Aer Lingus Plc

JurisdictionUK Non-devolved
Judgment Date27 August 1992
Date27 August 1992
CourtValue Added Tax Tribunal

VAT Tribunal

Aer Lingus plc

The following cases were referred to in the decision:

British Airways plc v C & E Commrs VAT(1990) 5 BVC 97

Fine Art Developments plc; C & E Commrs v VAT(1989) 4 BVC 26

Input tax - Whether recoverable in accounting period other than that in which tax on supplies chargeable - Adjustment of errors - Whether word "error" appropriate to describe inadvertence on part of taxpayer - Notice 700, para. 69 (1987 ed.).Input tax - Claim by airline for input tax incurred on hotel bills and hire charges - Purchase of return ticket gave traveller right to room or car hire at no extra cost - Whether appellant's claim blocked because airline a tour operator - Whether UK definition and operation of tour operators' margin scheme compatible with terms used in sixth directive - Value Added Tax Act 1983,Value Added Tax Act 1983 section 37 subsec-or-para (A)sec. 37(A); SI 1987/1806 section 2 section 3 section 12Value Added Tax (Tour Operators) Order 1987 (SI 1987/ 1806), art. 2, 3 and 12; Sixth Directive 77/388 of 17 May 1977 (OJ 1977 L145/1),eu-directive 77/388 article 26art. 26.

The issues were: (1) whether the appellant was entitled to claim input tax in a period later than that in which the right to deduct arose where the failure to claim it in the correct period was a result of inadvertence on the part of the taxpayer; (2) whether the services provided in the form of the facility of a flight to and from London together with accommodation for one night and the provision of a free car were services of a kind commonly provided by tour operators or tour agents for the benefit of travellers; (3) whether the definition of the term "tour operator" in domestic legislation was incompatible with the term "travel agent" as used in the sixth directive and therefore ultra vires.

The appellant had an office in the UK and was included in a VAT group registration in this country. From 1978 it offered package tours and, since 1987, ran the executive bonus scheme. This was a scheme whereby a passenger travelling by executive class was provided with a voucher entitling him to one night's accommodation at no additional cost and a day's free car hire. In addition, the appellant would make a booking for a longer period at the traveller's expense if he so wished. Aer Lingus also arranged package trips to a number of cities throughout Europe where the overall price for the package related to the two separate ingredients of scheduled flights and the accommodation.

From 1978 until 31 March 1988 the appellant, while accounting for output tax on the supply to it of hotel accommodation and car hire, failed through inadvertence to claim input tax in the returns for the periods in which the tax was recoverable. When a claim was made in the period ended 30 November 1990 it was disallowed.

The commissioners also refused to allow input tax claimed in respect of the periods between 1 April 1988 and 31 March 1989 on the basis that the appellant was a tour operator and the applicable legislation provided only for tax payable on the margin, with a consequent non-entitlement to claim input tax.

The appellant contended that: (1) Notice 700, para. 69 (the "VAT guide") (1987 ed.) had legal force and provided for the adjustment of errors in returns for later periods; (2) the tour operators margin scheme did not apply to the services the company was supplying; and (3) if it did, the term "tour operators" did not correctly adopt the expression "travel agents" used in eu-directive 77/388 article 26art. 26of the sixth directive and, to the extent that the domestic legislation was incompatible, it was ultra vires.

The commissioners contended that: (1) where underclaims to input tax were concerned, the term "error" in para. 69 was only apt to describe conscious rather than unconscious mistakes so that inadvertent mistakes could not be corrected in a later return; (2) the appellant was a "tour operator" within the meaning of domestic legislation which closely enacted the relevant provisions of the sixth directive. Therefore input tax could not be deducted.

Held, allowing the company's appeal in part:

1. Nothing in the context of para. 69 confined the scope of the word "error" to mistakes of fact or law attributable to something other than inadvertence on the part of the taxpayer. It had the force of law and entitled the appellant to claim back the tax that he had failed to claim in the correct period.

2. The services provided by the appellant for the purposes of running the executive bonus scheme were of a kind commonly provided by tour operators or tour agents and were provided for the benefit of travellers, so that the company was a "tour operator" and acquired the services in question for the purposes of its business, supplying them...

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5 cases
  • Commissioners of Customs and Excise v Madgett and Another (t/a Howden Court Hotel) (Joined Cases C-308/96 and C-94/97)
    • United Kingdom
    • Value Added Tax Tribunal
    • 22 October 1998
    ...t/a Howden Court Hotel The following cases were referred to in the decision: Aer Lingus plc VAT(LON/90/1747) and (LON/92/1140) No. 8893; [1993] BVC 596 Marleasing SA v La Comercial Internacional de Alimentación SA(Case C-106/89) [1990] ECR I-4135[1993] 1 CEC 124 Van Ginkel Waddinxveen BV v ......
  • Bicc Plc
    • United Kingdom
    • Value Added Tax Tribunal
    • 27 January 1998
    ...Tribunal BICC plc The following cases were referred to in the decision: Aer Lingus plc VAT(LON/90/1747) and (LON/92/1140) No. 8893; [1993] BVC 596 C & E Commrs v Fine Art Developments plc VAT(1989) 4 BVC 26 Elida Gibbs Ltd v C & E Commrs VAT(Case C-317/94) [1997] BVC 80 Pepper v Hart TAX[19......
  • Victoria and Albert Museum v Commissioners of Customs and Excise
    • United Kingdom
    • Queen's Bench Division
    • 18 July 1996
    ...& Albert Museum The following cases were referred to in the decision: Aer Lingus plc VAT(LON/90/1747) and (LON/92/1140) No. 8893; [1993] BVC 596 Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53 C & E Commrs v Fine Art Developments plc VAT(1989) 4 BVC 26 Gallic Leasing Ltd v C......
  • Virgin Atlantic Airways Ltd
    • United Kingdom
    • Value Added Tax Tribunal
    • 12 January 1996
    ...Atlantic Airways Ltd The following cases were referred to in the decision: Aer Lingus plc VAT(LON/90/1747) and (LON/92/1140) No. 8893; [1993] BVC 596 Beheermaatschappij Van Ginkel Waddinxveen BV, Reis-en Passagebureau Van Ginkel BV v Inspecteur der Omzetbelasting, Utrecht (Case C-163/91) 12......
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