Commissioners of Customs and Excise v Music and Video Exchange Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 24 February 1992 |
| Date | 24 February 1992 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
McCullough J.
Stephen Richards (instructed by the Solicitor for Customs and Excise) for the Crown.
Joe Smouha (instructed by Winston & Co) for the taxpayer.
The following cases were referred to in the judgment:
Bright, Ex parte. Re Smith ELR(1879) 10 ChD 566
Potter & Anor (t/a P & R Potter Wholesale) v C & E Commrs VAT(1984) 2 BVC 200,049
Value added tax - Agency - Second-hand goods - Taxpayer accepted musical equipment from members of the public for sale - Contract with sellers stated that goods were accepted by taxpayer for sale as agent - Whether taxpayer sold goods as principal or agent - Whether output tax calculated by reference to whole selling price or only to commission.
This was an appeal by the Commissioners of Customs and Excise from a decision of the VAT tribunal ((1990) 5 BVC 604) that second-hand goods accepted for sale in the taxpayer's shop were sold as agent for the individuals who brought them to the shop for sale. The taxable amount was, therefore, the difference between the amount paid to the seller and the price received when the goods were sold, rather than the whole amount of the selling price.
The taxpayer dealt in second-hand musical equipment which it bought from members of the public, who were unlikely to be registered for VAT.
The terms and conditions of acceptance for sale were displayed in the shop as well as on a document given to the seller when goods were accepted. The terms and conditions stated that the goods were accepted for sale by the taxpayer as the seller's agent and that they remained the seller's property until sold.
The goods were repaired by the taxpayer if necessary. If they did not sell at the asking price, the taxpayer might reduce the price, occasionally even to an amount less than the sum paid to the seller, but the taxpayer would not seek to recover the difference from the seller because that happened so infrequently that the taxpayer bore the loss, adopting that practice as a deliberate business decision. If a seller wished to recover the goods before they were sold, he was required to repay the sum he had received for them and in addition a handling charge calculated to cover any work such as repairs done while the goods were in the taxpayer's possession. The seller was not informed when the goods were sold.
The taxpayer gave a guarantee with goods purchased from the shop.
The issue was whether the goods were sold by the taxpayer as agent for the person from whom they were bought, as the taxpayer contended, or whether they were sold as principal, as the Customs and Excise contended.
The VAT tribunal decided that the goods were sold by the taxpayer as agent. The chairman concluded that although the terms and conditions of trading were unusual, nevertheless there was nothing inconsistent with the conclusion that the taxpayer was acting as the agent of the people who brought goods into the shop to be sold as stated in the contract.
The Customs and Excise had conceded before the tribunal that the contract between the sellers and the taxpayer was not a sham but submitted that the written contract was only part of the agreement between the parties. In practice, the facts pointed to the owners of the goods having sold them to the taxpayer as principal. The difference between the sale price and the purchase price represented the taxpayer's gross margin of profit.
Held, dismissing the appeal by the Customs and Excise:
The tribunal's conclusion was not inconsistent with the findings of fact. If matters outside the written contract were to be considered, they might explain the terms of the agreement but could not alter its nature. In the present case, although there were features unusual in a contract of agency, in particular that the agent should fix the price without reference to the principal, that the taxpayer carried out repairs and the giving of a guarantee, none of the pointers to a contract of sale displaced the clear terms of the contract. The giving...
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