Commissioners of Customs and Excise v Kingfisher Plc
| Jurisdiction | England & Wales |
| Judgment Date | 25 November 1993 |
| Date | 25 November 1993 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Popplewell J.
Nigel Pleming (instructed by the Solicitor for Customs and Excise) for the Crown.
David Milne QC and Andrew Hitchmough (instructed by Lovell White Durrant) for the taxpayer.
The following cases were referred to in the judgment:
BOC International Ltd (1982) VATTR 84
C & E Commrs v Diners Club Ltd WLRVAT[1989] 1 WLR 1196; (1989) 4 BVC 74
Charge Card Services Ltd, Re ELRUNK[1989] Ch 497; (1988) 4 BCC 524
GUS Merchandise Corporation Ltd v C & E CommrsWLRVAT[1981] 1 WLR 1309; (1981) 1 BVC 432
Midland Bank plc (1991) VATTR 525; VAT[1991] BVC 749
Pepper (HMIT) v Hart and related appeals ELRTAX[1993] AC 593; [1992] BTC 591
Polysar Investments Netherlands BV v Inspecteur der Invoerrechten en Accijnzen, Arnhem VAT(Case C-60/90) [1993] BVC 88
Value added tax - Taxable person - Taxpayer representative of group of companies - Retail stores using special retail scheme - Credit card issued by group member for use in group's stores - Whether credit sales to be accounted for as cash sales when card used or payment received - Whether registration as a group was merely for accounting purposes or whether group registration affected liability - section 29Value Added Tax Act 1983, s. 29; notice 727Customs Notice 727, para. 9.
This was an appeal by Customs from a decision of the VAT tribunal ((1990) 5 BVC 881) that where one member of a group of companies was the representative member for VAT purposes, the group was treated as a single enterprise. Consequently, credit card sales effected by a card issued by a group member for use throughout the group's stores was self-financed within the meaning of that term in notice 727Customs Notice 727 - Retail Schemes (1987). Consequently, Kingfisher was entitled to account for VAT on credit sales when payment was received, not as cash sales at the time that the card was used.
For VAT purposes Kingfisher was the representative member of a group of companies. A credit card for use in the group's retail stores was issued by a group member, Time Retail Finance Ltd ("Time").
Kingfisher, which operated a retail scheme within notice 727Customs Notice 727, was assessed to VAT, as representative member of the group, on the footing that the daily gross takings of the retail members of the group should include Time credit card sales as if the retailer had received cash for the full price of goods as would have been the case if a credit card issued by an independent finance company had been used. However, if the group were to be treated as a single taxable entity, the supply of credit by Time would be a supply of "self-financed" credit, which by virtue of notice 727Notice 727 would be accounted for at the later date when the goods were paid for.
The question was whether Kingfisher, as representative member of the group, was to be treated as carrying on both the Time credit business and the retail business of the group so that the credit supplied by Time was self-financed by the group.
Customs accepted that, if the credit sales were self-financed within the meaning of notice 727Notice 727, Kingfisher would succeed but contended that the sales by Time credit card were not self-financed. Time was a separate legal entity and it was immaterial that it was a member of the same VAT group. The group treatment provided for in theValue Added Tax Act 1983, s. 29(1) did not create a single taxable person nor alter the status of an individual member of the group. Here, credit was supplied by one member to the customer of another member and accordingly the supplies of credit were not self-financed within the meaning of para. 9(b)(1) of the notice: self-financing meant finance from retailers' own resources.
The tribunal concluded that the purpose of s. 29 of the 1983 Act was to treat a group as a single entity taxable through its representative member. Kingfisher was deemed to carry on the retail business of the group and also the credit business of Time. Its deemed retail sales were financed by its deemed credit business. The credit sales were therefore self-financed.
Customs contended that s. 29 provided a simplified method of accounting whereby supplies of goods or services were disregarded for VAT purposes between members of a group but that it did not create, nor was it intended to create, a single taxable person for the purpose of VAT. Customers using the Time credit card were in no different position from customers using another credit card, and it would be anomalous if use of the Time card had different legal consequences from use of an independent credit card. Moreover, the only reasonable construction ofnotice 727Notice 727 was that Time should not be included in the retail scheme which might only apply to those members of a group who were retailers and not to others.
Held, dismissing Customs' appeal:
A group registration created a single taxable person by virtue ofs. 29 of the 1983 Act. Unless the notice clearly altered the interpretation of s. 29, which it did not, it had to be construed so as to be read together with the Act. Time was deemed to be a retailer by s. 29 and the phrase "self-financing credit sales" was to be construed as including the credit business of Time which was part of the group.
It followed that the supplies of credit by Time to the retail companies were "self-financed" within the group and VAT would be accounted for when the price of the goods was received.
The Commissioners of Customs and Excise appealed against a decision of the VAT tribunal (chairman Mr DC Potter QC) released on 1 November 1990. The grounds of the appeal were that the tribunal erred in law in holding:
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(2) that Kingfisher plc was a retailer;
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(3) that section 29s. 29 of the Value Added Tax Act 1983 did more than provide a simplified accounting method for groups of companies;
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(4) that section 29s. 29 created a single taxable entity which changed the substantive liabilities of members of the group.
Popplewell J: This is an appeal by the Commissioners of Customs and Excise against a decision of the VAT tribunal dated 1 November 1990.
The appellants are the Commissioners of Customs and Excise who are responsible for the administration and collection of VAT. The respondent company is the holding company of a group of retailers called the Kingfisher group, which group include a number of well known retailers namely Woolworths, B & Q, Comet, Charlie Browns and most particularly Time Retail Finance Ltd which provides a consumer credit service for use in the retail outlets of the group.
Kingfisher was assessed by two separate assessments as a representative member of the group on the footing that the daily gross takings of retail members should properly include all payments made by customers using the Time credit card as though the retailer had received cash for the full amount payable in the same way as if a credit card had been issued by an independent finance house. Kingfisher submitted that as the representative member they were entitled to be treated as carrying on both the Time credit business and the retail business in the group. Thus the supply of credit by Time was a supply of self financed credit to be accounted for at the time of receipt of payments by Time.
The case involves not the avoidance of tax but of postponement. It is Customs' contention that VAT becomes payable on "supply of goods to the customer". It is Kingfisher's contention that VAT becomes payable when they receive payment from Time Credit.
There is no dispute about them. These two appeals govern assessments made on 6 April 1990 in respect of a sum in excess of £2m tax and the second dated 8 June 1990 in respect of a sum exceeding £4m tax. Time Retail Finance Ltd ("Time") was formed in 1988 and was a member of the Kingfisher group. It carried on business providing a consumer credit service for use in the retail outlets of Woolworths and other members of the group. The service included or consisted of the familiar credit card, the holder of which could use it in making purchases at retail outlets of companies in the group. Except that the finance group company providing the cards was a member of the group the tribunal found that the system operated by the cards closely resembled that described in C & E Commrs v Diners Club LtdWLRVAT[1989] 1 WLR 1196; (1989) 4 BVC 74 which cited with approval the judgment of...
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