Bugeja
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 June 1998 |
| Date | 30 June 1998 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following case was referred to in the decision:
Naturally Yours Cosmetics Ltd v C & E Commrs VAT(No. 2) (Case 230/87) (1988) 3 BVC 428
Valuation - Videos - Whether sold or hired - Nature of supply - Appellant supplies video for £20 and undertakes to supply replacement video for £10 - Whether appellant's supply is renting out the video - No - Whether value of replacement supply is £20, £10 or some other amount - What was supplied as matter of contract law explained - Further argument on VAT consequences required - Value Added Tax Act 1994 section 13 subsec-or-para (3) section 19 subsec-or-para (3)Value Added Tax Act 1994, ss. 13(3) and 19(3) - Directive 77/388, sixth VAT Directive, eu-directive 77/388 article 11(A)(1)art. 11(A)(1)(a).
The issue was what was the nature of the contract of supply when the appellant supplied a video for £20 and undertook to supply a replacement for £10. Was the value of the replacement video for tax purposes £20, £10 or some other amount?
The appellant sold videos all marked with a unique security tag for £20. If a video with this tag was returned to him, then another video, marked with a similar tag, could be bought for £10. There was no obligation to return any video at all but, provided a video with a tag was returned, another video could be bought for £10. The purchaser of the £10 video did not have to be the original purchaser of the £20 video. There was no time limit for returning tagged videos and the only requirement for a £10 video was the return of a tagged video. The appellant never dealt in non-tagged videos. Customs assessed the appellant in the sum of about £13,000 plus interest on the basis that the £10 videos were really part-exchanged, and that the subjective value was £10 in cash plus £10 in the old video. Thus each £10 video transaction was taxed on the basis that £20 was the true consideration.
The appellant contended he hired the videos and that the replacement or £10 supply was of rental services for which the consideration was £10. His alternative argument was that half of the £20 paid in return for the introductory supply was paid for the right to obtain the replacement supply of a video for £10.
The commissioners contended that the replacement supply was one of part sale and part exchange. As well as the £10 cash, the value was £10 to be ascribed to the original tagged video which was exchanged: thus VAT was due on £20 under s. 19(3) of the Value Added Tax Act 1994, because the consideration for the supply was not wholly in money. The consideration received was £20 and not a value estimated according to objective criteria, since the videos on the shelves cost £20 without the exchange of a tagged video.
Held, adjourning the appeal for further argument:
1. The property in (ownership of) both £20 and £10 videos passed to the purchaser. The purchaser gave no undertaking to take reasonable care of any video and there was no agreed period of hire. Thus the transaction was not a rental.
2. The contractual analysis of the introductory supply was that, in return for the £20, the customer got a tagged video together with the appellant's undertaking to keep open and unrevoked the offer to make a replacement supply for £10. The undertaking to the original purchaser was transferable to any person who handed in that tagged video to the appellant.
3. The contractual analysis of the replacement supply was that the customer exercised his right to accept the open offer made at the time of the first supply. He handed over the tagged video, paid £10 and got the replacement video.
4. Further argument was needed on whether the value of the second supply was £10 (as it appeared to be) or some other figure. In the absence of argument, the tribunal would draw its own conclusions.
[The tribunal set out the facts summarised above and continued as follows.]
Mr Simon Williams, for the commissioners, argues that it inevitably follows from the finding that Mr Bugeja does not rent out videos, that the replacement supply is one of part sale and part exchange. The transaction falls within Value Added Tax Act 1994 section 19 subsec-or-para (3)s. 19(3). The consideration obtained by Mr Bugeja is £20, i.e. £10 in cash plus the video taken in an exchange. The value to be ascribed to the video is £10 being its subjective value, that is:
The consideration actually received and not a value estimated according to objective criteria.
Those words came from the European Court of Justice decision inNaturally Yours Cosmetics Ltd v C & E Commrs VAT(No. 2) (Case 230/87) (1988) 3 BVC 428 at p. 438, para. 16. The parties must, he argued, have had £10 in mind as the value of the video handed in. £20 is the price for videos on the shelves: £10 is paid in cash; hence the balance must be accounted for by a value of £10 placed on the video handed in in exchange.
The argument advanced for Mr Bugeja had two elements to it. The first was that the replacement supply was a supply of rental services. On that basis the consideration should he taken to be the £10 hiring charge for the replacement video; the handing in of the "old" video at the same time was simply the termination of the hiring of that video. We have already decided that the transaction was not one of hiring or chattel rental. The second element to Mr Bugeja's argument, which had been...
To continue reading
Request your trial
-
Commissioners of Customs and Excise v Littlewoods Organisation Plc
...and Excise from a decision of the VAT tribunal at London (Mr Stephen Oliver QC, chairman, and Mr Aziz Khan) released on 30 June 1998 ([1998] BVC 2306). [90] Mr Bugeja sold video cassettes at a price of £20 each. But he would accept a cassette previously sold by him in part exchange. In such......
-
Bugeja v Commissioners of Customs and Excise (No.2)
...article 11(A)(1)art. 11(A)(1)(a) (OJ 1977 L145/1). This was an appeal against a decision of the VAT and duties tribunal (No. 15,586; [1998] BVC 2306) that no value was to be attributed to a returned item which the taxpayer undertook to replace on payment of half the original purchase price.......