C-38/16 Compass Contract Services

JUDGMENT OF THE COURT (Fourth Chamber)

14 June 2017 ¹

‛Reference for a preliminary ruling — Value added tax (VAT) — Repayment of overpaid VAT — Right to deduct VAT — Procedures — Principles of equal treatment and fiscal neutrality — Principle of effectiveness — National legislation introducing a limitation period’

In Case C‑38/16,

REQUEST for a preliminary ruling under Article 267 TFEU from the First-tier Tribunal (Tax Chamber, United Kingdom), made by decision of 20 January 2016, received at the Court on 25 January 2016, in the proceedings

Compass Contract Services Limited

v

Commissioners for Her Majesty’s Revenue and Customs,

THE COURT (Fourth Chamber),

composed of T. von Danwitz, President of the Chamber, E. Juhász, C. Vajda, K. Jürimäe and C. Lycourgos (Rapporteur), Judges,

Advocate General: M. Campos Sánchez-Bordona,

Registrar: L. Hewlett, Principal Administrator,

having regard to the written procedure and further to the hearing on 8 December 2016,

after considering the observations submitted on behalf of:

Compass Contract Services Limited, by D. Scorey QC, and by O. Jarratt and D. Stephens, advisors,

the United Kingdom Government, by D. Robertson and M. Holt, acting as Agents, and by A. Macnab, Barrister,

the European Commission, by M. Owsiany-Hornung and M. Wasmeier, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 2 March 2017,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of the EU law principles of equal treatment, fiscal neutrality and effectiveness.

2The request has been made in proceedings between Compass Contract Services Limited (‘Compass’) and the Commissioners for Her Majesty’s Revenue & Customs (‘the Commissioners’) concerning the latter’s refusal to repay value added tax (‘VAT’) overpaid by Compass.

Legal context

EU law

3Under the heading ‘Origin and scope of the right to deduct’, Article 17 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) (‘the Sixth Directive’) provides as follows:

‘1. The right to deduct shall arise at the time the deductible tax becomes chargeable.

2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

[VAT] due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;

[VAT] due or paid in respect of imported goods;

[VAT] due under Articles 5(7)(a) and 6(3).

...’

4Article 18 of the Sixth Directive, entitled ‘Rules governing the exercise of the right to deduct’, provides:

‘1. To exercise his right to deduct, the taxable person must:

in respect of deductions under Article 17(2)(a), hold an invoice drawn up in accordance with Article 22(3);

in respect of deductions under Article 17(2)(b), hold an import document, specifying him as consignee or importer, and stating or permitting calculation of the amount of tax due;

in respect of deductions under Article 17(2)(c), comply with the formalities established by each Member State;

when he is required to pay the tax as a customer or purchaser where Article 21(1) applies, comply with the formalities laid down by each Member State.

2. The taxable person shall effect the deduction by subtracting from the total amount of value added tax due for a given tax period the total amount of the tax in respect of which, during the same period, the right to deduct has arisen and can be exercised under the provisions of paragraph 1.

...

3. Member States shall determine the conditions and procedures whereby a taxable person may be authorised to make a deduction which he has not made in accordance with the provisions of paragraphs 1 and 2.

4. Where for a given tax period the amount of authorised deductions exceeds the amount of tax due, the Member States may either make a refund or carry the excess forward to the following period according to conditions which they shall determine.

...’

United Kingdom law

5Section 25 of the Value Added Tax Act 1994, in its version applicable at the time of the facts at issue in the main proceedings (‘the 1994 Act’), provides:

‘...

2. Subject to the provisions of this section, [a taxable person] is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.

...

6. A deduction under subsection (2) above and payment of a VAT credit shall not be made or paid except on a claim made in such manner and at such time as may be determined by or under regulations; and, in the case of a person who has made no taxable supplies in the period concerned or any previous period, payment of a VAT credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances.’

6Section 80 of the 1994 Act states:

‘Credit for, or repayment of, overstated or overpaid VAT

...

4. The Commissioners shall not be liable on a claim under this section,

to credit an amount to a person under subsection (1) or (1A) above, or

to repay an amount to a person under subsection (IB) above,

if the claim is made more than 3 years after the relevant date.’

7Regulation 29 of the Value Added Tax Regulations 1995, in its version applicable at the time of the facts at issue in the main proceedings, implemented section 25 of the 1994 Act. Regulations (29)(1) and (1A) state as follows:

‘1. Subject to paragraph (1A): ... below, and save as the Commissioners may otherwise allow or direct either generally or specially, a person claiming deduction of input tax under section 25(2) of the Act shall do so on a return made by him for the prescribed accounting period in which the VAT became chargeable.

1A. The Commissioners shall not allow or direct a person to make any claim for deduction of input tax in terms such that the deduction would fall to be claimed more than 3 years after the date by which the return for the prescribed accounting period in which the VAT became chargeable is required to be made.’

8Section 121 of the Finance Act 2008 (‘the 2008 Act’) provides:

‘Old VAT claims: extended time limits

The requirement in section 80(4) of the [1994 Act] that a claim under that section be made within 3 years of the relevant date does not apply to a claim in respect of an amount brought into account, or paid, for a prescribed accounting period ending before 4 December 1996 if the claim is made before 1 April 2009.

The requirement in section 25(6) of the [1994 Act] that a claim for deduction of input tax be made at such time as may be determined by or under regulations does not apply to a claim for deduction of input tax that became chargeable, and in respect of which the claimant held the required evidence, in a prescribed accounting period ending before 1 May 1997 if the claim is made before 1 April 2009.

...

This section is treated as having come into force on 19 March 2008.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

9Compass, which is a company providing, inter alia, catering services, seeks repayment of sums that it overpaid in respect of VAT relating, in particular, to two accounting periods (quarters) ending in the months of January and April 1997.

10In 1996, the United Kingdom of Great Britain and Northern Ireland announced its intention to amend the national legislation concerning repayment of overpaid output VAT and to reduce, from six years to three years, the limitation period for claims in respect of such repayments. That amendment entered into force on 4 December 1996. By judgment of 11 July 2002, Marks & Spencer (C‑62/00, EU:C:2002:435), the Court held that that national legislation was incompatible with the principles of effectiveness and of the protection of legitimate expectations given that it retroactively curtailed, without any transitional period, the period within which the repayment of the overpaid VAT could be claimed.

11The Court of Appeal (England & Wales) (Civil Division) (United Kingdom) applied that case-law in respect of claims for deduction of input VAT, the United Kingdom having also reduced, from 1 May 1997, the limitation period for such claims from six years to three years. In Michael Fleming (t/a Bodycraft) v Commissioners ((2006) EWCA Civ 70) that court held that, given that that reduction in the limitation period had been made without a transitional period, those persons whose right to deduct input tax arose before 1 May 1997 should be allowed to claim and the application of that new period should, in respect of those persons, be disapplied. That judgment of the Court of Appeal (England & Wales) (Civil Division) was confirmed on 23 January 2008 by the House of Lords in its judgment in Fleming and Condé Nast v Commissioners ((2008) UKHL 2).

12Following that judgment of the House of Lords, the Commissioners published a bulletin (Business Brief 07/08 (2008) STI 311 (Issue 8)) in which they declared that VAT claims brought before the expiry of the new three-year period may relate to ‘output tax overpaid or overdeclared in accounting periods ending before 4 December 1996’ and ‘input tax in respect of which the entitlement to deduct arose in accounting periods ending before 1 May 1997’. Those two dates, therefore, corresponded to the entry into force of the new reduced limitation period of three years for submitting, on the one hand, claims for repayment of overpaid VAT, namely 4 December 1996 and, on the other hand, claims for the deduction of input VAT, namely 1 May 1997. Those VAT claims are now known as ‘Fleming claims’. Section 121 of the 2008 Act codified those limitation periods for those two types of claim.

13It is apparent from the order for reference that in the month of June 2006 the Court of Appeal (England & Wales) (Civil Division) (United Kingdom) held that certain supplies by Compass of cold food catering, on which Compass had been charging and accounting for VAT, were not liable to VAT. That court held that those supplies were zero-rated under national law, pursuant to the derogation permitted by Article 28(2) of the Sixth Directive.

14The Commissioners therefore accepted that Compass had overpaid VAT. In January 2008, Compass submitted claims for the recovery of overpaid output tax for the periods from 1 April 1973 to 2 February 2002.

15The Commissioners repaid the VAT overpaid by Compass for the periods from 1 April 1973 to 31 October 1996. They refused, on the other hand, claims for repayment of VAT overpaid by that company for the remaining periods on the grounds that those claims were time-barred. They took the view that the three-year limitation period started to run on 4 December 1996 for the accounting periods ending from that date and that it had expired on the date on which Compass’s claims were filed. As the referring court has stated, the periods at issue in the case in the main proceedings are, therefore, limited to the two accounting periods ending after 4 December 1996 and before 1 May 1997, Compass not disputing that the limitation period had validly run after the latter date.

16Compass then brought an action before the First-tier Tribunal (Tax Chamber) (United Kingdom) against the refusal of the Commissioners to repay Compass the VAT overpaid in respect of those two accounting periods. In support of that action, Compass maintains that the difference in treatment between a claim for repayment of output tax, such as the claim it brought, and a claim for the deduction of input tax is contrary to the principle of equal treatment. According to Compass, there is no reason why, in respect of those same accounting periods, a taxable person may introduce a claim for the deduction of VAT but not a claim for repayment of overpaid VAT. The temporal discrepancy under the UK legislation as to the date from which the limitation period of three years comes into force, which thus establishes a difference in treatment between those two types of claim and which arose through happenstance from the history of the litigation giving rise to the enactment of the limitation period concerned, is not objectively justified.

17In those circumstances, the First-Tier Tribunal (Tax Chamber) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Does the UK’s different treatment of output tax Fleming claims (which could be made for periods ending before 4 December 1996) and input tax Fleming claims (which could be made for periods ending before 1 May 1997 — i.e. later than output tax Fleming claims) result in:

a breach of the EU law principle of equal treatment; and/or

a breach of the EU law principle of fiscal neutrality; and/or

a breach of the EU law principle of effectiveness; and/or

a breach of any other relevant EU law principle?

If the answer to any of Question 1(a) to 1(d) is affirmative, how should output tax Fleming claims relating to the period from 4 December 1996 to 30 April 1997 be treated?’

Consideration of the questions referred

The first question

18By its first question, the referring court asks, in essence, whether the principles of fiscal neutrality, equal treatment and effectiveness preclude national legislation, such as that at issue in the main proceedings, which, in the context of a reduction in the limitation period, lays down different transitional periods, on the one hand, for claims for repayment of overpaid VAT and, on the other hand, for claims for deduction of input VAT, so that claims relating to two three-month accounting periods are subject to different limitation periods depending on whether they concern the repayment of overpaid VAT or the deduction of input VAT.

19As is clear from the decision to refer, in accordance with section 80(4) and section 25(6) of the 1994 Act, itself implemented by Regulation 29(1A) of the Value Added Tax Regulations 1995, in its version applicable at the time of the facts at issue in the main proceedings, to which section 121 of the 2008 Act refers, claims for repayment of overpaid VAT and claims for the deduction of input VAT are subject to the same reduced limitation period of three years. By contrast, the date from which that period becomes applicable, as results from the transitional periods laid down in section 121 of the 2008 Act which codified the Commissioners’ practice — periods intended to comply with EU law as explained in paragraphs 10 to 12 above — is different for those two types of claims. On the one hand, under section 121(1) of the 2008 Act that three-year limitation period does not apply to a claim for repayment of overpaid VAT for an amount brought into account, or paid, for a prescribed accounting period ending before 4 December 1996 if the claim is made before 1 April 2009. On the other hand, section 121(2) provides that the limitation period does not apply to a claim for deduction of input VAT that became chargeable in an accounting period ending before 1 May 1997 if the claim is made before 1 April 2009.

20It is clear from the order for reference that the claim for repayment of overpaid VAT made by Compass was rejected on the basis of section 121(1) of the 2008 Act and the three-year limitation period applicable to prescribed accounting periods ending after 4 December 1996 which that section lays down. The situation would have been different if a company had made a claim for deduction of input VAT, the three-year limitation period relating to that type of claim being applicable only to accounting periods ending after 1 May 1997.

21In the first place, it should be recalled that, according to settled case-law, the principle of fiscal neutrality precludes in particular treating similar goods or supplies of services, which are thus in competition with each other, differently for VAT purposes (judgments of 3 May 2001, Commission v France, C‑481/98, EU:C:2001:237, paragraph 22, and of 10 November 2011, The Rank Group, C‑259/10 and C‑260/10, EU:C:2011:719, paragraph 32).

22Nothing in the file submitted to the Court by the referring court permits the inference that for VAT purposes the services supplied by Compass were treated differently to similar supplies by a competing trader.

23As the Advocate General stated in point 54 of his Opinion, the Commissioners applied the provisions governing the time limits to all applicants, including Compass, depending on the nature of their claims, according to whether they were for repayment of overpaid VAT or for deduction of input VAT.

24In the second place, regarding the principle of equal treatment, the Court has held that, although infringement of the principle of fiscal neutrality — which is the reflection, in matters relating to VAT, of the principle of equal treatment — may be envisaged only as between competing traders, infringement of the general principle of equal treatment may be established, in matters relating to tax, by other kinds of discrimination which affect traders who are not necessarily in competition with each other but who are nevertheless in a similar situation in other respects (see, to that effect, judgment of 10 April 2008, Marks & Spencer, C‑309/06, EU:C:2008:211, paragraph 49).

25According to settled case-law, a breach of the principle of equal treatment as a result of different treatment presupposes that the situations concerned are comparable, having regard to all the elements which characterise them (judgment of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 25). The elements which characterise various situations, and hence their comparability, must in particular be determined and assessed in the light of the subject matter of the provisions in question and of the aim they pursue, whilst account must be taken for that purpose of the principles and objectives of the field to which the measure at issue relates (see, to that effect, judgment of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 26, and the judgment of 7 March 2017, RPO, C‑390/15, EU:C:2017:174, paragraph 42).

26It is therefore necessary to examine whether, in the light of the limitation periods laid down in section 121 of the 2008 Act, the situation of a trader, such as Compass, who seeks repayment of VAT overpaid to the tax authorities is comparable to that of another trader who claims deduction of input VAT from the same authorities.

27In that regard, Compass submits that the situation of a trader who claims repayment of overpaid VAT is comparable to that of a trader who claims deduction of input VAT, on the ground, inter alia, as is said to be apparent from the judgment of 10 April 2008, Marks & Spencer (C‑309/06, EU:C:2008:211), that those two traders are holders of VAT credits against the tax authorities. On the other hand, the United Kingdom and the European Commission argue that those situations are not comparable given the different legal nature of the rights on which those two types of claims are based.

28In order to determine whether those situations are comparable, it is necessary, first, to establish the elements which characterise a claim for repayment of overpaid VAT, such as that of Compass. In that regard, it should be recalled that the Sixth Directive does not contain any provisions relating to the adjustment, by the issuer of the invoice, of VAT which has been wrongly invoiced. In those circumstances, it is in principle for the Member States to lay down the conditions under which wrongly invoiced VAT may be adjusted (see, to that effect, judgment of 19 September 2000, Schmeink & Cofreth and Strobel, C‑454/98, EU:C:2000:469, paragraphs 48 and 49, and judgment of 11 April 2013, Rusedespred, C‑138/12, EU:C:2013:233, paragraph 25).

29It is settled case-law of the Court that the right to a refund of charges levied in a Member State in breach of rules of EU law is the consequence and complement of the rights conferred on individuals by provisions of EU law as interpreted by the Court (see, inter alia, judgments of 9 November 1983, San Giorgio, 199/82, EU:C:1983:318, paragraph 12; of 8 March 2001, Metallgesellschaft and Others, C‑397/98 and C‑410/98, EU:C:2001:134, paragraph 84, and of 19 July 2012, Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraph 24). The Member State is therefore required, in principle, to repay charges levied in breach of EU law (see, inter alia, judgments of 14 January 1997, Comateb and Others, C‑192/95 to C‑218/95, EU:C:1997:12, paragraph 20, and of 19 July 2012, Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraph 24).

30The claim for repayment of overpaid VAT concerns the right to recovery of sums paid but not due which, according to settled case-law, helps to offset the consequences of the tax’s incompatibility with EU law by neutralising the economic burden which that tax has wrongly imposed on the trader who, in fact, has ultimately borne it (see, to that effect, judgment of 20 October 2011, Danfoss and Sauer-Danfoss, C‑94/10, EU:C:2011:674, paragraph 23).

31Therefore, it should be noted that the element which characterises such a right to repayment, and from which it originates, is an overpayment to the tax authorities by a taxable person of an amount of VAT in breach of EU law. It is specifically the fact that the VAT is not due which underlies the right to recover and ensures, in accordance with conditions laid down in the national law of each Member State, having regard to the principles of equivalence and effectiveness, that the economic burden arising from that payment is neutralised in respect of that taxable person.

32Secondly, as regards the elements which characterise a claim for deduction of input tax, it should be observed that, whereas the right to repayment of overpaid VAT derives from general principles of EU law, as the Advocate General noted in paragraph 59 of his Opinion and as is apparent from paragraphs 29 and 30 above, the right to deduct input VAT is laid down in Article 17 et seq. of the Sixth Directive.

33The Court has already held that the right of taxable persons to deduct VAT due or paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT established by EU law. The right to deduct VAT is, therefore, an integral part of the VAT scheme and in principle may not be limited (see, inter alia, judgments of 6 December 2012, Bonik, C‑285/11, EU:C:2012:774, paragraphs 25 and 26, and the judgment of 22 June 2016, Gemeente Woerden, C‑267/15, EU:C:2016:466, paragraphs 30 and 31).

34The deduction rules thus established are intended to free the taxable person completely of the burden of the VAT accruing or paid in all its economic activities. The common system of VAT therefore ensures that all economic activities, whatever their purpose or results, provided that they are, in principle, themselves subject to VAT, are taxed in a neutral way (judgments of 14 February 1985, Rompelman, 268/83, EU:C:1985:74, paragraph 19; of 6 July 2006, Kittel and Recolta Recycling, C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 48; and of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 43).

35Thus, the Court has already held that the right to deduct can be exercised only in respect of taxes actually due and cannot be extended to VAT invoiced though not due and paid to the tax authorities (see, to that effect, judgment of 15 March 2007, Reemtsma Cigarettenfabriken, C‑35/05, EU:C:2007:167, paragraphs 23 and 27, and of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 47).

36Therefore, unlike the element characterising the right to repayment of overpaid VAT, the right to deduct VAT, which is a right inherent in the VAT scheme established by the common system of VAT, is based on the existence of a tax that is due.

37It follows from the foregoing that, whilst the right to repayment of overpaid VAT is intended to remedy a situation which stems from an infringement of EU law by permitting the beneficiary of that right to neutralise an economic burden which is wrongly imposed, the right to deduct input VAT stems from the actual application of the common system of VAT, so that the VAT payable or paid is not borne by the taxable person in his economic activities that are subject to VAT, thus ensuring neutrality of taxation of those activities.

38As the Advocate General observed in point 60 of his Opinion, such a difference in the nature of the rights at issue and the objectives pursued justifies the existence of legal rules specific to each of those two rights, inter alia, as regards their content and the conditions for their exercise, such as the limitation period for actions to enforce those rights and, specifically, the date from which such a period applies.

39Therefore, the fact that the view may be taken, as Compass states in its written observations, that the holder of the right to repayment of overpaid VAT and the holder of the right to deduct of input VAT are both holders of a VAT credit against the tax authorities cannot in itself lead to the conclusion that their situation is comparable for the purpose of the application of the principle of equal treatment in taxation matters, given the fundamental differences as regards both the objectives pursued by the legal rules governing those rights and the elements which characterise them. Having regard to those differences, the national tax authorities are not required to treat the holders of those rights in the same way in respect of the limitation periods for claims concerning those rights, nor, in particular, to provide an identical date for the entry into force or application of a new limitation period.

40Furthermore, concerning the judgment of 10 April 2008, Marks & Spencer (C‑309/06, EU:C:2008:211), cited by Compass in its written observations, as referred to in paragraph 27 above, it is indeed true that the Court stated, in paragraph 50 of that judgment, that the general principle of equal treatment applies in a situation where traders are all holders of VAT credits, seek to obtain repayment from the tax authorities and find that their claims for a refund are treated differently. However, the Court’s interpretation of EU law in that judgment concerned a situation in which the traders all sought to obtain repayment of VAT which they had overpaid to the tax authorities and saw their claims for repayment treated differently. Thus, having regard to the differences between the facts at issue in that judgment and those at issue in the main proceedings, the Court’s interpretation in that judgment cannot call into question the interpretation that the right to repayment of overpaid VAT and the right to deduction of input VAT are different in nature.

41It follows from the foregoing that under the transitional periods concerning limitation laid down in section 121 of the 2008 Act, established, as is apparent from paragraph 19 above, to ensure that the right to repayment is effective and to comply with EU law, the situation of a trader, such as Compass, who seeks repayment of VAT which it has overpaid to the national tax authorities is not comparable to that of another trader who claims deduction of input VAT from those same authorities. The principle of equal treatment, therefore, does not preclude those two situations from being treated differently as regards the time limits resulting from those transitional periods.

42Thirdly, as regards consideration of the first question in the light of the principle of effectiveness, it should be recalled that the Court has stated that it is compatible with EU law to lay down reasonable time limits for bringing proceedings in the interests of legal certainty which protects both the taxpayer and the authorities concerned. Such periods are not by their nature liable to make it virtually impossible or excessively difficult to exercise the rights conferred by EU law, even if the expiry of those periods necessarily entails the dismissal, in whole or in part, of the action brought (see, to that effect, judgments of 17 July 1997, Haahr Petroleum, C‑90/94, EU:C:1997:368, paragraph 48, and of 8 September 2011, Q-Beef and Bosschaert, C‑89/10 and C‑96/10, EU:C:2011:555, paragraph 36). In that context, a national limitation period of three years appears to be reasonable (see, to that effect, judgments of 11 July 2002, Marks & Spencer, C‑62/00, EU:C:2002:435, paragraph 35, and of 15 April 2010, Barth, C‑542/08, EU:C:2010:193, paragraph 28.)

43Furthermore, the Court has already held, in paragraph 38 of its judgment of 11 July 2002, Marks & Spencer (C‑62/00, EU:C:2002:435), that national legislation reducing the period within which repayment of sums collected in breach of EU law may be sought is not incompatible with the principle of effectiveness, provided not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation.

44It must be held, as the United Kingdom states in its written observations, that a provision, such as section 121 of the 2008 Act, which lays down transitional periods for the application of reduced limitation periods for claims for repayment of overpaid VAT and claims for the deduction of input VAT, meets the conditions set out by the Court in the judgment of 11 July 2002, Marks & Spencer (C‑62/00, EU:C:2002:435).

45The fact that the transitional periods concerning the date from which new reduced limitation periods become applicable are different depending on whether they concern one or other of the periods which apply to those two types of claim can have no effect whatsoever on such a conclusion, in so far as, when implemented, those periods do not render impossible or excessively difficult the repayment of overpaid VAT and the deduction of input VAT. Since, in the situation at issue in the main proceedings, the reduction of the limitation period for the two types of claim at issue applies from 4 December 1996 for the first type and from 1 May 1997 for the second type, as was observed in paragraph 12 above, such a reduction, which did not have retrospective effect because of the transitional periods, allowed litigants, such as Compass, to have an actual period of three years to submit their claims for periods after 4 December 1996 for the first type and 1 May 1997 for the second type, respectively. Therefore, it must be held that the periods at issue in the main proceedings are reasonable, with the result that the principle of effectiveness does not preclude such legislation.

46It follows from the foregoing considerations that the answer to the first question is that the principles of fiscal neutrality, equal treatment and effectiveness do not preclude national legislation, such as that at issue in the main proceedings, which, in the context of the reduction of the limitation period, on the one hand, for claims for overpaid VAT and, on the other hand, for claims for deduction of input VAT, provides different transitional periods, with the result that claims relating to two accounting periods of three months are subject to different limitation periods depending on whether they concern the repayment of overpaid VAT or the deduction of input VAT.

The second question

47In the light of the answer to the first question, there is no need to answer the second question.

Costs

48Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fourth Chamber) hereby rules:

The principles of fiscal neutrality, equal treatment and effectiveness do not preclude national legislation, such as that at issue in the main proceedings, which, in the context of the reduction of the limitation period, on the one hand, for claims for overpaid value added tax and, on the other hand, for claims for deduction of input value added tax, provides different transitional periods, with the result that claims relating to two accounting periods of three months are subject to different limitation periods depending on whether they concern the repayment of overpaid value added tax or the deduction of input value added tax.

Signatures

von Danwitz

Juhász

Vajda

Jürimäe

Lycourgos

Delivered in open court in Luxembourg on 14 June 2017.

A. Calot Escobar

Registrar

T. von Danwitz

President of the Fourth Chamber

¹ Language of the case: English.

OPINION OF ADVOCATE GENERAL

CAMPOS SÁNCHEZ-BORDONA

delivered on 2 March 2017 ¹

‛VAT — Tax paid but not due — Detailed rules on repayment — National legislation introducing a limitation period — Difference in relation to the period laid down for repayment of deductions wrongly refused — Principles of equal treatment, fiscal neutrality and effectiveness’

1Is it acceptable under EU law for the limitation periods applicable to claims for repayment of value added tax (VAT) paid but not due to differ, as regards the date on which they were brought into force, from those applicable to claims for deduction of VAT? That is, in short, the question submitted by a United Kingdom court in a dispute between Compass Contract Services (UK) Ltd (‘Compass’) and the national tax authorities.

2In its judgment of 11 July 2002, Marks & Spencer, ² the Court held that national legislation (such as the Finance Act 1997) which retroactively reduced from six to three years the period within which repayment could be sought of VAT collected in breach of Directive 77/388/EEC was incompatible with the principles of effectiveness and of the protection of legitimate expectations. ³

3In the light of that judgment, the United Kingdom legislature subsequently provided that that reduction of the period would not apply to claims for repayment of VAT relating to tax periods preceding the date on which the reduced period was introduced. The same provision was later adopted in relation to (late) claims for deduction of input tax.

4However, administrative practice and successive legislative interventions have resulted in different treatment in the United Kingdom with regard to the date from which the limitation period applies for some claims (those for repayment of VAT) and the date from which it applies for others (those for deduction of VAT). The referring court asks the Court of Justice whether that difference is compatible with the principles of EU law, in particular, with the principle of equal treatment.

I – Legislative framework

A – EU law

Sixth Directive:

5Under the heading ‘Origin and scope of the right to deduct’, Article 17 provides:

‘1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.

2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

[VAT] due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;

[VAT] due or paid in respect of imported goods;

[VAT] due under Articles 5(7)(a) and 6(3).

…’

6Article 18, headed ‘Rules governing the exercise of the right to deduct’, provides:

‘1. To exercise his right to deduct, the taxable person must:

in respect of deductions under Article 17(2)(a), hold an invoice, drawn up in accordance with Article 22(3);

in respect of deductions under Article 17(2)(b), hold an import document, specifying him as consignee or importer, and stating or permitting calculation of the amount of tax due;

in respect of deductions under Article 17(2)(c), comply with the formalities established by each Member State;

when he is required to pay the tax as a customer or purchaser where Article 21(1) applies, comply with the formalities laid down by each Member State.

2. The taxable person shall effect the deduction by subtracting from the total amount of value added tax due for a given tax period the total amount of the tax in respect of which, during the same period, the right to deduct has arisen and can be exercised under the provisions of paragraph 1.

…

3. Member States shall determine the conditions and procedures whereby a taxable person may be authorised to make a deduction which he has not made in accordance with the provisions of paragraphs 1 and 2.

4. Where for a given tax period the amount of authorised deductions exceeds the amount of tax due, the Member States may either make a refund or carry the excess forward to the following period according to conditions which they shall determine.

…’

B – National law

7The history of the legislation on VAT, up to the Finance Act 1997, was set out in the judgment in M&S I. ⁴

8Article 11A(1)(a) of the Sixth Directive was not properly implemented in the United Kingdom until 1 August 1992, when the Finance (No 2) Act 1992 amended section 10(3) of the Value Added Tax Act 1983.

9The latter provision is now worded as follows:

‘If the supply is for a consideration not consisting or not wholly consisting of money, its value shall be taken to be such amount of money as, with the addition of the tax chargeable, is equivalent to the consideration.’

10As regards the legislation on repayment of amounts of VAT unduly paid, the relevant provisions of section 24 of the Finance Act 1989 provided (with effect from 1 January 1990) as follows:

Where a person has paid an amount to the Commissioners [ ⁵] by way of value added tax which was not tax due to them, they shall be liable to repay the amount to him.

The Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose.

…

No amount may be claimed under this section after the expiry of six years from the date on which it was paid, except where subsection (5) below applies.

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 six years from the date on which the claimant discovered the mistake or could with reasonable diligence have discovered it.

…

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.

…’

11Section 24 of the Finance Act 1989 was repealed and replaced by section 80 of the Value Added Tax Act 1994 with effect from 1 September 1994. The material parts of section 80 follow the wording of section 24 almost exactly.

12On 18 July 1996, a Government minister, Her Majesty’s Paymaster General, announced in Parliament that, in view of the increasing risk for the Treasury posed by claims for the refund of sums wrongly collected by way of tax, it was the Government’s intention in the 1997 Finance Bill to alter the limitation period for refund claims concerning VAT and other indirect taxes, reducing it to three years. The new limitation period was intended to apply immediately to claims already made on the date of the announcement so as to prevent the change in the law being deprived of its effect by the passage of time before the parliamentary process could be concluded.

13On 4 December 1996, the House of Commons voted in favour of the Government’s budget proposals, including the proposal announced on 18 July 1996, which was included in the 1997 Finance Bill as section 47.

14The Finance Act 1997 was enacted on 19 March 1997. Section 47(1) of the Act amended section 80 of the Value Added Tax Act 1994. Subsection (5) was repealed and subsection (4) was amended so as to provide as follows:

‘The Commissioners shall not be liable, on a claim made under this section, to repay any amount paid to them more than three years before the making of the claim.’

15Section 47(2) of the Finance Act 1997 provides:

‘... subsection (1) above shall be deemed to have come into force on 18 July 1996 as a provision applying, for the purposes of the making of any repayment on or after that date, to all claims under section 80 of the Value Added Tax Act 1994, including claims made before that date and claims relating to payments made before that date.’

16In accordance with section 25(6) of the Value Added Tax Act 1994, a deduction of input tax under subsection (2) of that section and payment of a VAT credit cannot be made except on a claim made at the time and in the manner stipulated in regulations.

17Regulation 29(1A) of the Value Added Tax Regulations 1995, in the version which was in force between 1 May 1997 and 31 March 2009, ⁶ provides that the tax authorities must not accept any claim for deduction of input tax lodged more than three years after the date by which the return for the prescribed accounting period was required to have been filed.

18Pursuant to section 121(1) of the Finance Act 2008, the requirement in section 80(4) of the Value Added Tax Act 1994 does not apply to a claim in respect of an amount brought into account, or paid, for a prescribed accounting period ending before 4 December 1996 if the claim is made before 1 April 2009.

19In accordance with section 121(2) of the Finance Act 2008, section 25(6) of the Value Added Tax Act 1994 does not apply to a claim for deduction of input tax that became chargeable in a prescribed accounting period ending before 1 May 1997 if the claim is made before 1 April 2009.

20Under section 121(4) of the Finance Act 2008, that provision entered into force on 19 March 2008.

II – The facts

21Compass is a company which supplies cold food and, in June 2006, it was judicially recognised that certain services on which it had charged and accounted for VAT in previous tax periods were, in fact, exempt from that tax.

22In particular, the United Kingdom courts held that those services qualified for the exemption corresponding to Article 28(2) of the Sixth Directive. The Commissioners therefore accepted that Compass had overpaid VAT.

23In January 2008, Compass sought repayment of the output tax overpaid between 1 April 1973 and 2 February 2002.

24The Commissioners agreed to repay the sums paid but not due between 1 April 1973 and 31 October 1996, arguing that the right to claim the remaining sums was time-barred.

25Compass appealed against the Commissioners’ decision to the First-tier Tribunal (Tax Chamber), United Kingdom, complaining about the difference in treatment between claims for a refund of wrongly paid VAT, on the one hand, and claims for deduction of VAT, on the other.

26That difference in treatment consists of the fact that the former can succeed only if they relate to tax periods which ended before 4 December 1996, whereas the time limit for the latter runs until 1 May 1997.

27Therefore, the main proceedings are concerned solely with the repayment of VAT wrongly paid between 1 November 1996 and 30 April 1997 (tax quarters 04/96 and 01/97).

28Against that background, the court seised of the dispute has made a reference to the Court for a preliminary ruling.

III – The questions referred for a preliminary ruling

29The questions referred for a preliminary ruling, on 25 January 2016, are worded as follows:

Does the UK’s different treatment of output tax Fleming claims (which could be made for periods ending before 4 December 1996) and input tax Fleming claims (which could be made for periods ending before 1 May 1997 — i.e. later than output tax Fleming claims) result in:

a breach of the EU law principle of equal treatment; and/or

a breach of the EU law principle of fiscal neutrality; and/or

a breach of the EU law principle of effectiveness; and/or

a breach of any other relevant EU law principle?

If the answer to any of Question 1(a) to 1(d) is affirmative, how should output tax Fleming claims relating to the period from 4 December 1996 to 30 April 1997 be treated?’

IV – Procedure before the Court of Justice and the arguments of the parties

30Compass, the United Kingdom Government and the Commission entered an appearance in the proceedings, submitting written observations and presenting oral argument at the hearing, held on 8 December 2016.

31In Compass’s submission, the first question should be answered in the affirmative. The difference in treatment complained of cannot be justified in accordance with the principle of equal treatment, because the two situations compared concern repayment of a ‘VAT credit’. Compass argues that the underlying rationale of the national provisions on the retroactive limitation period demonstrates that the Commissioners were seeking to apply that limitation period to all claims for repayment of VAT overpaid.

32In relation to the principle of neutrality, Compass maintains that it has received treatment less favourable than that of its hypothetical competitors entitled to deduct VAT during the period at issue.

33As regards the second question, Compass contends that, in accordance with the judgment of 10 April 2008, Marks & Spencer, ⁷ the referring court should apply to it the same limitation period as that applicable to claims for deduction of VAT, as a more favourable provision. Not to do so, it adds, would constitute a breach of the principle of effectiveness.

34The United Kingdom Government submits that, in the light of the questions referred, the only relevant principle is that of equal treatment. In the circumstances of the case, that principle does not preclude the difference in treatment of which Compass complains, since its situation is not comparable to that of a person submitting a ‘late’ claim for deduction of VAT. The two situations differ, in its opinion, both in their circumstances and in their legal nature.

35As regards the circumstances, the United Kingdom Government contends that the difference derives from the fact that the respective caps (three years in both cases) were introduced at different times, after the judgment in M&S I found that there had been an infringement of EU law. ⁸ To remedy that infringement, section 121 of the Finance Act 2008 provided for a transitional period, taking as the reference dates the first dates on which the United Kingdom could reduce the limitation periods with immediate effect, those being the dates on which the provisions relating to the reduction of the limitation period from six to three years applied.

36As regards the legal nature of the two types of claim, the United Kingdom Government argues that the right to obtain the sum claimed in respect of VAT paid but not due does not, by definition, derive from the VAT system or the VAT directives but from general EU law. By contrast, the right to deduct derives exclusively from the VAT directives, pursuant to which a person liable to VAT, who has paid or must pay VAT to a third person, also liable to VAT, from whom he has received certain good or services, is authorised to deduct the VAT paid (or to obtain the corresponding credit). Proof of the legal difference between the two situations is the fact that EU law grants the tax authorities the right to invoke unjust enrichment in the former but not in the latter.

37The United Kingdom Government also submits that the phrase ‘VAT credit’ used in M&S II, is not strictly speaking a legal definition but rather a form of expression.

38The United Kingdom Government further observes that the judgment in M&S II did not concern the national rules amended in 2005 and applied to Compass. Since that amendment, the two kinds of claim have been afforded the same treatment, while Compass has not established that anyone in the same situation as it has received different, more favourable treatment.

39The United Kingdom Government concludes that the national legislation at issue does not offend against the principle of effectiveness or that of protection of legitimate expectations, for the incompatibility with EU law identified in M&S I was remedied by the introduction of transitional rules.

40The Commission argues that tax legislation (like that in the present case) may provide for different periods without infringing the principle of neutrality or the general principles of EU law. In relation to the former, the Commission claims that that principle may be found to have been infringed only if there is a difference in treatment between competing traders, which happened in the circumstances of M&S II but not in those of this case.

41In the same way as the absence of competing traders would mean that there was no infringement of the principle of neutrality, the presence of traders who are in a comparable situation could lead to an infringement of the principle of equal treatment. For the Commission, however, this case involves two situations that cannot be considered to be similar: there is an objective, substantial difference between the two kinds of claim, in that they concern different levels of economic activity and are also governed by different rules. This follows, according to the Commission, from the case-law laid down in Reemtsma Cigarettenfabrike. ⁹

42The Commission argues, lastly, that the mention of the principle of effectiveness is inappropriate, since, again, claims like Compass’s cannot be placed on the same footing as claims for deduction. And as regards the principle of equivalence, it will be for the referring court to determine whether it is applicable, bearing in mind that, in accordance with the case-law, that principle may not be interpreted as obliging a Member State to extend its most favourable national rules to all actions brought in a certain area of law.

V – Analysis

A – Introductory remarks. The historical and legislative context of the situation at issue

43As noted by the referring court ¹⁰ and emphasised by the United Kingdom Government, ¹¹ in order to understand the different treatment, under section 121 of the Finance Act 2008, of claims for repayment of overpaid VAT, on the one hand, and claims to deduct VAT, on the other, it is necessary to look at the origins of the three-year limitation period and the chronology of the legal challenges made to it.

44According to the account given by the referring court and by the United Kingdom Government, section 121 of the Finance Act 2008 represents the culmination of a series of legislative actions beginning with the announcement by the United Kingdom Government, on 18 July 1996, of its intention of amending section 80 of the Value Added Tax Act 1994. ¹² The national legislature approved the Government’s bill on 4 December 1996.

45The Commissioners initially took the view that the new three-year period did not apply to claims for deduction of VAT. However, with effect from 1 May 1997, the VAT Regulations 1995 were amended so that that period also applied to such claims.

46In the light of the judgment in M&S I, ¹³ which held that the reduction (from six to three years), with retroactive effect, of the period for claiming a refund of VAT paid but not due was contrary to EU law, the United Kingdom courts decided (in what is called the ‘Fleming case-law’) ¹⁴ that that cap was to be applied by means of a transitional period and be extended to claims for deduction of VAT.

47On the basis of that case-law, the Commissioners decided:

to allow claims relating to wrongly paid VAT for accounting periods before 4 December 1996 (the date of amendment of section 80 of the Value Added Tax Act 1994, which initially concerned only that type of claim); and

also to allow claims for deduction for accounting periods before 1 May 1997 (date of amendment of the Value Added Tax Regulations 1995, which put into effect the three-year period for such claims).

48Following judicial approval of that administrative practice, the Finance Act 2008 finally gave legislative backing to the solution reached, providing that it was to apply to claims made before 1 April 2009.

49This is the background against which the referring court has submitted its questions. By the second question, if the first question should be answered in the affirmative, the referring court asks how claims for repayment of overpaid VAT submitted in the period between the two dates should be treated.

B – The first question referred

50The referring court asks, in short, whether it is contrary to EU law for a national measure, in laying down rules governing the transitional period applicable to reduced limitation periods, to treat claims for repayment of overpaid VAT differently from claims for deduction of VAT. ¹⁵ In the referring court’s view, that difference in treatment may be contrary to several principles of EU law.

51In particular, the referring court refers to the principles of equal treatment, fiscal neutrality and effectiveness, and to ‘any other relevant EU law principle’; the latter phrase would permit account to be taken of the principles of equivalence ¹⁶ and of the protection of legitimate expectations. ¹⁷

52However, I agree with the United Kingdom Government ¹⁸ that the dispute in the main proceedings has focused (and so, I think, should the reply to the question too) on the difference between the rules applied to the one kind of claim and the other respectively, that is, on a possible infringement of the principle of equal treatment. I believe that, in this case, the other principles mentioned by the referring court have a merely incidental effect.

53The principle of neutrality, fundamental to the common system of VAT, ¹⁹ prohibits similar goods or services — which, precisely because of that similarity, are deemed to be in competition with each other ²⁰ — being treated differently for VAT purposes. ²¹ I agree with the stance of the Commission ²² and the United Kingdom Government ²³ when they state that that was not the case here.

54In particular, it has not been established that the Commissioners treated the services supplied by Compass differently from similar services supplied by its competitors. The provisions governing the time limits were applied in the same way to all those suppliers, including Compass, depending on the nature of their claims (whether for repayment or deduction).

55The principle of fiscal neutrality is simply the translation into the sphere of VAT of the principle of equal treatment. ²⁴ The latter applies not only between competing traders but also between traders who are not necessarily in competition with each other but are nevertheless in a similar situation in other respects, ²⁵ which brings the analysis back to the principle of equal treatment.

56In short, it has to be determined:

whether the situation of a person who, like Compass, claims a refund of overpaid VAT is comparable to that of one who, while not necessarily a competitor of Compass, claims deduction of VAT; and

whether, if the two claims should be held to be similar, the difference in treatment is justified if the law sets for the exercise of each of them limitation periods that, while identical, nonetheless start on different dates.

1. The difference between the nature of the right to a refund of VAT and the right to deduct VAT

57The United Kingdom Government and the Commission maintain that, conceptually, a claim for a refund of overpaid VAT cannot be considered equivalent to a claim for deduction of VAT. I believe that they are right and, in fact, Compass does not even deny that there are differences between the two kinds of claim, because they are so obvious as hardly to admit of any argument. ²⁶

58The right to deduct VAT is a basic principle of the common system of VAT established by the European Union. The Court has stated that the deduction system ‘is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities’. In that way, ‘neutrality of taxation of all economic activities, whatever the purpose or results of those activities, provided that they are themselves subject to VAT’ is ensured. ²⁷

59For its part, the right to a refund of overpaid VAT — which, by contrast to the above, does not derive from the VAT directives but from general EU law ²⁸ — ‘helps to offset the consequences of the duty’s incompatibility with EU law by neutralising the economic burden which that duty has unduly imposed on the operator who, in the final analysis, has actually borne it’. ²⁹

60It is logical that those differences on points of principle should lead to legal rules governing each of those two rights that reflect their differences. Both may, therefore, be framed in such a way that they differ as regards their content and the conditions for their exercise, having regard to the aim for which they were instituted by law.

61That very diversity explains, for example, the fact that, under certain conditions, it is not contrary to EU law for a national legal system to refuse repayment of charges levied but not due when to allow it could lead to unjust enrichment of the recipients, ³⁰ a criterion not applicable to the deduction of VAT.

62As EU law now stands, given that there are no harmonised rules in this respect, it is for each Member State to lay down the conditions under which claims for repayment of taxes may be made; those conditions must observe the principles of equivalence and effectiveness. ³¹ However, in the field of VAT, the Sixth Directive defines, in Article 20, the conditions which must be met in order that deduction of input taxes may be adjusted at the level of the person to whom goods or services have been provided. ³²

63Taking those differences into account, therefore, the respective positions of the holders of each of those rights are not comparable and, as a result, the requirements of the principle of equal treatment may not be extended to those positions. The Member States may introduce different rules (on, inter alia, the periods within which the respective claims must be made and on the time-barring of the right to make a claim) for a refund of overpaid VAT, that may differ from those applicable to the deduction of input VAT. EU law does not, I repeat, require the two kinds of national rules to be identical.

64Notwithstanding their specific and particular features, the two positions may be based on a common denominator: in both cases, they are rights entitling the holders to demand that the same institution responsible, that is, the tax authorities, should give effect to their content.

65Compass refers to that factor as an element of similarity, using the expression ‘VAT credit’, which was used in M&S II. ³³ The United Kingdom Government ³⁴ stresses the inappropriateness of that phrase which, in its view, the Court did not use as a legal definition but as a simple, practical form of expression to describe either the situation of those claiming a refund of overpaid VAT or of those claiming a deduction of VAT, ³⁵ but never the compared situation of those making the two kinds of claim.

66I believe that the United Kingdom is right to point out the context in which the meaning and scope of the term ‘VAT credit’ are to be interpreted. In that connection, however, it constitutes sufficient latitude to indicate that a person claiming a refund of overpaid VAT and a person claiming a deduction of input VAT both claim a ‘credit’ (that is, a sum of money which the creditor is entitled to demand and collect from the debtor) from the authorities. The credit position of both parties in relation to the treasury is an element that enables their positions to be compared in such a way that, from the perspective of the principle of equal treatment, a judgment can be made regarding their different treatment under national law.

67For the purposes of enforcing claims to each of those ‘credits’, account must be taken of what is provided in the respective sets of legislative rules. The tax authorities will fulfil their obligation by abiding by what the tax system provides for every right claimed. They must, therefore, observe the conditions for exercise of the right fixed by the rules defining the respective legislative spheres. Rules that not only need not necessarily be the same for every one of the rights claimed but may, on the contrary, differ precisely because they concern different rights.

68Quite apart from the conditions relating to and inherent in the subject matter of each right claimed, the key question is whether the tax authorities are entitled to impose different temporal conditions for its exercise. In other words, does the difference between the right to the refund of overpaid VAT, on the one hand, and the right to deduct VAT, on the other, allow the exercise of each right to be made subject to different time limits?

2. Justification for the different treatment of the two rights as regards the start of the limitation period established for their exercise

69The question submitted by the national court arose in the context of legislative action whose purpose was the uniform treatment of the two rights at issue: the intention was to extend to claims for deduction the reduced time limit which the national legislature had initially introduced exclusively for claims for overpaid VAT.

70As I have explained, the intended temporal uniformity of the two types of claim involved providing that the reduction of the time limit (from six to three years) introduced in December 1996 for claims for repayment of overpaid VAT would apply, with effect from May 1997, to claims for deduction. ³⁶

71The intention of providing uniform treatment for the two types of claim is openly acknowledged by the United Kingdom Government. In its submissions, it indicates that it agrees that the amendment, with effect from 1 May 1997, of regulation 29 of the Value Added Tax Regulations 1995 was intended ‘to correct the inadvertent anomaly’ consisting of the different treatment of claims for repayment and claims for deduction and ‘to ensure that all [these claims] were subject to the same 3 year cap’. ³⁷

72To avoid the breach of EU law identified by the Court in M&S I, ³⁸ the national legislature decided not to apply retroactively the new three-year period for claims, but instead to calculate that period from the time the measure entered into force, which took place on a different date for each of the two types of claim. Apart from that difference, treatment is the same for both types of claim, as the national legislature moreover intended.

73The difference at issue in the main proceedings is, therefore, the result of the unexpected consequences of legislative action intended to bring the rules governing the two types of claim into line with one another. It was, accordingly, a difference based on an objective event: the different dates of entry into force of the reduction of the period for making each type of claim.

74In my opinion, the measure adopted did not depart from the purpose that prompted it, for the period is, in any event, three years for both types of claim and only the date from which that period is to start being applied is different. I stress that, by the adoption of that measure, the United Kingdom legislature intended that the new period should apply strictly from the date on which the measure entered into force, thereby preventing any retroactive effect on claims which, until then, were subject to a six-year time limit. As the date on which the amendment entered into force was not the same for both types of claim, it seems reasonable for the cap on the retroactive effect of the new time limit (three years) to be set at a date when the old time limit (six years) still had to apply.

75The solution implemented by the national legislature de-activated the retroactive effect in peius of the amendment of the limitation period, which was essential because the Court held in M&S I ³⁹ that, otherwise, there was an infringement of EU law. In view of the difference with regard to entry into force of the three-year period, the prohibition of retroactivity, from the point of view of the principle of equal treatment, reflected the difference in treatment for each of the two types of claim, since the moment from which the new limit could be applied without giving rise to retroactive effect was different in either case.

76Whatever the aim of the amendment and the degree ⁴⁰ to which its aim of making the two limitation periods the same was achieved, the fact is that, for just a few months (December 1996 to May 1997) there was a temporal imbalance between the treatment of claims for a refund of VAT and the treatment of claims for deduction of VAT.

77Given that what is at stake in this case is a claim for repayment of VAT overpaid by Compass, the temporal imbalance, resulting from the unexpected consequences of the national legislative procedure, between the limitation period for such claims and the limitation period for claims for deduction of input VAT is not, in my view, open to objection under EU law, because:

on the one hand, as I have pointed out, EU law contains no unified or harmonised rules prevailing over national provisions governing the exercise of the right to repayment of wrongly paid VAT, it being sufficient that the latter observe the principles of equivalence and effectiveness, ⁴¹ which are not at issue in this case; and

on the other hand, neither the Sixth Directive nor the other provisions applicable to the common system of VAT require the treatment of claims for repayment of VAT (when it has been paid in error or, in general, is not due) to be the same as that of claims for deduction of input VAT.

78In short, I believe that the existence of two dates with effect from which the three-year period for each type of claim was to be applicable raises no issue of incompatibility with EU law. The United Kingdom authorities could undoubtedly have made different arrangements for the application to claims of the new temporal rules, but the way in which the limitation period for claims for a refund of VAT paid but not due was governed retroactively is not contrary to EU law, nor is the fact that that limitation period differs from the period stipulated for claims for deduction.

79I suggest, therefore, in reply to the first question referred, that it is not contrary to EU law for a national measure, like that at issue in the main proceedings, in laying down a transitional period for the introduction of reduced limitation periods applicable both to claims for repayment of overpaid VAT and to claims for deduction of input VAT, to provide that the new limitation period should start to run, for the latter, from a later date than the date fixed for it to start running for the former.

C – The second question referred

80The second question is framed in the alternative, in case the reply to the first question should be affirmative, that is, if it were to be confirmed that the treatment in the United Kingdom of the two kinds of claims breaches EU law. As I have proposed the contrary, I believe that the Court need not examine this second question. I shall, in any case, set out my observations in this regard.

81The referring court essentially asks how claims for repayment of overpaid VAT relating to the reference period (from 4 December 1996 to 30 April 1997), that is, relating to the period between the dates on which the three-year limitation period started to apply to each kind of claim (for repayment or for deduction of VAT), should be treated.

82As the Court observed in M&S II, ⁴²‘it is, in the absence of Community legislation, for the internal legal order of each Member State to designate the competent courts and lay down the detailed procedural rules for legal proceedings intended fully to safeguard the rights which individuals derive from Community law’.

83It therefore falls to the referring court to draw any conclusions from the infringement of the principle of equal treatment which may have been identified by the Court of Justice, using the guidance provided by the latter with regard to certain criteria or principles of EU law which must be complied with when that task is carried out. ⁴³

84In particular, the referring court would have to ‘set aside any discriminatory provision of national law, without having to request or await its prior removal by the legislature, and apply to members of the disadvantaged group the same arrangements as those enjoyed by the persons in the favoured category’. ⁴⁴

85Subject to the other rules of its own legal system, the referring court would have, in principle, to order that the trader affected by discrimination should receive the amount of VAT overpaid, as a remedy for the infringement of the principle of equal treatment, unless, under national law, there are other remedies available to make reparation for that infringement.

86Finally, I believe that it would not be acceptable for the unequal treatment identified to be remedied by making claims for deduction subject to the time limit stipulated for claims for repayment, in other words, by bringing forward for the former the date initially set for them (30 April 1997) and making them subject instead to the date set for the latter (4 December 1996). That would, of course, resolve the difference in treatment between the two, but with the corollary that claims for deduction would suffer the retroactive application of a time limit that, for those claims, did not enter into force until 1 May 1997. That would be contrary to the case-law laid down in M&S I. ⁴⁵

VI – Conclusion

Conclusion

87In the light of the foregoing considerations, I propose that the Court reply as follows to the questions referred for a preliminary ruling by the First-tier Tribunal (Tax Chamber), United Kingdom:

It is not contrary to EU law for a national measure, like that at issue in the main proceedings, in laying down a transitional period for the introduction of reduced limitation periods applicable both to claims for repayment of overpaid VAT and to claims for deduction of input VAT, to provide that the new limitation period should start to run, for the latter, from a later date than the date fixed for it to start running for the former.

In the alternative, were the Court to give an affirmative answer to the first question, the national court would have to draw the appropriate conclusions from infringement of the principle of equal treatment, in accordance with the rules of national law relating to temporal effects, in such a way that the remedies it grants are not contrary to EU law.

¹ Original language: Spanish.

² C‑62/00, M&S I, EU:C:2002:435.

³ Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1; ‘the Sixth Directive’).

⁴ Points 8 to 15 of this Opinion transcribe almost verbatim paragraphs 4 to 11 of the judgment in M&S I.

⁵ Tax authority with responsibility for the collection of VAT in the United Kingdom.

⁶ A period which includes the date on which Compass made its claim for repayment.

⁷ C‑309/06, M&S II, EU:C:2008:211.

⁸ C‑62/00, EU:C:2002:435.

⁹ Judgment of 15 March 2007, C‑35/05, EU:C:2007:167.

¹⁰ Points 8 to 26 of the order for reference.

¹¹ Point 4 of the United Kingdom Government’s observations.

¹² As stated above at point 12 of this Opinion, the bill was put forward in the light of the ‘increasing risk for the Treasury posed by claims for the refund of sums wrongly collected by way of tax’; the intention was to lower that risk by reducing from six to three years the period for reclaiming those sums.

¹³ C‑62/00, EU:C:2002:435.

¹⁴ According to the explanation provided by the referring court at point 4 of the order for reference, the term ‘Fleming claim’ derives from the judgment of the House of Lords in Fleming v HMRC [2008] UKHL 2. An ‘output tax Fleming claim’ is a claim under section 80 of the Value Added Tax Act 1994 in respect of a sum brought into account, or paid, by way of output tax that was not tax due for a prescribed accounting period ending before 4 December 1996. The term ‘input tax Fleming claim’ refers to a claim for deduction of input tax where the right to deduct arose in a prescribed accounting period ending before 1 May 1997.

¹⁵ As stated, while the same limitation period was established for both types of claim, the date with effect from which it applies in each case is different.

¹⁶ The Commission’s observations, points 34 to 36.

¹⁷ The United Kingdom’s observations, points 28 to 34.

¹⁸ The United Kingdom’s observations, point 8.

¹⁹ Judgment of 19 December 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 59).

²⁰ Judgment of 10 November 2011, The Rank Group (C‑259/10 and C‑260/10, EU:C:2011:719, paragraphs 33 and 34).

²¹ In that connection, judgment of 3 March 2011, Commission v Netherlands (C‑41/09, EU:C:2011:108, paragraph 66).

²² The Commission’s observations, point 20.

²³ The United Kingdom’s observations, points 25 to 27.

²⁴ Judgment of 8 June 2006, L.u.P. (C‑106/05, EU:C:2006:380, paragraph 48).

²⁵ Judgment in M&S II (C‑309/06, EU:C:2008:211, paragraph 49).

²⁶ At the hearing, Compass acknowledged that they were different species of claim although, in its view, they belonged to the same genus.

²⁷ See, for example, judgment of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774, paragraphs 25 and 27 and the case-law cited).

²⁸ The judgment of 16 May 2013, Alakor Gabonatermelő és Forgalmazó (C‑191/12, EU:C:2013:315), expresses this as follows in paragraph 22: ‘the right to a refund of charges levied in a Member State in breach of rules of EU law is the consequence and complement of the rights conferred on individuals by provisions of EU law as interpreted by the Court.’

²⁹ Ibid., paragraph 24.

³⁰ Judgment in M&S II (C‑309/06, EU:C:2008:211, paragraph 41).

³¹ In other words, the conditions for making such claims must not be less favourable than those relating to similar claims founded on provisions of domestic law or framed so as to render virtually impossible the exercise of rights conferred by the Community legal order. See, inter alia, judgment of 15 March 2007, Reemtsma Cigarettenfabriken (C‑35/05, EU:C:2007:167, paragraph 37).

³² Judgment of 15 March 2007, Reemtsma Cigarettenfabriken (C‑35/05, EU:C:2007:167, paragraph 38).

³³ C‑309/06, EU:C:2008:211, paragraph 50.

³⁴ Written observations, points 18 and 19.

³⁵ A situation in relation to which the United Kingdom Government invokes, inter alia, the judgment of 8 May 2008, Ecotrade (C‑95/07 and C‑96/07, EU:C:2008:267).

³⁶ The limitation of the retroactive reduction of the time limit for each type of claim could only be effective if the claim for either repayment or deduction was submitted before the same date, applicable to both types of claim (1 April 2009).

³⁷ The United Kingdom’s observations, point 4(b).

³⁸ C‑62/00, EU:C:2002:435.

³⁹ C‑62/00, EU:C:2002:435.

⁴⁰ I wonder whether a subsequent legislative intervention might have been possible, which, after establishing the outcome resulting from the earlier laws, corrected the temporal anomaly identified by bringing it into line with the aim of placing both types of claim on an equal footing in all respects (also with regard to the start of the limitation period).

⁴¹ See point 62 and footnote 31 of this Opinion.

⁴² C‑309/06, EU:C:2008:211, paragraph 59.

⁴³ Judgment in M&S II (C‑309/06, EU:C:2008:211, paragraph 61).

⁴⁴ Judgment in M&S II (C‑309/06, EU:C:2008:211, paragraph 63).

⁴⁵ C‑62/00, EU:C:2002:435.