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United Kingdom Supreme Court
You are here: BAILII >> Databases >> United Kingdom Supreme Court >> DCM (Optical Holdings) Ltd v Revenue and Customs (Scotland)  UKSC 26 (12 October 2022)
Cite as: 2023 SCLR 56,  BVC 11,  STC 1900,  WLR 4815,  UKSC 26,  1 All ER 617,  1 WLR 4815,  STI 1335, 2023 SC (UKSC) 1,  WLR(D) 398, 2022 SLT 1223, 2022 GWD 32-480
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Press Summary Issues & Facts
 UKSC 26
On appeal from:  CSIH 60
DCM (Optical Holdings) Ltd (Appellant)
Commissioners for His Majesty’s Revenue and Customs (Respondent) (Scotland)
Lord Reed, President
Lord Hodge, Deputy President
JUDGMENT GIVEN ON
12 October 2022
Heard on 8 February 2022
Julian Ghosh KC
(Instructed by Harper Macleod LLP (Glasgow))
David Thomson KC
(Instructed by Office of the Advocate General for Scotland)
LORD HODGE (with whom Lord Reed, Lord Sales, Lord Hamblen and Lord Stephens agree):
1. Factual background
“Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it…”
2. The proceedings below
3. The time bar challenge
“An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following-
(a) 2 years after the end of the prescribed accounting period; or
(b) one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge, (emphasis added)
but (subject to that section) where further such evidence comes to the Commissioners’ knowledge after the making of an assessment under subsection (1), (2) or (3) above, another assessment may be made under that subsection, in addition to any earlier assessment.”
At the material time section 77 imposed a backstop time limit for the making of an assessment under, among others, section 73 of three years after the end of the prescribed accounting period. That backstop is now four years. The dispute in this appeal concerns the time limit in section 73(6)(b).
“1. The Commissioners’ opinion referred to in section 73(6)(b) is an opinion as to whether they have evidence of facts sufficient to justify making the assessment. Evidence is the means by which the facts are proved.
2. The evidence in question must be sufficient to justify the making of the assessment in question: C & E Commissioners v Post Office  STC 749, 754G. (Emphasis added)
3. The knowledge referred to in section 73(6)(b) is actual, and not constructive knowledge: C & E Commissioners v Post Office at p755D. In this context, I understand constructive knowledge to mean knowledge of evidence which the Commissioners do not in fact have, but which they could and would have if they had taken the necessary steps to acquire it.
4. The correct approach for a Tribunal to adopt is (i) to decide what were the facts which, in the opinion of the officer making the assessment on behalf of the Commissioners, justified the making of the assessment, and (ii) to determine when the last piece of evidence of these facts of sufficient weight to justify making the assessment was communicated to the Commissioners. The period of one year runs from the date in (ii): Heyfordian Travel Ltd v C & E Commissioners  VATTR 139, 151; and Classicmoor Ltd v C & E Commissioners  V & DR 1, 10.1.27. (Emphasis added)
5. An officer’s decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury … (see Classicmoor … at 10-11,and more generally John Dee Ltd v C & E Commissioners  STC 941, 952 per Neill LJ).”
“The relevant evidence of facts is that which was considered, in the opinion of the Commissioners, to justify the making of the assessment. The one-year time limit runs from the date when the facts constituting the evidence came to the knowledge of the Commissioners.” (Emphasis added)
He went on to state (para 15):
“An opinion as to what evidence justifies an assessment requires judgment and in that sense is subjective; but the existence of the opinion is a fact. From that it is possible to ascertain what was the evidence of facts which was thought to justify the making of the assessment. Once that evidence has been ascertained, then the date when the last piece of the puzzle fell into place can be ascertained.”
4. The vires challenge
The accounting period of the VAT return
Date and effect of decision
30 July 2008, reducing the VAT credit.
16 January 2009, reducing the VAT credit.
15 January 2009, reducing the VAT credit.
16 July 2009, reducing the VAT credit.
July 2005, January, April, July and October 2006, January, April, July, September and December 2007, March, June and December 2008
Review decision dated 3 June 2013, upholding earlier decisions amending amounts in the VAT returns and reducing DCM’s VAT credits.
“If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then … the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners; and an amount which is due under this subsection is referred to in this Act as a ‘VAT credit’.”
“While DCM stressed that the only power which HMRC could use to direct the formal amendment of returns was that contained in regulation 35, in our opinion formal amendment of the returns is not the critical issue. Rather, the crux is whether HMRC have the power to refuse to accept (in whole or in part) a sum claimed as input tax. We agree with the FTT and the UT that it is clear that HMRC do have that power. In our opinion, just as it is implicit in section 25(2) and (3) and Schedule 11, paras 1 and 4 that the allowance of an input tax claim is conditional upon the claim’s verification, it is also implicit in those provisions that HMRC may accept or reject the claim in whole or in part.”