Commissioners of Customs and Excise v Littlewoods Organisation Plc
| Jurisdiction | England & Wales |
| Judgment Date | 20 June 2000 |
| Date | 20 June 2000 |
| Court | Chancery Division |
Chancery Division.
Lightman J.
Kenneth Parker QC (instructed by the Solicitor for Customs and Excise) for the Crown.
Penny Hamilton (instructed by Landwell) for Littlewoods.
The following cases were referred to in the judgment:
Boots plc v C & E Commrs VAT(Case 126/88) (1990) 5 BVC 21; [1990] ECR I-1235
C & E Commrs v Bugeja VAT[2000] BVC 21
C & E Commrs v Robert Gordon's CollegeVAT[1996] BVC 27
C & E Commrs v Westmorland Motorway Services LtdVAT[1998] BVC 154
Empire Stores Ltd v C & E Commrs VAT(Case C-33/93) [1994] BVC 253; [1994] ECR I-2329
Rosgill Group Ltd v C & E Commrs VAT[1997] BVC 388
Staatsecretaris van Financiën v Co-öperatieve Aardappelenbewaarplaats GA (Case 154/80) [1981] ECR 445
Value added tax - Taxable amount - Mail order company - Commission earned by agents on sale of catalogue goods - Additional commission earned for purchase of further goods paid for with commission already earned - Whether commission on further goods a non-taxable discount on sale price of goods or part of non-monetary consideration for supply of services and subject to VAT - Sixth Council directive (Directive 77/388) of 17 May 1977 (OJ 1977 L145/1),eu-directive 77/388 article 11(A)(1) article 11(A)(3)art. 11(A)(1) and (3).
This was an appeal by Customs against a decision of the VAT and duties tribunal (No. 16,318; [2000] BVC 2136) that an extra 2.5 per cent commission, payable to a mail order company's agents when the agents paid for goods with sums credited for commission already earned, was a non-taxable discount.
Agents selling goods by mail order were entitled to commission in any one of four ways: by obtaining immediate cash payment of ten per cent of the relevant sales payment; by using the ten per cent commission to which they were entitled to pay for goods already obtained; by applying the commission for further goods subsequently ordered ("the third option"); or by carrying the commission forward and allowing it to accumulate to be used in the future. If the agent used the third option, he or she was entitled to an additional 2.5 per cent commission ("the special allowance").
The issue was whether (as contended for by Littlewoods) the special allowance was properly treated for VAT purposes as a discount on the price of the further goods within eu-directive 77/388 article 11(A)(3)art. 11(A)(3)(b) of the sixth Council directive, or, as contended for by Customs, as consideration for the supply of the agent's services within eu-directive 77/388 article 11(A)(1)art. 11(A)(1)(a). Two questions arose: whether there was a direct link between the agency contract and the contract for the sale of the further goods necessary to establish a supply of services and, if there was, how the supply of services was to be valued.
Held, allowing Customs' appeal:
2. There was the necessary direct link between the contract of agency and the contract for the sale of further goods. The only reason why the agent could and did enter into the sale contract at the price reflecting the special allowance was the existence of and exercise by the agent of the third option contained in the agency contract.
3. When valuing the non-monetary consideration consisting in the services of the agent, the consideration had to be capable of being expressed in money, and must have a subjective value reflecting the amount actually received. The further goods purchased attracting the special allowance in this case had a catalogue price, i.e. a value attributed to the goods by the parties. Therefore, the value of the agent's services depended on which of the four options the agent actually exercised. The special allowance was accordingly to be treated, not as a non-taxable discount, but as part of the consideration for the agent's services: Rosgill Group Ltd v C & E CommrsVAT[1997] BVC 388 and C & E Commrs v Westmorland Motorway Services Ltd VAT[1998] BVC 154 followed.
Lightman J: Facts
1. This is an appeal by Customs against a decision dated 25 September 1999 of the VAT and duties tribunal (Mr Demack) sitting at Manchester.
2. The Littlewoods Organisation plc ("Littlewoods") carries on business as a retailer by mail order and through high street stores. The home shopping division of Littlewoods retails goods through mail order. Catalogue goods are sold through a network of agents who earn commission on the payments remitted to Littlewoods in respect of sales made to the agent or sales through the agent to third parties. The agent ("the agent") earns "commission" in respect of his or her own purchases in relation to which the agent provides no services to Littlewoods. Customs accept that the commission so earned represents a...
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