983”) if made after 19 March 1997 (as GMAC’s was). Counsel for GMAC suggested that section 22 of VATA 1983 could not be made compliant with EU law and, hence, that the section should not be taken as covering its claims (see paragraph 166 of the decision). The Upper Tribunal disagreed, but also said this (in paragraph 184 of the decision):
“Once it had become apparent that the taxable amount should be reduced pursuant to art 11C(1), it would be open to the taxpayer to claim appropriate relief. If, as [counsel for GMAC] submits, s 22 does not apply, there is no domestic provision which indicates how or when the relief is to be given. But it is obvious, we think, that the onus is on the taxpayer to make a claim; in the absence of a claim, HMRC would have no way of knowing that a bad debt had arisen. It follows, unless and until a claim is indicated, that it cannot be said that any relief is to be afforded and that it cannot be said that any amount has been brought into account as output tax that was not output tax due. Accordingly, s 80 [of VATA 1994] does not, in our judgment, in terms apply to GMAC’s claims.”
33.	Mr Hitchmough argued that the Upper Tribunal recognised in this passage that GMAC could not be said to have accounted to HMRC for more VAT than was properly due unless and until a claim was made. Moreover - so Mr Hitchmough said - the Court of Appeal has subsequently endorsed that view (as to which, see paragraph 38 below).
34.	Miss Mitrophanous, however, disputed Mr Hitchmough’s interpretation of paragraph 184 of the Upper Tribunal’s decision. She attributed the perceived need “to claim appropriate relief” to the fact that the Upper Tribunal was dealing with bad debt relief, which has always depended on the creditor asking for it. In this connection, she referred us to section 12 of the Finance Act 1978 (which provided for a person to be entitled to a refund “on making a claim to the Commissioners”), section 22 of VATA 1983 (which was in material respects identical), section 11 of the Finance Act 1990 (which similarly spoke of “making a claim to the Commissioners”) and section 36 of VATA 1994 (also providing for a claim to be made to HMRC). She pointed out, too, that the Upper Tribunal could not have been proceeding on the basis that GMAC would have been able to trigger a reduction in “taxable amount” at a time of its choosing since the Tribunal could not then have concluded (as it did) that BT’s (similar) claims would be time-barred if they fell to be dealt with under Section 80 (see paragraph 244(c) of the decision). Had it been the case, Miss Mitrophanous said, that no “taxable amount” was reduced until the taxable person claimed, there could have been no question of BT’s claims being too late. In all the circumstances, it seems to me that the Upper Tribunal’s decision cannot of itself lend any support to Iveco’s case.
35.	The two matters that had been before the Upper Tribunal in GMAC UK plc v HMRC were the subject of separate appeals. The first to reach the Court of Appeal related to BT: British Telecommunications plc v HMRC [2014] EWCA Civ 433, [2014] STC 1926. Miss Mitrophanous focused on the comments of Rimer LJ, with whom Kitchin and Christopher Clarke LJJ expressed agreement, about the element of BT’s claim that related to the period between January and September of 1978, when the United Kingdom had not yet introduced any bad debt relief scheme implementing Article 11C(1). Rimer LJ said this about the relevant supplies in paragraph 86 of his judgment:
“As regards supplies made during the first, nine-month, period during which there was no bad debt relief domestic legislation in place, BT was, as I would hold, entitled nevertheless to enforce domestically its directly effective rights under art 11C(1) of the Directive. There was some discussion in argument as to the nature of the claim that it could have made and I cannot see how it could have been otherwise than of an English common law restitutionary nature, in respect of which there would be a domestic limitation period of six years. I did not understand either side to suggest anything different.”
Later in his judgment, Rimer LJ said (in paragraph 118):
“Taking first the period 1 January to 30 September 1978, we had some generalised discussion about this during the argument, but it did not distinguish between the types of case referred to at [116] and [117] above [i.e. (a) bad debts arising before October 1978 and (b) bad debts arising after that date but on supplies made before it]. Given my overall conclusion in respect of the main part of BT’s claims, namely that part relating to supplies made during the period 1 October 1978 to 31 March 1989, I regard it as unnecessary to deal separately with these two types of case. Either they are blighted by the same problem as relates to the main claim; or else the only right that BT ever had to claim relief in respect of these bad debts was a common law restitutionary claim, which is long since statute barred.”
36.	Miss Mitrophanous said, I think correctly, that these passages are inconsistent with Iveco’s case, since they implicitly assume that BT’s rights accrued when the bad debts arose, not when it put forward its claim in 2009. Mr Hitchmough, however, emphasised that Rimer LJ’s comments were based on no more than “generalised discussion”.
37.	The GMAC appeal was heard by the Court of Appeal last year: GMAC UK plc v HMRC [2016] EWCA Civ 1015, [2017] STC 1247. One of the issues that the Court had to consider was whether section 39(5) of FA 1997 barred GMAC’s claim for supplies which took place before 1 April 1989 (see paragraph 41 of the judgments). Differing from the Upper Tribunal, the Court of Appeal held that it did. Floyd LJ, with whom Arden LJ and Theis J agreed, said this on the subject:
“[133] Against that background, was the exercise of GMAC’s EU law rights rendered excessively difficult or virtually impossible by s 39(5)? I do not consider that it was. GMAC had more than adequate time to exercise their EU law rights and were given adequate notice of the withdrawal of the scheme….
[134] I do not therefore consider that it is necessary for the court to find some other route to give effect to GMAC’s EU law rights, so as to avoid collision with s 39(5). I would simply record my view, which is in conformity with the view which GMAC expressed to the Commissioners in their original claim, that s 80 [of VATA 1994] is not the appropriate domestic provision for giving effect to bad debt relief. When GMAC accounted for VAT on the whole value of the supply it did not account for VAT which was not due. That did not change at the point when GMAC considered the debt to be bad. To that extent, to the extent they are different, I prefer the views of the UT expressed in the present case to those expressed in Iveco.”
38.	Mr Hitchmough suggested that Floyd LJ was there preferring the views that the Upper Tribunal had expressed in paragraph 184 of the Upper Tribunal decision in GMAC UK plc v HMRC (for which, see paragraph 32 above) to those found in the Upper Tribunal decision under appeal before us. I do not think, however, that Floyd LJ’s comments are of any real assistance to Iveco. It is apparent from the context that the part of the latter decision that Floyd LJ had in mind was that quoted in paragraph 123 of his judgment, where he said:
“[The Upper Tribunal in Iveco Ltd v Revenue and Customs Comrs] said this in relation to a particular hypothetical example:
‘[21] If T [the taxpayer] fails to implement reg 38, that is not an end of T’s claim to credit or repayment of £200. The result of failing to implement reg 38 [of the 1995 Regulations] is that, in the case where the amount otherwise due exceeds £200, T has paid too much VAT in the prescribed period just mentioned. It is accepted by both HMRC and Iveco that s 80 [VATA 1994] is applicable. In other words, the reduction in VAT which T could have achieved by using reg 38 remains VAT which was not due to HMRC so that T can make a claim under s 80 to recover it. We consider that that is a correct and purposive approach to the legislation.’”
What, therefore, Floyd LJ was considering was whether a claim could be made under Section 80 in circumstances where Regulation 38 had already been enacted and, hence, Article 11C(1) had been implemented. He concluded that the answer, as regards bad debt relief, was “No” and that the Upper Tribunal was mistaken if and to the extent that it said anything inconsistent with that in the present case. To my mind, Floyd LJ’s view is readily explicable in relation to bad debt relief, which has always been something that a creditor must claim. In any case, Floyd LJ is not, as I see it, to be taken to have approved Mr Hitchmough’s interpretation of paragraph 184 of the Upper Tribunal’s decision in GMAC UK plc v HMRC.
39.	Overall, it seems to me that the United Kingdom case law is of rather limited assistance, but that, in so far as it is of help to either party, it tends to favour HMRC (because Rimer LJ’s judgment in the BT case is consistent with Miss Mitrophanous’ submissions and not Mr Hitchmough’s).
40.	Turning to EU authorities, Miss Mitrophanous relied particularly on the decision of the ECJ in Freemans plc v Customs and Excise Commissioners (Case C-86/99) [2001] STC 960. In that case, Freemans sold through agents, who would buy goods at the prices given in a catalogue but be credited with a sum equal to 10% of each payment. An agent could then withdraw the amount standing to the credit of his account, set it off against an outstanding balance or use it against new purchases; he was not, however, entitled to pay, from the outset, the catalogue price less the 10% discount. Under the United Kingdom’s domestic legislation, the “taxable amount” in respect of relevant goods fell to be reduced only when an agent used his discount by withdrawing it or setting it against what he would otherwise owe. Freemans, however, contended that the “taxable amount” was never more than the catalogue price less the discount or, alternatively, that the “taxable amount” had to be reduced when the discount was credited to an agent’s account. The ECJ decided otherwise, concluding (in paragraph 36 of its judgment):
“upon a proper construction of arts 11A(3)(b) and 11C(1) of the Sixth Directive, the taxable amount in respect of goods supplied by mail order from a catalogue to a customer for the customer’s own use where the supplier allows the customer a discount from the catalogue price, a separate account being credited in the customer’s favour with the amount of that discount as and when instalment payments are paid to the supplier—a discount which may then be immediately withdrawn or used in another way by the customer—is the full catalogue price of the goods sold to the customer, reduced accordingly by the amount of that discount at the time when it is withdrawn or used in another way by the customer”.
The ECJ explained (in paragraph 35):
“at the time when it credits the amount in question to the agent’s account established in its books, Freemans has not yet actually paid the … discount to the agent. Where the agent does not use that amount, Freemans disposes of it by adding it to its profit and loss account. It is only when the customer uses the … discount that the discount is actually paid, so that, as art 11C(1) of the Sixth Directive provides, the taxable amount for the corresponding purchase must be reduced accordingly under conditions to be determined by the member states”.
The ECJ also said (in paragraph 31):
“it must be stated that art 11C(1) of the Sixth Directive must be interpreted as meaning that, in a sales promotion scheme such as that at issue in the main proceedings, the taxable amount constituted by the full catalogue price must be reduced as soon as the agent withdraws or uses in another way the amount with which her separate account has been credited”.
41.	Miss Mitrophanous argued that the Freemans case shows that, unless and until implementing legislation has modified the position in a permissible way, a “taxable amount” is reduced under EU law as and when the price is reduced. Mr Hitchmough pointed out that the issue in Freemans was whether the “taxable amount” was reduced in accordance with the United Kingdom’s implementing legislation or at an earlier stage; the CJEU was not dealing with a case (such as the present one) where there had been no implementation. While, however, there is some force in that submission, there can, as it seems to me, be no question of the United Kingdom having been free to delay substantially the time at which a “taxable amount” was to be reduced as a result of a rebate. The fact that Article 11C(1) provided for the “taxable amount” to be reduced “under conditions which shall be determined by the Member States” will have given the United Kingdom a margin of discretion, but a limited one.
42.	The decision of the CJEU in Minister Finansów v Kraft Foods Polska SA (Case C-588/10) [2012] STC 787 is relevant in this context. That case concerned Polish legislation under which a taxable person could not reduce a “taxable amount” unless the purchaser had acknowledged receipt of a correcting invoice. Kraft issued correcting invoices where discounts were given, goods returned or errors identified, but it not did always receive acknowledgments quickly or, sometimes, at all. The CJEU decided that, although Member States had a margin of discretion as to the formalities that taxable persons were to comply with (see paragraph 23 of the judgment), where acknowledgment of receipt of a correcting invoice is required “VAT neutrality is affected when it is impossible or excessively difficult for the supplier of goods or services to obtain such acknowledgment of receipt within a reasonable period of time” (paragraph 38). Thus, as the CJEU said in paragraph 40:
“If it is impossible or excessively difficult for the supplier of goods or services to recover, within a reasonable period, the excess VAT paid to the tax authorities on the basis of the initial invoice because of the condition at issue in the main proceedings, the principles of VAT neutrality and proportionality require the member state concerned to permit the taxable person to establish by other means before the national tax authorities, first, that he has taken all the steps necessary in the circumstances of the case to satisfy himself that the purchaser of the goods or services is in possession of the correcting invoice and that he is aware of it and, second, that the transaction in question was in fact carried out in accordance with the conditions set out in the correcting invoice.”
43.	A little earlier in its judgment, the CJEU had said this:
“26. As to whether the principles of VAT neutrality and proportionality preclude such a requirement, it must be noted that art 90(1) of the VAT Directive [i.e. the Principal VAT Directive] requires the member states to reduce the taxable amount and, consequently, the amount of VAT payable by the taxable person whenever, after a transaction has been concluded, part or all of the consideration has not been received by the taxable person (see Goldsmiths (Jewellers) Ltd v Customs and Excise Comrs (Case C-330/95) [1997] STC 1073, [1997] ECR I-3801, para 16).
27. That provision embodies one of the fundamental principles of the VAT Directive, according to which the basis of assessment is the consideration actually received and the corollary of which is that the tax authorities may not in any circumstances charge an amount of VAT exceeding the tax paid by the taxable person (see, to that effect, Goldsmiths (para 15)).
28. It is also apparent from case law that measures to prevent tax evasion or avoidance may not, in principle, derogate from the basis for charging VAT except within the limits strictly necessary for achieving that specific aim. They must have as little effect as possible on the objectives and principles of the VAT Directive and may not therefore be used in such a way that they would have the effect of undermining VAT neutrality, which is a fundamental principle of the common system of VAT established by the relevant European Union legislation (see, to that effect, Goldsmiths (para 21); Staatssecretaris van Financien v Stadeco BV (Case C-566/07) [2009] STC 1622, [2009] ECR I-5295, para 39 and the case law cited: and Vandoorne NV v Belgium (Case C-489/09) (27 January 2011, unreported), para 27).
29. Consequently, if reimbursement of the VAT becomes impossible or excessively difficult as a result of the conditions under which applications for reimbursement of tax may be made, those principles may require that the member states provide for the instruments and the detailed procedural rules necessary to enable the taxable person to recover the unduly invoiced tax (Stadeco (para 40) and the case law cited).
30. Moreover, as regards the possibility, under art 183 of the VAT Directive, of providing that excess VAT is to be carried forward to the following tax period or refunded, the court has made it clear that the conditions for the refund of excess VAT cannot undermine the principle of fiscal neutrality by making the taxable person bear the burden of the VAT in whole or in part (EC Commission v Hungary (Case C-274/10) (26 May 2011, unreported), para 45).
31. The court has stated that such conditions must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess VAT. This implies that the refund is to be made within a reasonable period of time (EC Commission v Hungary (para 45)).”
44.	It is apparent from this passage that Article 11C(1), as the predecessor of article 90(1) of the Principal VAT Directive, “requires the member states to reduce the taxable amount and, consequently, the amount of VAT payable by the taxable person whenever, after a transaction has been concluded, part or all of the consideration has not been received by the taxable person” and embodies the “fundamental” principle that “the basis of assessment is the consideration actually received and the corollary of which is that the tax authorities may not in any circumstances charge an amount of VAT exceeding the tax paid by the taxable person”. It can be seen, too, that the margin of discretion which Poland enjoyed because article 90(1) of the Principal VAT Directive provided for the “taxable amount” to be reduced “under conditions which shall be determined by the Member States” was a restricted one and did not allow Poland to impose conditions preventing a taxable person from obtaining a refund within a reasonable period of time.
45.	Similar points emerge from the Lombard case. As is evident from the passage from the judgment quoted in paragraph 28 above, the “certain degree of discretion” which Member States have “to determine the amount of the reduction” under article 90(1) of the Principal VAT Directive “does not alter the precise and unconditional nature of the obligation to allow the reduction in the taxable amount in the cases referred to by that provision”. Further, measures to prevent tax evasion or avoidance “must have as little effect as possible on the objectives and principles of the VAT Directive and may not be used in such a way that they would have the effect of undermining the neutrality of VAT” (paragraph 43 of the judgment).
46.	In the event, the United Kingdom legislated for a supplier who had granted a rebate to make a negative entry in the tax payable portion of his VAT account relating to “the prescribed accounting period in which the … decrease is given effect to in the business accounts of the taxable person” (see regulation 24(5) of the 1989 Regulations). Had the United Kingdom instead provided for a rebate to be reflected in the supplier’s VAT account very much later, it would, as it seems to me, plainly have failed to implement Article 11C(1) properly. There is nothing in the wording of Article 11C(1) to suggest that a reduction in the “taxable amount” could legitimately be deferred to any great extent (the more so since the French language version uses “est réduite” in place of “shall be reduced”), and it would be wholly inconsistent with the “precise and unconditional nature of the obligation” imposed by Article 11C(1), the “fundamental” principle that it embodies and the importance of VAT neutrality to allow a Member State to evade Article 11C(1) by delaying a reduction substantially. To the contrary, a refund must be made available within a reasonable period of time (compare paragraph 31 of the judgment in the Kraft Foods case).
47.	The upshot, in my view, is that it was incumbent on the United Kingdom to implement Article 11C(1) by providing for a reduction in the “taxable amount” at or soon after the time when a rebate was paid. It failed to do so until the end of 1989, but suppliers were nonetheless entitled to rely on Article 11C(1) against the United Kingdom. It was therefore open to a supplier to “make a negative entry for the relevant amount of tax” (to adopt words subsequently used in regulation 7(3) of the 1989 Regulations) in his VAT account when he paid a rebate. If he did not make such an entry at the time, his right to rely on Article 11C(1) will have allowed him to say that each relevant “taxable amount” should be treated as having been reduced when it would have been if the United Kingdom had duly implemented Article 11C(1) (in other words, at or soon after the time when a rebate was paid) and that, on that footing, he had made overpayments. 
48.	I do not see why a supplier’s entitlement to rely on Article 11C(1) against the United Kingdom should permit him to reduce the “taxable amount” himself (and so trigger a repayment claim) years later. There is, to my mind, no reason why an ability to rely on a provision in implementation of which the United Kingdom ought to have provided for a “taxable amount” to be reduced at or soon after the time when a rebate was paid should translate into a right for the taxable person to reduce the “taxable amount” himself, whenever he chooses, potentially decades later and at a time which the United Kingdom could not have adopted had it duly implemented. It follows that I do not accept the analysis advanced by Mr Hitchmough.
49.	I would add the following comments:
i)	I do not consider that the approach adopted in the last two paragraphs involves HMRC relying on Article 11C(1) against Iveco or imposing an obligation on it, contrary to the principle mentioned in paragraph 25 above. It is Iveco that is invoking Article 11C(1), against HMRC. HMRC are taking issue with Iveco’s contentions as to the implications of its reliance on Article 11C(1), but there can be no objection to that. Cases such as Fantask A/S v Industriministeriet illustrate that a Member State can properly contend that a claim based on its failure to implement a directive properly is time-barred;
ii)	Mr Hitchmough argued that the timing of the outcome required by Article 11C(1) (i.e. the reduction of the “taxable amount” in the case of a rebate) “must depend upon the exercise by the individual of their directly effective rights”. I cannot see, however, why that should be so. A supplier is entitled to rely on Article 11C(1) in relation to the period between 1978 and 1989 notwithstanding the United Kingdom’s failure to implement it, but nothing in Article 11C(1) indicates that the taxable person is intended to be able to determine the point at which a “taxable amount” is to be treated as having been reduced as a result of a rebate, let alone that he should be free to do so many years later;
iii)	Mr Hitchmough suggested that it was HMRC’s case that Section 80 had served to reduce the relevant “taxable amounts” and submitted that it could not have done so. As, however, Miss Mitrophanous explained, HMRC do not contend that Section 80 operated to reduce the “taxable amounts”. Their case is that Section 80 provided a remedy where, independently of that provision, a supplier could show that it had overpaid; and
iv)	It appears from the passage from his first decision set out in paragraph 17 above that Judge Berner did not consider that Article 11C(1) could operate to produce an overpayment “independently of domestic legislation implementing it”. If I have understood Judge Berner correctly, he was of the view that such a consequence could “only flow from the domestic legislation that gives effect to the reduction of the taxable amount”. In my view, however, the ability of a supplier who had paid a rebate to recover the VAT that he would not have paid if the price had been reduced from the start cannot have depended on the United Kingdom introducing provisions such as Regulation 38 or Section 80. Since Article 11C(1) conferred directly effective rights, a supplier must have been able to rely on it, and to obtain appropriate redress, in advance of any implementing legislation and, in fact, regardless of whether any steps were ever taken to implement Article 11C(1). Any other conclusion would, in my view, be inconsistent with the directly effective nature of the supplier’s rights.
50.	In short, it seems to me that, on the assumption that Iveco paid rebates between 1978 and 1989 without making adjustments in respect of them in its VAT accounts, it was at once (or at least after the expiry of a relatively short period) entitled to maintain that the relevant “taxable amounts” should be treated as having been reduced and, accordingly, that it had overpaid.
The How Issue
51.	Echoing Judge Berner, Mr Hitchmough argued that Regulation 38 should be used to give effect to Iveco’s rights under Article 11C(1). The Upper Tribunal, Mr Hitchmough said, was mistaken in thinking that Iveco could enforce its rights through Section 80 (or a moulded version of it).
52.	Mr Hitchmough’s submissions were advanced on the premise that Iveco had a directly effective right to reduce the “taxable amount” where there had been a rebate and that it was therefore necessary to look for a vehicle to achieve the reduction. This, he maintained, was to be found in Regulation 38, which had been enacted in order to implement Article 11C(1) and specifically explained what entries should be made where the consideration had changed after the end of the accounting period in which the original supply had taken place. Mr Hitchmough contended that, in the circumstances, Judge Berner had been right to conclude (in paragraph 50 of his first decision) that “Regulation 38 should … be construed so as to enable Iveco to obtain relief in order to secure compliance with EU law”.
53.	Miss Mitrophanous, of course, did not accept the premise underlying Mr Hitchmough’s submissions. She argued that there was no need to look to Regulation 38 to provide Iveco with a remedy. She suggested that, by 1990, when both regulation 7 of the 1989 Regulations and section 24 of FA 1989 came into force, Iveco was already too late to pursue any claim arising from rebates between 1978 and 1984, since the restitutionary claim that (on her case) it would previously have had would by then have become time-barred. In so far, however, as Iveco still had a claim, its remedy was, she said, to be found in Section 80. That provision was, she submitted, designed to apply where there had been an overpayment and could have afforded Iveco redress here. She drew an analogy with Birmingham Hippodrome Theatre Trust Ltd v HMRC [2014] EWCA Civ 684, [2014] STC 2222 and the Leeds City Council case, each of which proceeded on the footing that Section 80 was applicable to overpayments flowing from failure to implement a directive correctly. In the Leeds case, Lewison LJ noted (at paragraph 13) that Section 80 “is intended to be a complete statutory code for the repayment of overpaid VAT”.
54.	I have already said that, in my view, Iveco was entitled to maintain that the relevant “taxable amounts” should be treated as having been reduced and, accordingly, that it had overpaid even before regulation 7 of the 1989 Regulations and section 24 of FA 1989 were enacted. That being so, I do not accept Mr Hitchmough’s premise. I do not think that there is any need to identify a vehicle allowing Iveco to exercise a right to reduce the “taxable amount” where there had been a rebate before 1990. Its remedy, as regards pre-1990 rebates, was to claim to recover overpayments, which it could do under section 24 of FA 1989 and, later, section 80 of VATA 1994. Section 24(1) provided for HMRC to be liable to a person who had “paid an amount to the Commissioners by way of value added tax which was not due to them”, and section 80 of VATA 1994 contained almost identical wording until 2005. Viewing matters in the way I do, the words were apt to apply. In 2005, section 80 of VATA 1994 was amended by the Finance (No. 2) Act 2005, but one or other of subsections (1) and (1B) (I do not think it is necessary to decide which) will then have been applicable.
55.	On this basis, Iveco’s claim must be time-barred in its entirety. It had to be brought by, at the latest, the end of the Fleming window in 2009.
The Restitution Issue
56.	The Restitution Issue relates to whether the Upper Tribunal was right to consider that, even if its conclusions on other matters were wrong, Iveco would still be unable to pursue any claim in respect of pre-1994 price reductions. In the Upper Tribunal’s view, the Court would have had to provide a restitutionary (or other) remedy to Iveco for such reductions had it sought to enforce its directly effective rights before regulation 7 of the 1989 Regulations and section 24 of FA 1989 came into force. Accordingly, “all of Iveco’s claims based on price reductions occurring before the beginning of January 1984 (six years before section 24 FA came into force) were time-barred by 1 January 1990” (paragraph 95 of the decision).
57.	This issue would have been important if I had arrived at different conclusions on the When and How Issues. As it is, it is academic. Whether or not claims relating to pre-1984 rebates survived to 1990, they (like claims arising from later price reductions) must be time-barred now. I do not therefore need to address the merits of the issue.
Conclusion
58.	I would dismiss the appeal. In my view, Iveco’s claim is time-barred in its entirety.
Lord Justice Henderson:
59.	I agree.
Lady Justice Sharp:
60.	I also agree.