Commissioners of Customs and Excise v High Street Vouchers Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 28 June 1990 |
| Date | 28 June 1990 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
McCullough J.
Mr Nigel Pleming (instructed by the Solicitor for Customs and Excise) for the Crown.
Mr Jan Matthews (instructed by Beechcroft Stanleys) for HSV.
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
C & E Commrs v Diners Club Ltd; C & E Commrs v Cardholder Services Ltd VAT(1989) 4 BVC 74
C & E Commrs v Pippa-Dee Parties Ltd VAT(1981) 1 BVC 422
Naturally Yours Cosmetics Ltd v C & E Commrs VAT(Case 230/87) (1988) 3 BVC 428
Value added tax - Consideration - Supply of services - Taxpayer sold vouchers for face value less a percentage and agreed with retailers to accept vouchers at face value for redemption at a discount - Whether taxpayer supplied services to retailers for consideration - section 2 subsec-or-para (3)Value Added Tax Act 1983, sec. 2(3), Value Added Tax Act 1983 section 3 subsec-or-para (2)3(2); Second EC Council Directive (67/228),eu-directive 67/228article 8(a) article annex A article para. 13art. 8(a), annex A, para. 13; Sixth EC Council Directive (77/388), eu-directive 77/388article 11(A)(1)art. 11A(1)(a).
This was an appeal by the Commissioners of Customs and Excise from the decision of a VAT tribunal ((1989) 4 BVC 610) that the redemption of vouchers at a discount by the taxpayer company ("HSV")was not a supply of services for consideration.
HSV sold vouchers with a face value varying from 50p to £10 at a discount. For the most part the vouchers were sold to members of the group of companies to which HSV belonged, or to companies outside the group. The companies to which the vouchers were sold distributed them to members of the public either for payment or as prizes in competitions.
HSV entered into agreements with well-known retailers who agreed to accept the vouchers at face value in exchange for goods and to redeem them for a discount. The advantages to HSV were that it had the use of the money received from the sales until the vouchers were redeemed; made a profit on the difference between the discount given on sale and the discount given on redemption of the vouchers; and retained the price of vouchers which were never presented.
The commercial advantage to the retailers was the hope of increased sales by accepting the vouchers.
The issue was whether a supply of services was made by HSV to the retailers within the section 2 subsec-or-para (3)Value Added Tax Act 1983, sec. 2(3) and whether consideration was given by the retailers for such a supply within Value Added Tax Act 1983 section 3 subsec-or-para (2)sec. 3(2).
The VAT tribunal held that HSV supplied services to the retailers otherwise than for consideration on the ground that the retailer was not forgoing any right when he agreed to accept the face value of the vouchers less a discount when he returned them. The only rights which the retailer had were the rights under the agreement with HSV and that did not give the retailer any right to receive the face value.
The tribunal also held that the requirement of the combined provisions of the Sixth Directive, article 11(A)(1)art. 11A(1)(a) and para. 13 of the Annex to the Second Directive that the consideration should be "directly linked" to the service was not satisfied.
Held, allowing the Crown's appeal:
HSV provided a service to the retailers for which consideration was given in the form of the discount and, looking at the entire transaction consisting of the scheme as a whole from which HSV obtained commercial advantages, the consideration was directly linked to the service provided. (C & E Commrs v Diners Club Ltd TAX[1989] BTC 5084 followed.)
McCullough J: High Street Vouchers Ltd ("HSV") supply certain services which in the opinion of the Commissioners of Customs and Excise are taxable under the Value Added Tax Act 1983. The commissioners' decision was given in letters written on 25 March 1986, 23 July 1986, 26 March 1987 and 11 May 1988. HSV appealed against the first three of these decisions and on 10 April 1989 the VAT tribunal (Judge Medd QC as chairman) allowed their appeals. The commissioners have now further appealed to the High Court under the Tribunals and Inquiries (Value Added Tax Tribunals) Order1972 (SI 1972/1210).
Value Added Tax Act 1983 section 2 subsec-or-para (1)Section 2(1) of the 1983 Act provides:
Tax shall be charged on any supply of goods or services … where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
HSV accepts that it is a taxable person and that it supplied the services in question in the course of its business. The issue is whether that supply is a taxable supply.
HSV has established a voucher scheme pursuant to which it issues High Street Vouchers ("HSVs"). These range in value from 50p to £10. On their face they bear the names of eight well-known retailers, each trading in a different field.
Each retailer has made with HSV an agreement under which the retailer has agreed to accept HSVs in or towards payment for goods or services it supplies and HSV has agreed to redeem at face value, less a discount, the vouchers accepted by the retailer during the previous week. HSV has agreed that its vouchers will only be redeemable at a limited number of retail outlets.
Agreements made with five of the retailers are before the court. In each case the discount agreed was ten per cent, though in one it was initially nine per cent. The word "discount" is used in all of the agreements save one, which describes the ten per cent as "commission payment".
HSV sells its vouchers to different trading companies. Some are within the group of companies to which HSV itself belongs. These companies generally pay HSV the face value of the vouchers less 9.25 per cent. Others are outside the group and generally pay face value less nine per cent. The sale of the vouchers by HSV is exempt from VAT (Value Added Tax Act 1983 schedule 4subsec-or-para 6Sch. 4, para. 6 to the 1983 Act).
The vouchers are thereafter acquired by members of the public who may use them to pay for goods or services provided by any of the named retailers. Thereafter...
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