Commissioners of Customs and Excise v Redrow Group Plc
| Jurisdiction | England & Wales |
| Judgment Date | 04 December 1995 |
| Date | 04 December 1995 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Potts J.
Melanie Hall (instructed by the Solicitor for Customs and Excise) for the Crown.
Richard Bramwell QC (instructed by Redrow Group Services) for Redrow.
The following cases were referred to in the judgment:
BLP Group plc v C & E Commrs VAT(Case C-4/94) [1995] BVC 159
C & E Commrs v Reed Personnel Services Ltd VAT[1995] BVC 222
Plessey Co Ltd v C & E Commrs VAT(LON/94/254) No. 12,814; [1996] BVC 2074
Value added tax - Supply - House builder - Estate agents' fees for selling prospective purchaser's existing house paid by builder - Whether supply of estate agency services to builder - Value Added Tax Act 1983, s. 2(3), 5(1) (Value Added Tax Act 1994 section 1 subsec-or-para (2) section 6 subsec-or-para (4)Value Added Tax Act 1994, ss. 1(2), 6(4)).
This was an appeal by Customs against a decision of a tribunal (chairman Mr JD Demack) that a house builder, who paid estate agents' fees for purchasers selling an existing house, might deduct as input tax VAT paid in respect of the fees ((MAN/94/717) No. 13,207; [1996] BVC 2234).
The taxpayer ("Redrow") operated a sales incentive scheme intended as a financial incentive for purchasers to buy houses built by Redrow by putting them in a position to complete the purchase. Redrow would instruct an estate agent of its choice and would agree a price for a purchaser's existing house. On exchange of contracts, the estate agent would send an invoice to Redrow. Redrow thus became liable to pay the agent in the event of a sale, but a term of the agreement between Redrow and the agent was that Redrow's liability was extinguished if the prospective purchaser did not proceed with the purchase of a Redrow house.
Redrow appealed to the VAT tribunal against the decision of Customs that it was not entitled to deduct input tax on the payment of the estate agents' fees.
The tribunal held that the estate agents made supplies both to Redrow and to the prospective purchaser. If Redrow subsequently became liable to pay the agent it was entitled to deduct input tax.
Customs appealed to the High Court contending that input tax might be recovered only where a supply was made to the taxpayer: see the Value Added Tax Act 1983, s. 14(3)(a). By s. 2(3) a supply was made to a taxable person at the "time of supply" and by s. 5(1) the time of supply was when the estate agent issued an invoice on the exchange of contracts for sale of the prospective purchaser's house. Thus, if Redrow were right, the destination of the supply would be contingent on a subsequent event, the sale to the purchaser of a Redrow home. That contingency was wholly unrelated to the supply of the agent's services and outside the control of either the estate agent or Redrow. The tribunal's approach involved waiting to see whether Redrow derived any benefit from the fact that the potential purchaser had sold his house. The Act did not contemplate a retrospective alteration to the destination of the supply by events subsequent to the making of the supply.
Customs further argued that the direct and immediate link required between the supply of services and the sale of a Redrow home was lacking.
Held, dismissing Customs' appeal:
1. The question to whom a supply was made was a question of fact for the tribunal. Since Redrow was a party to a contract with the estate agent and the tribunal had found as a fact that services were supplied to Redrow under a three party contract, the agents' services were provided both to Redrow and the prospective purchaser. A "wait and see" approach to the question was unnecessary.
2. Whether there was the necessary direct link between the estate agency services and the sale of a Redrow home was also a question of fact. The tribunal, in concluding as it did, must have found that there was such a link.
Potts J: This is a statutory appeal brought by Customs against a decision of a VAT tribunal released on 6 April 1995. The grounds of the appeal are that the tribunal erred in law in holding that there was a supply to Redrow Group plc (Redrow) giving rise to a right to deduct input tax.
Redrow was the representative member of a group of 21 companies involved in the construction of houses. Redrow designed and operated a sales incentive scheme called the Estate Agents Package Scheme ("EAPS"). The effect of this scheme was that Redrow agreed to pay the fees of estate agents instructed in the sale of the existing house of a purchaser of one of its new houses on completion of that purchase. Before the tribunal, Redrow maintained that the estate agent's services were...
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