British United Shoe Machinery Company Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 October 1977 |
| Date | 14 October 1977 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
Assessment - Supply - Agency - Separate registration of parent and subsidiary companies - Parent company made exempt supplies - Invoices for service charges raised against parent - Subsequent issue of credit notes cancelling service charges - Whether supplies within "service charges" were agency charges which could be cancelled by issue of credit notes or taxable supplies - section 3 section 33Finance Act 1972, sec. 3, 33 (now section 14 schedule 7 subsec-or-para 6VATA 1983, sec. 14, Sch. 7, para. 6).
The appellant was a wholly-owned subsidiary of a parent company who made a high proportion of exempt supplies. The companies were registered separately for Value Added Tax. The appellant owned the building occupied by the parent company and paid for the staff and other goods and services supplied to the parent, for which a service charge was made. A credit note was subsequently issued in favour of the parent company, cancelling the service charge when it was realised that the parent company was unable to recover the full amount of VAT. The Commissioners did not regard the credit note as valid.
Held, allowing the taxpayer's appeal in part:
1. Authorisation of a credit note is not a matter exclusively within the discretion of the Commissioners.
2. It is the Commissioners duty to be satisfied that a credit note has been issued bona fide to correct a genuine mistake or overcharge or give a proper credit.
3. Credit notes were properly issued to cancel all the service charges except those relating to rent, lighting and other overheads.
[The Tribunal set out the facts summarised above and continued as follows.]
…
… In the first place we think that for the purposes of VAT a mere supply is irrelevant: what is relevant is that no taxable supply should have taken place: secondly it seems to us that the issue of a credit note is a common and usual commercial method of rectifying an overcharge or giving credit for damaged or returned goods. We can find nothing in the Finance Act 1972 or elsewhere which empowers the Commissioners to say whether or not a credit note should be issued at all - so to hold would bring commercial life to a standstill whilst permissions were being sought. In the judgment of this Tribunal the duty of the Commissioners, and of the Tribunal on appeal, is to satisfy ourselves that a credit note has been issued bona fide in order to correct a genuine mistake or overcharge, or to give a...
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