Commissioners of Customs and Excise v Tilling Management Services Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 07 July 1978 |
| Date | 07 July 1978 |
| Court | Queen's Bench Division |
Queen's Bench Division.
Mr. H. Woolf (instructed by the Solicitor for Customs & Excise) for the Crown.
Mr. I. Richards (instructed by Messrs. Chapman & Co.) for the company.
Before: Neill J.
Value added tax - Supplies of services - Group relief under section 258Income and Corporation Taxes Act 1970, sec. 258 - Taxpayer company providing management services free of charge to other members of group and incurring losses - Losses surrendered for payment - Whether supply of services for consideration - section 5 subsec-or-para (2) section 510 subsec-or-para (3)Finance Act 1972, sec. 5(2) and 10(3) (now section 3 subsec-or-para (2) section 3 subsec-or-para (2)sec. 3(2)(a) and 10(3)).
This was an appeal by the Crown against a decision of the London Value Added Tax Tribunal which allowed an appeal by Tilling Management Services Ltd. ("the taxpayer company") against a decision by the Commissioners that the surrender by it of group relief for losses was a taxable supply.
The taxpayer company was a member of the Tilling group of companies of which Tilling Ltd., an investment holding company, was the principal company. On 25 May 1973, the taxpayer company agreed with Tilling Ltd. that it would provide management services to the operating subsidiaries within the Tilling group without charge. Consequent upon this agreement the taxpayer company incurred substantial losses over a period of years. It was agreed that these losses should be surrendered to the profit-making companies in the group in return for payments by way of group relief. The auditors of the taxpayer company required evidence that, in exchange for surrendering its losses, the taxpayer company would receive a payment for group relief. On 1 August 1974, the taxpayer company entered into an agreement with Tilling Ltd. This agreement referred to the agreement dated 25 May 1973 provided that, with effect from 1 April 1973, in consideration of the taxpayer company performing its activities, Tilling Ltd. would procure group relief payments. These payments were to be equal to the losses incurred by the taxpayer company provided that such payments did not exceed in total the limit provided by section 258Income and Corporation Taxes Act 1970, sec. 258. The Commissioners raised assessments on the taxpayer company on the basis that the taxpayer company had supplied the services to Tilling Ltd. and its subsidiaries for a consideration which was quantified by the sums it received by way of group relief payments. The taxpayer company appealed contending that the agreement of 1 August 1974 was executed solely to satisfy its auditors and that the parties did not intend to enter into an agreement which affected their legal relations. Further, even if the parties to the agreement had intended to enter into a legal relationship, it was not an enforceable agreement because the services which the taxpayer company had agreed to supply had already been provided. Thus, there had been no consideration from the taxpayer company to Tilling Ltd. to make the agreement a binding one. Even assuming that the taxpayer company had provided consideration for the agreement, such consideration amounted to group relief payments which was not consideration within section 5 subsec-or-para (2) section 510 subsec-or-para (3)Finance Act 1972, sec. 5(2) and 10(3). The VAT Tribunal allowed the appeal.
Held, allowing the Crown's appeal:
1. The agreements were entered into on professional advice and were intended to be legally binding and have legal effect.
2. The services were supplied for a consideration because they were supplied either under the agreement of May 1973 for the consideration expressed in that agreement or under the agreement of August 1974 for the consideration then stated.
3. The promise by Tilling Ltd. that it would procure group relief payments was valuable consideration within the terms of section 10 subsec-or-para (3)Finance Act 1972, sec. 10(3).
Neill J.: This is an appeal by the Commissioners of Customs and Excise against a decision of the VAT Tribunal sitting in London on 9 May 1977. The decision is dated 21 June 1977.
The matter came before the tribunal by way of an appeal by a company called Tilling Management Services Limited (which I will call "T.M.S.") against two assessments for value added tax for periods ending 31 March 1975 and 30 September 1975 in the respective sums of £14,000 and £1,090.64. The basis of these assessments was that T.M.S. had supplied services for its holding company. Thomas Tilling Limited (which I will call "Tilling") and subsidiary and associated companies of Tilling for a consideration. For the purpose of those assessments, the consideration was quantified in the respective sums of £175,000 and £13,633.
The submission made to the Tribunal by T.M.S. and the matter with which I am concerned can be summarised as follows: T.M.S. contend that although it supplied services to Tilling it supplied such services for no consideration and that, accordingly, no value added tax was payable.
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