Commissioners of Customs and Excise v Battersea Leisure Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 20 February 1992 |
| Date | 20 February 1992 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Kennedy J.
Mr Nigel Pleming (instructed by the Solicitor for Customs and Excise) for the Crown.
Mr John Tallon (instructed by Jolliffe & Co) for the taxpayer.
The following cases were referred to in the judgment:
Apple and Pear Development Council v C & E Commrs VAT(Case 102/86)(1988) 3 BVC 274
British Railways Board v C & E Commrs VAT(1977) 1 BVC 116
C & E Commrs v Diners Club Ltd; C & E Commrs v Cardholder Services Ltd VAT(1989) 4 BVC 74
C & E Commrs v High Street Vouchers Ltd VAT(1990) 5 BVC 89
C & E Commrs v Pippa-Dee Parties Ltd VAT(1981) 1 BVC 422
C & E Commrs v Tilling Management Services Ltd VAT(1978) 1 BVC 185
Gleneagles Hotel plc VAT(1986) VATTR 196; (1986) 2 BVC 208,108
IR Commrs v Church Commissioners for England ELR[1977] AC 329
Naturally Yours Cosmetics Ltd v C & E Commrs VAT(Case 230/87) (1988) 3 BVC 428
Russell (Neville) (a firm) VAT(1987) VATTR 194; (1987) 3 BVC 611
Trafalgar Tours Ltd v C & E Commrs VAT(1989) 4 BVC 222
Value added tax - Consideration - Company purchased Battersea Power Station and assumed liability to remove asbestos from site - Vendor contributed to cost of removal - Whether contribution was consideration for a taxable supply of services by taxpayer to vendor - Whether extrinsic evidence could be adduced to determine true nature of transaction - Value Added Tax Act 1983 section 3 subsec-or-para (2)Value Added Tax Act 1983, sec. 3(2)(b); Sixth Council Directive 77/388 of 17 May 1977 (OJ 1977 L145/1), eu-directive 77/388 article 2art. 2.
This was an appeal by the Commissioners of Customs and Excise from a decision of the VAT tribunal ((1990) 5 BVC 532) that a payment made to the taxpayer, the purchaser of Battersea Power Station, by the vendor, the CEGB, as a contribution to the removal of asbestos remaining on the site was not in respect of a taxable supply of services by the taxpayer to the CEGB.
The taxpayer purchased Battersea Power Station from the CEGB for £1.5m. It was agreed that the taxpayer would remove and dispose of the asbestos remaining on the site at its own expense, but the agreement provided that the CEGB would pay £2,248,893 by way of agreed contribution towards the cost of removal.
The issue was whether the CEGB's contribution to the removal and disposal of asbestos was consideration for a taxable supply of services by the taxpayer within the definition of a "supply" of services in theValue Added Tax Act 1983 section 3 subsec-or-para (2)Value Added Tax Act 1983, sec. 3(2)(b) as "anything which is not a supply of goods but is done for a consideration".
The VAT tribunal, relying on evidence extrinsic to the contract consisting of the terms of a competition to select a developer for the site and negotiations leading to the sale agreement, decided that the payment described as a "contribution", which produced no commercial benefit for the taxpayer, did not amount to consideration for services performed by the taxpayer but was a contribution to the cost of carrying out a public duty.
The commissioners appealed to the High Court contending that the tribunal should not have allowed the extrinsic evidence to be adduced. It tended only to show what was the motive for the payment and motive was irrelevant to the issue. The only question was whether the payment was, looked at objectively, consideration for services within the meaning of Value Added Tax Act 1983 section 3 subsec-or-para (2)sec. 3(2)(b) of the 1983 Act having regard to the sixth directive, eu-directive 77/388 article 11(A)(1)art. 11A(1)(a) and the meaning given to consideration by the Court of Justice of the European Communities.
The taxpayer contended that the extrinsic evidence considered by the tribunal showed the true nature of the contribution to removal of asbestos from the site. It was not consideration for services. The taxpayer derived no profit or commercial benefit from receipt of the contribution which did not even cover the whole cost of removing the asbestos.
Held, allowing the commissioners' appeal:
1. This was not a case where extrinsic evidence, which was admissible only to show the true nature of transaction, could be admitted because the nature of the transaction involving the contribution to the removal of asbestos was apparent on the face of the contract documents. The extrinsic evidence relied on by the tribunal tended only to show the motive for the payment which was irrelevant to the question whether consideration was given by the CEGB for services supplied by the taxpayer.
2. The contribution payment by the CEGB was directly linked to the services to be supplied for the removal of asbestos. Accordingly the payment was consideration within the meaning of Value Added Tax Act 1983 section 3 subsec-or-para (2)sec. 3(2)(b) of the 1983 Act for services consisting in the removal of asbestos from the site.
The Commissioners of Customs and Excise appealed against a decision of the VAT tribunal that a payment described as a contribution to the cost of removing asbestos from the site of the former Battersea Power Station was not paid in consideration for a supply of services by the taxpayer. The grounds of the appeal were that the tribunal had erred in law in three respects:
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1. in admitting extrinsic evidence;
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2. in having regard to what it conceived to be the motives of the parties in relation to the removal of asbestos;
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3. in concluding that the payments made under the terms of the agreement for sale of Battersea Power Station were made otherwise than for consideration within the meaning of the Value Added Tax Act 1983 section 3 subsec-or-para (2)Value Added Tax Act 1983, sec. 3(2)(b).
Kennedy J: This is an appeal under the Tribunals and Inquiries Act 1971 on a point of law from a decision of the VAT tribunal of 23 January 1990 which allowed an appeal by the respondent, Battersea Leisure Ltd, against an assessment raised by the Commissioners of Customs and Excise dated 18 July 1988.
In summary form the problem arose in this way. On 11 March 1987 Battersea Leisure agreed to purchase the former Battersea Power Station from the Central Electricity...
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