Commissioners of Customs and Excise v Plantiflor Ltd
| Jurisdiction | England & Wales |
| Judge | LORD SLYNN OF HADLEY,LORD MACKAY OF CLASHFERN,LORD HOBHOUSE OF WOODBOROUGH,LORD MILLETT,LORD SCOTT OF FOSCOTE |
| Judgment Date | 25 July 2002 |
| Neutral Citation | [2002] UKHL 33 |
| Date | 25 July 2002 |
| Court | House of Lords |
[2002] UKHL 33
Lord Slynn of Hadley
Lord Mackay of Clashfern
Lord Hobhouse of Wood-borough
Lord Millett
Lord Scott of Foscote
HOUSE OF LORDS
My Lords,
Miss Brierley ordered some bulbs from "Bakker Holland", the name under which Plantiflor Ltd trades in the United Kingdom. She received an "invoice" dated 5 September 1996. The invoice specified that the price of the goods she had ordered was £52.00. There were other charges of £2.50 ("Postage (£1.63) plus packing (£0.87)") and £0.25 transport insurance. The total was thus £54.75. The invoice acknowledged that she had already paid this sum. The total VAT was stated to be "£53.12 17.50% = £7.91". The difference between £53.12 and £54.75 is £1.63, the postage charged. Thus no VAT was charged on the postage. The commissioners however say that VAT was chargeable to Plantiflor on the postage. Plantiflor says it was not. Accordingly, Miss Brierley's order was taken as a particular assessment to test the practice of the Commissioners in respect of many thousands of mail orders.
Mr P M F Horsfield QC, the chairman of the London VAT and Duties Tribunal, allowed Plantiflor's appeal and held that VAT was not payable by Plantiflor on the postage. Laws J held that it was and reversed Mr Horsfield. The Court of Appeal held that it was not and so reversed Laws J. The commissioners have now appealed to your Lordships. Miss Brierley would no doubt be surprised that what seemed a simple transaction should have led to such complex arguments and different decisions. That, however, seems to be inherent in the administration of the VAT system.
The basis of that system is to be found in the Sixth Council Directive of 17 May 1977 (77/338/EEC) as subsequently amended and as applied to the United Kingdom by the Value Added Tax 1994 and Orders in Council made pursuant to it. It is accepted for present purposes that the United Kingdom legislation is in accordance with the Community Directives.
By article 2 of the Sixth Directive "the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such" shall be subject to value added tax, a tax not on profits but on turnover. The supply of goods means "the transfer of the right to dispose of tangible property as owner" (article 5) and the supply of services means any transaction which does not constitute a supply of goods within the meaning of article 5: article 6.
By article 11(A)(1)(a) the taxable amount is to be, subject to exceptions, "everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies". By article 11(A)(2) the taxable amount shall include "(b) incidental expenses such as commission, packing, transport and insurance costs charged by the supplier to the purchaser or customer."
By article 11(A)(3):
"The taxable amount shall not include:
…
(c) the amounts received by a taxable person from his purchaser or customer as repayment for expenses paid out in the name and for the account of the latter and which are entered in his books in a suspense account."
By article 13(A)(1)(a) member states are required to exempt from VAT "the supply by the public postal services of services other than passenger transport and telecommunication, services, and the supply of goods incidental thereto". By section 31 of, and Group 3 of Schedule 9 to, the 1994 Act "the conveyance of postal packets by the Post Office" and "the supply by the Post Office of any services in connection with [such] conveyance" were made exempt from VAT.
By section 19 (2) of the 1994 Act:
"If the supply [of goods or services] 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."
The contract between Plantiflor and its customers is to be found in a page in Plantiflor's catalogue and the order form filled in by the customer together perhaps with the invoice. The catalogue under the heading "Convenience of Delivery to Your Door" states:
"Bakker deliver every order, whether large or small, direct to your home. Everything neatly packed with the utmost care. You will also receive the latest Garden Review".
Under the heading "Collection and Delivery":
"Orders collected incur no handling charges. If you require delivery by carrier then a nominal charge is made to cover mail order packing and handling. We will happily arrange delivery on your behalf via Royal Mail Parcelforce if requested. In which case please include the postage and handling charge on your order. We will then advance all postal charges to Royal Mail on your behalf".
The order form in the present case on the front side contains spaces to indicate (a) "Total Order Value", (b) "Goods in Transit Insurance (Cross out if not required) 0.25p" and (c) "Contribution Towards Post and Packing £2.50" and (d) "Final Total". On the reverse side the customer was told that if some goods were to be sent in advance "Please add an extra £2.50 postage and packing charges".
Plantiflor is the subsidiary of a Dutch company and the group operates widely in Europe selling directly to the public. Customers can collect the goods ordered from Plantiflor in Spalding or in the Netherlands though very few customers do so and then it seems only from Spalding. When orders are received in Spalding either by post or telephone they are forwarded to Holland where the goods are packed and sent by lorry to the United Kingdom. On arrival in the United Kingdom parcels go direct to Royal Mail Parcelforce, at the time a section of the Post Office. They are then delivered by Parcelforce. In 1995 some 475,500 orders were made by Plantifor's customers, the average price being £22.11. Something in the order of £2,000 worth of goods are sent by trailer each week from Holland to the United Kingdom.
Plantiflor entered into a contract with Parcelforce on 6 January 1994 in relation to the carriage of Plantiflor's products, the contract to remain in operation from 1 August 1993 until 31 August 1998. The agreement recited that "Plantiflor has agreed to send a certain number of items and Parcelforce has agreed to deliver them for Plantiflor at the prices set out below". Plantiflor's obligation was to send a minimum of 400,000 parcels a year, with an average weight of 3.4 kgs. For the first four years Plantiflor was to "use Parcelforce for the dispatch and delivery of 100% of its parcels traffic". In the fifth year Plantiflor could use another carrier for a maximum of 5% of its total parcels traffic.
In the first year, "Parcelforce will charge Plantiflor at a rate of £1.45 per parcel with a rate of £1.35 to commence with the introduction of bar-coded Plantiflor parcels scanned at collection and delivery." Thereafter the charges were to be varied as provided at the beginning of each year of the agreement. Plantiflor "shall pay invoices submitted to Parcelforce by means of direct debit transfer". The parcels were to be delivered to Parcelforce at Peterborough for onward transmission. Parcelforce undertook that 95% of the parcels dispatched would be delivered on or before the third working day after dispatch.
On 21 September 1993 Plantiflor told Parcelforce that in Holland and Germany no VAT was charged on postage. This was on the basis that "providing we charge the customer the actual value of the postage paid to the PTT and that all contracts state clearly that we are receiving postage, and posting parcels on their behalf, we will no longer be the contract principal, merely the customers' agent". Plantiflor therefore proposed that Parcelforce should confirm that it delivered parcels "(a) for us as principal and (b) as agent of our retail customers".
Plantiflor on 7 March 1994 told the commissioners that they intended no longer to pay VAT on the postal charge and they asked for the commissioners' acceptance of this.
"If the customer requires us to present the goods either to a chosen carrier or to Royal Mail Parcelforce at a special price of £1.45 negotiated on our customers' behalf then we will do so subject to an additional packaging charge of £0.50."
By letter of 8 August 1994 the Commissioners replied that it might be possible to treat the postage as a disbursement but only if the customer knew
"precisely what the Post Office charged for delivery. Have you any evidence that the Post Office actually charges the flat rate of £1.45 referred to in all cases? Failure to meet the basic requirements will nullify acceptance of such charges as a disbursement".
Plantiflor replied that the customer knew the charges of £1.49 (previously £1.45) which was disclosed on the invoice and that Parcelforce charged Plantiflor a flat rate of £1.49 per parcel. By letter of 29 September 1994 Customs and Excise accepted that postage should be treated as a disbursement but on 9 May 1996 they said that they had been advised and had decided that
" 'Plantiflor are making single supplies of delivered goods, and those supplies cannot be divided into component parts.' Delivery is therefore part of your supply, and the full payment made by your mail order customer is therefore liable to VAT at the appropriate rate".
On 23 August 1996 the Post Office told the commissioners that it considered that the Post Office services were provided to the mail order company with whom it had a contract.
My Lords, it is clear that under the contract Plantiflor is to supply the goods packed and, if required, insured for the transport. A principal feature of its marketing is the "Convenience of Delivery to Your Door" that is really why "You'll...
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