Commissioners of Customs and Excise v Plantiflor Ltd

JurisdictionUK Non-devolved
Judgment Date15 April 1997
Date15 April 1997
CourtVAT Tribunal (UK)

VAT Tribunal

*Plantiflor Ltd

VAT Tribunal

Plantiflor Ltd

The following cases were referred to in the decision:

Basebuy Ltd VAT(LON/93/1080) No. 12,088; [1995] BVC 1456

British Airways plc v C & E Commrs VAT(1990) 5 BVC 97

BSN (Import & Export) Ltd VAT(1980) VATTR 177; (1980) 1 BVC 1142

C & E Commrs v British Telecommunications plcVAT[1997] BVC 222

C & E Commrs v Reed Personnel Services Ltd VAT[1995] BVC 222

C & E Commrs v Tarmac Roadstone Holdings Ltd VAT(1987) 3 BVC 91

C & E Commrs v Wellington Private Hospital LtdVAT[1997] BVC 251

Card Protection Plan Ltd v C & E Commrs VAT[1994] BVC 20

EC Commission v United Kingdom VAT(Case 353/85) (1988) 3 BVC 265

Finanzamt Uelzen v Armbrecht VAT(Case C-291/92) [1996] BVC 50

HJ Glawe Spiel- und Unterhaltungsgeräte Aufstellungsgesellschaft mbH & Co v Finanzamt Hamburg-Barmbek-Uhlenhorst VAT(Case C-38/93) [1994] BVC 242

Rayner & Keeler Ltd VAT(LON/90/306) No. 5803; [1991] BVC 1346

Skatteministeriet v Henriksen VAT(Case 173/88) [1989] ECR 2763; (1990) 5 BVC 140

Trafalgar Tours Ltd v C & E Commrs VAT(1989) 4 BVC 222

Trustees of the Nell Gwynn House Maintenance Fund v C & E CommrsVAT[1996] BVC 153

Supply - Whether compound or multiple - Mail order goods - Separate amount charged for delivery by Parcel Force - Exemption - Postal service - Whether total amount paid by customer represented chargeable amount for VAT purposes -Value Added Tax Act 1994 schedule 9 group 3Value Added Tax Act 1994, Sch. 9, Grp. 3, item 1; Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 11(A)(1) article 11(A)(2) article 11(A)(3) article 13(A)(1)art. 11(A)(1), (2)(b) and (3)(c) and 13(A)(1)(a).

The issue was whether the amount charged by the appellant to a customer expressed to be for post and packing formed part of the consideration for a single supply of goods and services made by the appellant or whether it was the consideration for a separate supply which, if made by the Post Office, was exempt.

The appellant was a wholly-owned UK subsidiary of a Dutch group of companies, which supplied horticultural and related products through catalogues and garden centres directly to the public. The appellant, which traded almost exclusively by mail order, processed orders for goods which were dispatched from Holland.

Customers ordered goods through the appellant's current catalogue and although they were invited to collect orders at the appellant's UK headquarters or from their nurseries in Holland most orders were delivered by the Post Office through Parcel Force. In 1993, the appellant changed its arrangements with Parcel Force and entered into an agreement with it for bulk deliveries of goods to its customers and, to bring its VAT arrangements into line with those in place elsewhere in Europe, it wrote to Parcel Force stating its intention of acting as customers' agent in arranging deliveries. The consequence of this was that its post and packing charges, separately itemised in invoices, would not be subject to VAT. Despite attempts to elicit a considered response to its letter to Customs, none was forthcoming. However, following a further letter on the subject from the appellant, Parcel Force paid a claim by the appellant for expenses incurred in making refunds to customers where late delivery had occurred.

Acting on advice as to the proper VAT treatment of post and packing, the appellant omitted from its annual accounts the sum of £900,000 received from customers in respect of deliveries and it credited the postage received to a separate account in its books. In evidence to the tribunal it explained the breakdown of the £2.50 standard charge for post and packing as representing the combined current rate agreed with Parcel Force for delivery, with the balance made up of a variable amount to take account of packing. It stated that the £2.50 charge remained the same because of difficulties arising out of periodic changes to the amount charged and that, based on the demonstrable figure for 1995 of the average postal charge representing 6.02 per cent of all moneys received from customers, the average amount of interest earned on each payment of postage was £0.0025.

Customs' initial response to the appellant's changed arrangements was to accept that the charge could be treated as a disbursement. However, in April 1996 they informed the appellant that the arrangements in place were no longer considered to be effective for the stated purpose.

The appellant contended that there were two separate supplies: one of the goods and another of the delivery of the goods. The latter was economically severable and could be valued separately. In support, it argued that title to the goods passed to the customer prior to dispatch, probably at the time of allocation. The appellant only acted as intermediary in arranging delivery, as could be seen from the statement in the current catalogue: "We will happily arrange delivery on your behalf via Royal Mail Parcel Force 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." It further contended that the postage money provided by a customer never constituted "consideration" for any supply, as could be seen from the fact that it was excluded from the turnover in the accounts and was entered separately in the books as required by art. 11(A)(3)(c) of the sixth VAT directive.

The commissioners contended that the issue was governed by art. 11(A)(2)(b) of the sixth directive, where it was stated that incidental expenses such as packing and transport were included in the taxable amount. They further argued that title to the goods passed not when appropriated to a customer, but on delivery and pointed to the fact that the precise amount of postage was not identified in the catalogue. They also relied on the fact that the appellant was in the position to deal with the postage monies and gain a benefit from them by way of interest and in terms of its customers goodwill and pointed to the fact that the mixing of customers' postage moneys in one account was incompatible with a "suspense account" within the meaning of art. 13(A)(3)(c).

Held, allowing the company's appeal:

1. The commissioners' reliance on C & E Commrs v British Telecommunications plc [1997] BVC 222 for the mandatory requirement of the inclusion of incidental expenses such as postage in the taxable amount was misplaced. In that case the judge had merely given effect to a concession by the appellant. In reality, the provision on which they relied had nothing to do with the identification of a supply, but only operated when the supply had been identified and quantified the taxable amount in respect of it. If anything, its effect was to the contrary to that propounded, since the inclusion of incidental expenses in the value of a composite supply implied the exclusion of those related to a separate supply.

2. The delivery service was a separate supply from that of the goods since it was economically dissociable and separately identified. The appellant's role in relation to delivery was that of an intermediary and once it had performed this function in delivering a packet to Parcel Force the goods became the customer's property. The actual supplier of the delivery service was Parcel Force and not the appellant.

3. In arranging delivery of the goods the appellant did supply a non-exempt service as intermediary, but the consideration for this was included in the purchase price of the goods and the packaging cost so that no extra VAT was payable as a consequence.

4. To the extent that it was necessary to decide the point, the amounts were received "as repayment for expenses paid out in the name and for the account of (the taxable person)" and were "entered in his books in a suspense account" and therefore not included in the taxable amount on account of art. 11(A)(3)(c) of the sixth VAT directive.

DECISION

[The tribunal set out the facts summarised above and continued as follows.]

5. The appellant's submissions

5.1 The corner stone of the appellant's case is that there are two separate supplies, one of the goods and another of delivery of the goods. In support of this proposition Mr Cordara QC for the appellant relies on the following factors:

  1. (2) The delivery of the goods is economically severable from the sale of (i.e. the passing of title to) the goods. Delivery is therefore capable of being the subject of a separate supply: indeed the Post Office specialises in such a supply.

  2. (3) The supply of the goods and their delivery can be valued separately and there is separate pricing of the delivery service in the invoice (though the cost of packing and postage are rolled together prior to...

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