The Claimants in the Royal Mail Group Litigation - Court of Appeal confirms there is no actionable private law right to compel the issue of VAT invoices

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In The Claimants in the Royal Mail Group Litigation v Royal Mail Group Ltd [2021] EWCA Civ 1173, the Court of Appeal has confirmed that the claimants have no actionable private law right to compel Royal Mail Group Ltd (Royal Mail) to issue invoices which show the amount of VAT which should have been charged in respect of services that were incorrectly treated as VAT exempt.

Before 2009, there was a general assumption that all postal services were VAT exempt. In 2009, the CJEU held in R (on the application of TNT Post UK Ltd) v HMRC (Case C-357/07) (TNT) that, while the universal postal service is VAT exempt, arrangements that are individually negotiated, such as franking and tracked delivery arrangements, are not. A group of approximately 340 companies (the Traders) were of the view that the amounts they paid for services before the UK VAT legislation was revised to comply with TNT had not been VAT exempt and claimed to be entitled to VAT invoices from Royal Mail. In the High Court, the claimants sought (a) declarations that they were entitled to VAT invoices, (b) orders that the VAT invoices be provided, and (c) damages for not having been provided with VAT invoices in respect of services which TNT confirmed were, and always had been, taxable.

The High Court found in favour of Royal Mail, concluding that there was neither a statutory duty nor a contractual obligation, enforceable by the Traders, to require a VAT invoice. We reported on the judgment of the High Court in the February 2020 edition of RPC's VAT update. The Traders appealed to the Court of Appeal.

The Court of Appeal upheld the decision of the High Court, dismissing the Traders' arguments that they had an actionable private law right to compel Royal Mail to issue invoices which show the amount of VAT which should have been charged. The Court found that, although the principle in Marleasing SA v La Comercial Internacional de Alimentación SA (Case C-106/89) requires the court to interpret domestic legislation in conformity with EU law, it does not go any further. In particular, it does not require the court to interpret domestic legislation in such a way as to give rise to a private law cause of action where no such right exists as a matter of EU law. The Court did not consider that the Marleasing principle requires a court to hold that there is a private law claim of the kind that the Traders asserted, unless Parliament had independently made it clear that such a right exists, which was not the case here.

Why it matters: If the CJEU follows the opinion of Advocate General Kokott in Zipvit Ltd (see our case commentary above), in deciding that a right of deduction requires an invoice separately stating the VAT, the Court of Appeal's judgment, in this case, will prevent the Traders from recovering their input VAT in respect of the relevant supplies. Given that the total potential recovery if the Traders ultimately succeed is in the region of £500 million, the Traders are likely to seek to appeal this judgment to the Supreme Court.

The judgment can be viewed here. https://www.bailii.org/ew/cases/EWCA/Civ/2021/1173.pdf