British Telecommunications Plc v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 05 February 1997 |
| Date | 05 February 1997 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Dyson J.
Michael Kent QC and Nicholas Randall instructed by Customs.
David Milne QC, Rupert Baldry and Elizabeth Wilson instructed by BT.
The following cases were referred to in the judgment:
British Airways plc v C & E Commrs VAT(1990) 5 BVC 97
C & E Commrs v British Telecom plc WLRVAT[1996] 1 WLR 1309; [1996] BVC 276
C & E Commrs v Leightons Ltd VAT[1995] BVC 192
C & E Commrs v Reed Personnel Services Ltd VAT[1995] BVC 222
C & E Commrs v Wellington Private Hospital Ltd; C & E Commrs v St Martins Hospital; C & E Commrs v British United Provident Association VAT[1997] BVC 251
Card Protection Plan v C & E Commrs VAT[1994] BVC 20
EC Commission v United Kingdom VAT(Case 353/85) [1988] ECR 817; (1988) 3 BVC 265
Litster v Forth Dry Dock and Engineering Co Ltd ELR[1990] 1 AC 546
Von Colson v Land-Westfalen (Case 14/83) [1984] ECR 1891
Webb v EMO Air Cargo (UK) Ltd UNK[1992] 4 All ER 929
Value added tax - Input tax - Delivery charge for cars - Input tax not recoverable in respect of cars - Whether delivery charge part of the price of the car - Whether delivery charge incidental to purchase of car or separate supply - Whether input tax on delivery charge recoverable - Value Added Tax (Input Tax) Order 1992 (SI 1992/3222); Value Added Tax Act 1994, s. 19(2); Sixth VAT directive (Directive 77/388) of 17 May 1977 (OJ 1977 L145/1), art. 11(A)(2)(b).
This was an appeal by Customs against a decision of the VAT and Duties Tribunal ((LON/94/1036) No. 14,072; [1996] BVC 2821) that delivery charges for cars purchased from manufacturers were not part of the total price of the car within art. 11(A)(2)(b) of the sixth VAT directive.
BT purchased a large number of cars from various manufacturers. Although they could have made other delivery arrangements, they paid a separate charge for delivery.
The issue was whether BT was entitled to deduct input tax in respect of the delivery charges. That depended on whether the delivery charge fell within art. 7(1) of the Value Added Tax (Input Tax) Order 1992 ('the blocking order') which disallowed credit for input tax on the supply of cars. The tribunal ruled that the delivery charges were not covered by the blocking order.
Two questions arose. The first was whether art. 11(A)(2)(b) of the sixth VAT directive had been implemented and incorporated into UK law so as to treat incidental expenses such as delivery charges as part of the consideration for the supply of a car. BT claimed that it had not and the tribunal found in favour of BT on that point.
Customs contended that art. 11(A)(2)(b) had been implemented by the Value Added Tax Act 1994, s. 19(2). BT contended that since incidental expenses were expressly included in the consideration for imports in s. 21(2), corresponding to the provisions of art. 11(B)(3)(b), but not included in s. 19(2), it must have been intended to include such expenses when considering the consideration for supplies under s. 19(2). To include incidental expenses in s. 19(2) would be to distort the meaning of the provision.
The second question was whether, if the answer to the first question was No, the delivery charge was part of a single composite supply of the car, as contended for by Customs or whether there was a separate supply of services as contended for by BT. The tribunal held that there was a separate supply of services.
Held, allowing Customs' appeal:
1. It involved no distortion of the Value Added Tax Act 1994, s. 19(2) to regard that provision as implementing art. 11(A)(2)(b) of the sixth directive. To do so would involve a canon of construction applicable to a purely domestic statute without reference to the UK's treaty obligations. Even in a purely domestic context, it would operate only where it was not outweighed by other factors. There was no obvious reason why the UK should have intended to implement its obligations under the sixth directive as regards imports but not as regards domestic supplies. Accordingly, "consideration" in s. 19(2) included incidental expenses, such as in this case, transport.
2. However, apart from the directive, the delivery charges would have been regarded as a separate supply not covered by the blocking order. The delivery charge was a service dissociable from the supply of the car itself.
This is an appeal by the Commissioners of Customs and Excise ('Customs') on a point of law against the decision of the VAT and Duties Tribunal released on 10 April 1996. The point of law is whether British Telecommunications plc ('BT') is entitled to deduct the input tax it pays to car manufacturers from whom it buys motor cars for the service of delivering the cars. This depends on whether the delivery charge falls within the provisions of art. 7(1) of the Value Added Tax (Input Tax) Order 1992 (SI 1992/3222) ('the blocking order') which disallow the credit of input tax on the supply of a motor car.
Two questions arise, namely:
-
(2) whether art. 11(A)(2)(b) of EC Council Directive 77/388 ('the sixth directive') has been implemented and incorporated into UK domestic law so as to treat the delivery charge as part of the consideration for the supply of the motor car, thus bringing the delivery service within the single composite supply of a motor car; and
-
(3) if the answer to (i) is No, whether the delivery service was properly to be regarded as part of a single composite supply of a motor car in any event.
The tribunal answered the first question in the negative, but held that the delivery service constituted a separate supply of services for VAT purposes, which was not covered by the blocking order. The point is of some general application because very large companies, such as BT, purchase substantial quantities of motor cars each year directly from manufacturers, rather than from dealers. As in the six sample contracts which were considered by the tribunal, it is a term of the contract that the manufacturer agrees to deliver the vehicle to an agreed place and within an agreed period.
The relevant UK provisions are (now) contained in the Value Added Tax Act 1994 ('the 1994 Act') (which has replaced theValue Added Tax Act 1983, without material amendment). I shall refer to the 1994 Act because that is the Act to which the tribunal referred in its decision.
Section 2:
-
(1) … VAT shall be charged …
-
(a) on the supply of goods or services, by reference to the value of the supply as determined under this Act …
-
Section 5:
-
(2) Subject to any provision made by [Sch. 4 and Treasury Order]
-
(a) "supply" in this Act includes all forms of supply, but not anything done otherwise than for a consideration;
-
(b) anything which is not a supply of goods but is done for a consideration … is a supply of services.
-
Section 19:
-
(1) For the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section … and for those purposes subsections (2) and (4) below have effect …
-
(2) If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration.
Section 21:
-
(1) For the purposes of this Act, the value of goods imported from a place outside the member States shall (subject to subsections (2) to (4) below) be determined according to the rules applicable in the case of Community customs duties, whether or not the goods in question are subject to any such duties.
-
(2) For the purposes of this Act the value of any goods imported from a place outside the member States shall be taken to include the following so far as they are not already included in that value in accordance with the rules mentioned in subsection (1) above [relating to customs value], that is to say-
-
(a) all taxes, duties and other charges levied either outside or, by reason of importation, within the United Kingdom (except VAT);
-
(b) all costs by way of commission, packing, transport and insurance up to the port or place of importation …
-
Section 24:
-
(1) Subject to the following provisions of this section "input tax", in relation to a taxable person, means the following tax, that is to say-
-
(a) VAT on the supply to him of any goods or services …
-
being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him.
Section 25:
-
(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 …
-
(7) The Treasury may by order provide, in relation to such supplies, acquisitions and importations as the order may specify, that VAT charged on them is to be excluded from any credit under this section; and-
-
(a) any such provision may be framed by reference to the description of goods or services supplied or goods acquired or imported, the person by whom they are supplied, acquired or imported or to whom they are supplied, the purposes for which they are supplied, acquired or imported, or any circumstances whatsoever …
-
The Value Added Tax (Input Tax) Order 1992: (the blocking order):
-
2 In this Order …
"motor car" means any motor vehicle of a kind normally used on public roads which has three or more wheels and either-
-
(a) is constructed or adapted solely or mainly for the carriage of passengers; or
-
(b) has to the rear of the driver's seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows …
-
7(1) … tax charged on-
-
(a) the supply … to a taxable person …
-
of a motor car...
To continue reading
Request your trial
-
British Telecommunications Plc v Commissioners of Customs and Excise
...deduct input tax paid on delivery charges in respect of cars purchased directly from the manufacturers as a separate supply. Dyson J ([1997] BVC 222), reversing the decision of the VAT and duties tribunal ((LON/94/1036) No. 14,072;[1996] BVC 2821) held, relying on para. 2 ofeu-directive 77/......
-
Commissioners of Customs and Excise v Plantiflor Ltd
...quite separate from the sale and there were two supplies as the tribunal had accepted. 23 If, as I considered in Customs and Excise Comrs v British Telecommunications plc [1999] 1WLR 1376, 1382–1383, and as I still consider, the appropriate question is whether one act (here arranging the d......
-
Baxi Group Ltd v The Commissioners for Hm Revenue and Customs
... ... Mr Scorey relies first upon Customs and Excise Commissioners v Telemed Limited [1992] STC 89 ... 24 Telemed each ... See CPP ibid at paragraph 29; CPP (HL) [2001] STC 174 at paragraph 22; British Telecom [1999] STC 758 at 766; Dr Beynon & Partners [2005] STC 55 at paragraph 31; and ... Just as, in C&E Commissioners v British Telecommunications plc [1999] STC 758 HL , the House of Lords arrived at the conclusion that what BT there wanted ... ...
-
Beynon and Partners v Commissioners of Customs and Excise
...of services or of goods and services was a question of law. He cited in support the decision of this House in Customs and Excise Commissioners v British Telecommunications Plc [1999] 1 WLR 1376, 1381 in which Lord Slynn of Hadley said that the "characterisation of the supply as provided fo......