Commissioners of Customs and Excise v Redrow Group Plc
| Jurisdiction | England & Wales |
| Judgment Date | 09 June 1997 |
| Date | 09 June 1997 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Simon Brown, Peter Gibson L JJ and McCullough J.
Richard Bramwell QC (instructed by the litigation director, Redrow Group Services) for the taxpayer.
Dr Paul Lasok QC and Melanie Hall (instructed by the Solicitor for Customs and Excise) for the Crown.
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
C & E Commrs v Robert Gordon's CollegeVAT[1996] BVC 27
Edwards (HMIT) v Bairstow ELR[1956] AC 14
P & O European Ferries (Dover) Ltd VAT(LON/91/2146 and 2532) No. 7846; [1992] BVC 955
Potter (t/a P & R Potter Wholesale) v C & E CommrsVAT(1984) 2 BVC 200,049
The Plessey Co Ltd VAT[1996] BVC 2074
Trafalgar Tours Ltd v C & E Commrs VAT(1989) 4 BVC 222
Value added tax - Supply - House builder incurred estate agent's fees for selling prospective purchasers' existing houses - Whether supply of estate agency services to builder or purchaser - Value Added Tax Act 1983, s. 14(3)(a) (Value Added Tax Act 1994 section 24 subsec-or-para (1)Value Added Tax Act 1994, s. 24(1)(a)).
This was an appeal against a judgment of Potts J ([1996] BVC 147) whereby he dismissed an appeal by Customs against the decision of the VAT and duties tribunal which allowed the taxpayer, a house builder, to recover input tax paid on estate agent's fees which it had paid for the sale of purchasers' houses.
Redrow started a sales incentive scheme since many of its prospective purchasers had to sell their homes before they could proceed with the purchase of a Redrow home. Under the scheme Redrow chose an estate agent and instructed it to value and find a buyer for a prospective purchaser's house. Redrow agreed that it would pay the agent's fee if and when the purchaser completed the purchase of a Redrow house. Whilst the purchaser's house was on the market Redrow staff kept in close contact with the agent to ensure that maximum effort was made to sell it. The instructions to the agent could not be changed by the purchaser without Redrow's agreement. If the prospective purchaser did not sell his existing home through the agent instructed by Redrow, Redrow would not pay the agent's fee.
Redrow claimed that since it had received a supply of services within the Value Added Tax Act 1983, s. 14(3)(a) it was entitled to deduct the tax it had paid to the agents as allowable input tax. The tribunal, allowing the claim, said that in each case it was necessary to wait and see if the prospective purchaser bought a Redrow home and if and when a purchase was completed it could then be concluded that the agent had made a supply of services to Redrow. The High Court held that the wait and see approach was superfluous since the agents' services had been provided to both Redrow and the purchasers which was sufficient in itself to entitle Redrow to recover the tax paid to the agents as allowable input tax.
Held, allowing Customs' appeal:
1. VAT law required a careful analysis of each transaction undertaken. The services which had been supplied had to have had a direct and immediate link with the taxable transaction and the ultimate aim pursued by the taxable person was irrelevant. Each transaction had to be examined separately and it was not permissible to take a global view of a series of transactions in the chain of supply (BLP Group plc v C & E Commrs VAT(Case C-4/94) [1995] BVC 159 and C & E Commrs v Robert Gordon's CollegeVAT[1996] BVC 27, followed).
2. Redrow's scheme had involved two transactions, the sale by prospective purchasers of their existing houses and the sale by Redrow of new houses. It was in connection with the latter sale that Redrow was claiming as input tax the VAT on the supply by the agents of their services. The direct recipient of those services had been the prospective purchasers and the supply had not had a direct and immediate link with the sale by Redrow of houses and the sales by Redrow had not been objectively linked to the supply of services. Therefore the agent's services had been services supplied to the purchasers and not to Redrow.
Simon Brown LJ: This is an appeal by Customs with the leave of this court from the judgment of Potts J on 4 December 1995 dismissing their statutory appeal against the decision of the VAT tribunal (Mr JD Demack) given on 6 April 1995. The tribunal by their decision had allowed the respondent taxpayers' appeal against a VAT assessment of £58,853 and £6,638.12 default interest, an assessment made to recover input tax claimed and deducted by the taxpayer ("Redrow") during 48 consecutive monthly accounting periods. The question arising in these proceedings is whether or not Redrow were properly entitled to the benefit of that input tax.
Section 14(3)(a) of the Value Added Tax Act 1983 (the provision in force at the material time, now replaced in essentially the same terms by s. 24(1)(a) of the Value Added Tax Act 1994) defines input tax in relation to a taxable person as:
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(a) tax on the supply to him of any goods or services … being (in either case) goods or services used … for the purpose of any business carried on … by him.
Section 15 of the 1983 Act entitles a taxable person to credit for input tax attributable to taxable supplies.
The input tax claimed by Redrow here was in respect of services supplied by estate agents. The position essentially was this. Redrow build houses for sale in the private sector. Most of their prospective purchasers have an existing home to sell and, until it is sold, cannot proceed with their purchase from Redrow. As a marketing device Redrow designed and operate a sales incentive scheme called the Estate Agents Package Scheme (the Scheme) under which in certain circumstances Redrow pay the fees of estate agents who sell the existing homes of prospective purchasers. It is the VAT on those fees which is in dispute in these proceedings.
The tribunal held that the estate agents' services were supplied to Redrow. Customs' appeal being limited to errors of law, the issue on appeal before Potts J, and now again before this court, is whether the tribunal's holding can be impugned on Edwards v Bairstow ELR[1956] AC 14 grounds. As Sir John Donaldson MR said in comparable circumstances in Potter (t/a P & R Potter Wholesale) v C & E Commrs VAT(1984) 2 BVC 200,049 at p. 200,052:
This requires me to examine the facts as found by the tribunal with a "decent respect for that tribunal" and to ask myself whether the only reasonable conclusion on the facts found is...
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