Commissioners of Customs and Excise v Battersea Leisure Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 January 1990 |
| Date | 22 January 1990 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Apple and Pear Development Council v C & E Commrs VAT(Case No. 102/86) (1988) 3 BVC 274
Barclays Bank Ltd v Quistclose Investments Ltd ELR[1970] AC 567
Diners Club Ltd; C & E Commrs v VAT(1988) 3 BVC 233
Furniss v Dawson TAX[1984] BTC 71
Gleneagles Hotel plc VAT(1986) 2 BVC 208,108; (1986) VATTR 196
IR Commrs v Church Commissioners for England WLRELR[1975] 1 WLR 251; [1977] AC 329
Joscelyne v Nissen ELR[1970] 2 QB 86
Neville Russell (a firm) VAT(1987) 3 BVC 611; (1987) VATTR 194
Assessment - Payment to appellant of a sum of money as contribution towards the costs of removing asbestos from the Battersea Power Station - Whether such payment consideration for a taxable supply - Value Added Tax Act 1983 section 3 subsec-or-para (2)Value Added Tax Act 1983, sec. 3(2)(b)- EC Sixth Directive, eu-directive 77/388 article 2art. 2.
The appellant company purchased the Battersea Power Station from the Central Electricity Generating Board ("the Board") for £1,500,000. The appellant company agreed that, immediately upon purchase, it would remove and dispose of the asbestos remaining in the plant at its own cost and expense, but the Board would pay the appellant company the sum of £2,248,893 by way of agreed contribution towards such cost and expense.
The commissioners contended that such payment was consideration for a taxable supply of services by the appellant company to the Board and raised an assessment in the sum of £293,833.35.
The appellant contended that the term "consideration" must be construed in accordance with European law which was different from the concept of consideration under UK law. It was agreed that the asbestos would have to be removed and disposed of and that both parties would contribute to the cost. Negotiations with the contractor who removed the asbestos had originally proceeded on the basis that the Board was going to be responsible for the removal work and the sale agreement would oblige the purchaser to make a contribution to the cost. Once the appellant company became the freehold owner it was a matter of commercial common sense for it to carry through the removal contract.
Held, allowing the company's appeal:
1. In order to determine the nature of a payment for VAT, it would be wrong to confine the tribunal's attention to the written obligation which bound the parties to each other. It was necessary to look at the circumstances in which the bargain was made and, in particular, the negotiations which led to it.
2. "Consideration" referred to in the Value Added Tax Act 1983Value Added Tax Act 1983, sec. 3(2)(b) is not a reference to consideration under English law. The word "consideration" in the section means something like a commercial return, something going into a trader's till, or pocket, or coffers.
3. Where the vendor pays to the purchaser a sum which produces no commercial benefit to the vendor the payment does not amount to consideration for the purposes of VAT.
4. The payment made by the Board amounted to a contribution to the general public good.
[The tribunal set out the facts summarised above and continued as follows.]
During the hearing I invited Mr Tallon [for the company] and Mr Allen [for the commissioners] to consider the authority of IR Commrs v Church Commissioners for England, particularly the judgment of Megarry JWLRELR[1975] 1 WLR 251 and the speeches in the House of Lords [1977] AC 329, concerning the admissibility and relevance of evidence of the negotiations. The conclusion at which I arrive from that authority is that in order to determine the nature of a payment for the purposes of VAT it would be wrong to confine one's attention to the written...
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Commissioners of Customs and Excise v Battersea Leisure Ltd
...eu-directive 77/388 article 2art. 2. This was an appeal by the Commissioners of Customs and Excise from a decision of the VAT tribunal ((1990) 5 BVC 532) that a payment made to the taxpayer, the purchaser of Battersea Power Station, by the vendor, the CEGB, as a contribution to the removal ......