Commissioners of Customs and Excise v Sooner Foods Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 16 March 1983 |
| Date | 16 March 1983 |
| Court | Queen's Bench Division |
Queen's Bench Division.
Mr. Simon D. Brown (instructed by the Solicitor of H.M. Customs and Excise) for the Crown.
Mr. John Walters (instructed by Cove & Co.) for the taxpayer company.
Before: Forbes J.
Value added tax - Input and output tax - Coupon scheme for goods or services - Whether goods supplied to retailers by taxpayer company - Meaning of "transfer" - Meaning of "supply" as used in Finance Act 1972 - section 3 subsec-or-para (1)Finance Act 1972, sec. 3(1)- section 3 subsec-or-para (4)(4); section 66; schedule 2 subsec-or-para 1Sch. 2, para. 1(1)- schedule 2(4).
This was an appeal by the Commissioners of Customs and Excise from a decision of a VAT Tribunal that the taxpayer company was not liable for input tax on goods as there was no taxable supply by it.
The taxpayer company carried on the business of manufacturing and packaging foodstuffs. In 1975 the company introduced a coupon promotion scheme. In each box of potato crisps, but not in the individual cellophane packets, they enclosed one or more gift coupons. These coupons were intended for the benefit of the retailers and could not, normally, come into the possession of the public. In order to run this scheme the taxpayer company entered into contractual relations with a third party - the "administrator". The coupons did not have printed upon them a sterling or cash redemption value and no cash charge additional to the cost of the crisps was made to the retailer for them. However, the coupons were serially numbered and each purported to entitle the holder to a holiday or merchandise of his choice. The administrator produced an illustrated catalogue of gift goods. The retailer took the coupons to the address of the administrator where he could exchange them for goods.
The financial result of this contractual relationship between the taxpayer company and the administrator was that the latter, from time to time, issued invoices to the company. These invoices contained two elements: firstly, the cost of the gift goods and secondly, a service charge or commission to cover the administrator's services. The tribunal found that value added tax was added to both; the company recovered the amount of this tax from the Commissioners as input tax.
The question before the court arose out of a direction given by the tribunal which had the effect of precluding the Commissioners from making any further assessment on the taxpayer company claiming these amounts to input rather than output tax.
For the taxpayer company arguments were advanced on three points. First, that the contract between it and the retailer, which would otherwise attract VAT, was taken outside the scheme of the Act by a Statutory Instrument which made the arrangement a trading stamp scheme. The Crown did not dissent from this. Secondly, with regard to the second contract whereby the administrator transferred the property in the gift goods to the retailer and invoiced the taxpayer company for the cost of the goods plus an administration fee, that was a supply by the administrator to the taxpayer and that was a composite supply. Finally, it was argued that there is nothing in the Act which precludes the result the company contended, namely, that there may be a transfer of the whole property in goods from A to B but at the same time the goods may be supplied not by A to B but by A to C. It was argued this is what occurred in the present case.
For the Crown it was contended that the taxpayer company had supplied the gift goods to its retailers and ought consequently to have accounted to the Commissioners for the output tax on them.
Held, appeal allowed.
1. The word "transfer" in schedule 2 subsec-or-para 1Sch. 2, para. 1, both in its verbal and its substantive forms, supposes the passing of something from a transferor to a transferee. This means "any transfer from one person to another". Similarly, the expression "is a supply of goods" means "is a supply from that person to that other person". To construe these words otherwise would be to rob them of all practical application. In order to look at the transaction to see what is being transferred it is necessary to find out who is transferring the thing and to whom. A transfer of the whole property in goods from A to B is, and must be, a supply by A to B and cannot be a supply by A to any other person.
2. In the face of these findings, no reasonable tribunal, properly directing itself, could have come to the conclusion that they ought to direct the Commissioners not to assess sums for input tax based on these findings.
Forbes J.: In this matter Mr. Simon Brown appears on behalf of the Commissioners of Customs and Excise in the matter of an appeal by the Commissioners of Customs and Excise under section 13sec. 13 of the Tribunals and Inquiries Act from a decision of the Value Added Tax Tribunal sitting at Temple Street, Birmingham, on 26 January 1982 and 11 March 1982.
The facts of the matter I can take briefly from the Tribunal's decision. The respondents to this appeal, Sooner Foods Limited...
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