UK Supreme Court: Case Preview: WHA Ltd v Her Majesty’s Revenue and Customs

The case of WHA Limited and another (Appellants) v Her Majesty’s Revenue and Customs (Respondent, “HMRC”) UKSC 2009/0074 will be heard in the UK Supreme Court from 21 to 24 January 2013 and it shall be streamed online here. Lords Hope, Walker, Mance, Reed and Carnwath JJSC will hear the appeal.

Facts

WHA Limited (“WHA”) and Viscount Reinsurance Company Limited (“V”) are part of a group of companies providing motor breakdown insurance. V is the reinsurer, in effect standing in the shoes of the original insurer with whom the breakdown policies were taken out with. V contracts with WHA to handle the claims. WHA also contracts with garages to carry out repairs to vehicles. The garages invoice WHA the cost of the repairs. It was originally envisaged that WHA would treat the VAT added by the garages as input tax and not therefore charge it on to V.

The Court of Appeal, giving an interim judgment, held that this was not permissible and that WHA must charge V the VAT. However, V then passes this cost onto other companies within the group between which, due to geographical location, no VAT is due. Subject to adjourned consideration of arguments based on the doctrine of “abuse of rights”, Viscount was entitled to claim back the VAT from HMRC. This meant that the group of companies escaped paying VAT on the garage services.

The Court of Appeal’s subsequent judgment on the “abuse of rights” issue concluded that such a corporate structure was indeed such an abuse, as it held that its sole purpose was to avoid paying tax. In 2007, permission was granted to appeal to the House of Lords, whose role the Supreme Court has since assumed.