Bookit Ltd v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | THE VICE CHANCELLOR,The Vice Chancellor |
| Judgment Date | 28 July 2005 |
| Neutral Citation | [2005] EWHC 1689 (Ch) |
| Docket Number | Case No: CH/2005/APP/0060 |
| Court | Chancery Division |
| Date | 28 July 2005 |
[2005] EWHC 1689 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Vice Chancellor
Case No: CH/2005/APP/0060
Mr Jonathan Peacock QC (instructed by Deloitte & Touche LLP) for the Appellants
Mr Peter Mantle (instructed by HMRC Solicitor) for the Respondents
Hearing dates: 12 th and 13 th July 2005
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Odeon Ltd ("Odeon") is the holding company of a group which owns and operates almost 100 cinemas. It attracts about 673,000 customers a week. In the year 2002 its turnover was £202m. Bookit Ltd ("Bookit") is another company in the Odeon Group which, since 28th June 2002, has operated a call centre through which an intended cinemagoer ("the Customer") may book and, by the use of a debit or credit card, pay for a seat for a given future performance at a specified cinema in the chain. For the service it provides to the Customer Bookit charges a handling charge of 50p per ticket with a maximum of £2.
By a decision dated 18th September 2002 the Commissioners of Customs and Excise ("C/E") held that the supply of services by Bookit to the Customer was liable to VAT at the standard rate and required Bookit to account to them for VAT on the handling charges it received. Bookit disagreed and appealed to the VAT and Duties Tribunal (Mr Theodore Wallace and Mrs Lynneth Salisbury JP)("the Tribunal"). It contended that the supply by Bookit to the Customer was exempt pursuant to the provisions of Item 5, Group 5 of Schedule 9 to the VAT Act 1994.
This claim to exemption was rejected by the Tribunal in its decision dated 28th May 2004 ("the First Decision"). In paragraph 94 the Tribunal noted that one aspect of the matter had not been clearly explained in the evidence and gave liberty to either party to apply for permission to adduce more evidence. Bookit took the opportunity to do so and there was a further hearing before the Tribunal. On 7th December 2004 the Tribunal handed down a second decision ("the Second Decision") in which it found certain additional facts and modified some of the conclusions in the First Decision but did not alter its determination that the supplies by Bookit to the Customer were not exempt under item 5 of Group 5 of Schedule 9 to the VAT Act 1994.
This is the appeal of Bookit from the decision of the Tribunal. It lies pursuant to s.11 Tribunals and Inquiries Act 1992 to the High Court on a point of law only. Bookit contends that the Tribunal was wrong in law to conclude that the supplies made by Bookit to the Customers in return for the 50p per ticket card handling charge are not exempt supplies of financial services within Group 5 Schedule 9 to the VAT Act 1994 when interpreted in accordance with Article 13(B)(d) Sixth EC VAT Directive. It relies:
(1) in relation to Group 5 of Schedule 9 to the VAT Act 1994 on:
(a) item 1 "dealing with money";
(b) item 5 "intermediary services" in relation to item 1 ;
(c) item 5 "intermediary services" in relation to item 2 "making of an advance or the granting of credit"; and
(2) in relation to Article 13(B)(d) Sixth Directive EC VAT Directive on:
(a) 1 "the negotiation of credit";
(b) 3 "transactions concerning…payments, transfers…";
(c) 3 "negotiation concerning….payments, transfers…".
The Facts
The Tribunal set out the facts in some detail in paragraphs 1–44 of the First Decision and paragraphs 1–9 of the Second Decision. I can take the matter more shortly. There are four parties to the relevant series of events, namely (1) the Customer, (2) Girobank plc, (3) Bookit and (4) Odeon. In a typical transaction there are the following steps:
1. The Customer contacts Bookit by, say, telephone to ask if there are any seats available for a particular film in a particular cinema at a particular time on a particular day.
2. Bookit checks such availability with Odeon.
3. Odeon confirms to Bookit the availability of the required seats.
4. Bookit informs the Customer of such availability, the cost of the tickets and that it will make an additional charge for handling payment by debit or credit card.
5. Bookit takes the Customer's card details ("payment information") and verifies its right to use the card ("security information").
6. Bookit transmits the payment information and security information to Girobank.
7. Girobank processes the payment for the seats by means of the Customer's debit or credit card and credits Bookit with the aggregate of the price for the seats and the card handling charge.
8. Bookit confirms the purchase of the tickets to Odeon.
9. Bookit confirms the booking and payment to the Customer and informs him that the tickets may be collected from the relevant cinema.
10. The Customer collects the tickets.
11. Odeon admits the Customer to the relevant showing.
12. Bookit accounts to Odeon for the sums received for the tickets but retains the card handling charge.
13. Bookit pays Girobank for the services it provides out of the card handling charges it has retained.
As between Bookit, Girobank and Odeon the procedure is regulated, with effect from 1st February 2002, by a Merchant Services Agreement ("the MSA") dated 15th August 2002 and made between Girobank plc (1), Odeon (2) and Bookit (3). MSA recites that
"A. Girobank is a member of the MasterCard, Visa and Switch card schemes and is authorised under the regulations governing membership of these schemes to acquire data in respect of all MasterCard, Visa and Switch transactions from merchants who have signed a Girobank Merchant Agreement.
B. This Agreement sets out the terms on which Odeon Ltd will accept agreed financial plastic cards as a means of payment for cinema tickets, and on which card transactions will be authorised by and presented by Odeon to Bookit, and by Bookit to Girobank."
Clause 1 contains a number of definitions. I should refer to the following:
""Advanced Card Transaction" means any advance payment made by telephone, internet or other such media by the Cardholder for debit to the Cardholders account in respect of the card in question including, for the avoidance of doubt, both sums payable to Odeon for Supplies and any Handling Fee payable by the Cardholder to Bookit.
"Card Transaction" means any payment (other than an Advanced Card Transaction) made by the Cardholder for debit to the Cardholder's account in respect of the Card in question including sums payable to Odeon for Supplies.
"Card Transaction data" means details of a Card Transaction or Advanced Card Transaction in a form approved by Girobank.
"Floor Limit" means the total value of the sales (as notified to Odeon or varied from time to time by Girobank), including any Bookit Handling Fees, that Odeon may make to a Cardholder on any one occasion without the authorisation of Girobank.
"Merchant" means Odeon and Bookit together jointly and severally.
"Supplies" means the products and services offered by Odeon."
Clause 2 provides:
"2. Girobank acknowledges that in relation to Advanced Card Transactions for the purchase of Supplies, the following arrangements shall apply between Odeon and Bookit
2.1.1 It shall be a condition of Odeon accepting Card Payment for Advanced Card Transactions that the Cardholder agrees that Bookit will provide card-handling services to the Cardholder.
2.1.2 Bookit will be required to pay Odeon the amount due to Odeon from the Cardholder and require the Cardholder to pay Bookit a fee ("Handling Fee") for which Bookit shall accept payment by card.
2.1.3 Subject to paragraph 3.1.1 the price payable to Odeon by a Cardholder shall be an amount equivalent to the full price of the Supplies and the price payable to Bookit shall be the amount of the said Handling Fee.
2.1.4 In relation to each Advanced Card Transaction Girobank shall pay to Bookit under clause 3.1.1 an amount equivalent to the aggregate of the Handling Fee due to Bookit and the amount due from the Cardholder to Odeon and payable by Bookit to Odeon, provided that such amount shall not in any case exceed the amount received by Girobank from the Card Issuer for that Advanced Card Transaction."
Clause 2.2 contains similar provisions in relation to Card Transactions, as defined.
Clause 3, so far as relevant, provides:
"3.1 Girobank shall:
3.1.1 credit Bookit with the amount of all Card Transactions and Advanced Card Transactions effected by Odeon and in respect of which the relevant Card Transaction Data is presented to Girobank in accordance with the terms of this Agreement by crediting a Girobank account within the United Kingdom, nominated by Bookit or such other account as may be agreed between the parties; and
[3.1.2…]
3.2 For the avoidance of doubt, Girobank's payments are made to Bookit for and on its own account and Girobank shall be under no obligation to make any payment to Odeon under this Clause 3.
[3.3–3.5]
3.6 Subject to Clause 3.7, Girobank shall use reasonable endeavours within one Banking day of receipt of a credit into Bookit's Girobank account under Clause 3.1.1 to transfer such credit by BACS transfer to any bank account within the United Kingdom nominated by Bookit, or such other account as may be agreed between the parties.
3.7 Where payment of charges due to Girobank under Clause 8.4, or any other sums due to Girobank under this Agreement, are to be made by debit from Bookit's Girobank account, then Girobank shall be entitled to debit such charges in accordance with Clause 8.4 and such sums in accordance with its rights under this Agreement, prior to making any BACS transfer under Clause 3.6."
Clause 4 contains what are described...
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