Computeach International Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 April 1994 |
| Date | 20 April 1994 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Amministrazione delle Finanze dello Stato v SpA San Giorgio(Case 199/82) [1983] ECR 3595
Boots Co plc v C & E Commrs VAT(Case 126/88) [1990] ECR I-1235; [1990] 1 CEC 455; (1990) 5 BVC 21
Bophuthatswana National Commercial Corp Ltd v C & E CommrsVAT[1993] BVC 194
British Airways plc v C & E Commrs VAT(1990) 5 BVC 97
Butler Question Method School of Languages Ltd VAT(LON/90/223) No. 5677; [1991] BVC 1326
Card Protection Plan Ltd v C & E Commrs VAT[1994] BVC 20
Cicero Languages International VAT(LON/89/272) No. 4286; (1989) 4 BVC 1426
City College of Higher Education Ltd VAT(LON/87/203) No. 2500; (1987) 3 BVC 670
Co-operative Retail Services Ltd VAT(MAN/89/843) No. 7527; [1992] BVC 725
EC Commission v Italy (Case 104/86) [1988] ECR 1799; [1989] 2 CEC 585
EC Commission v UK VAT(Case 353/85) [1988] ECR 817; (1988) 3 BVC 265
Fibrosa Spolka Akcyjna v Fairbairn Lawson Coombe Bartown LtdSC1943 SC 32
GUS Merchandise Corp Ltd v C & E Commrs; C & E Commrs v GUS Merchandise Corp Ltd (No. 2) VAT[1993] BVC 239
Hans Just I/S v Danish Ministry for Fiscal Affairs (Case 68/79)[1980] ECR 501
Leightons Ltd VAT(LON/92/2521) No. 10,928; [1994] BVC 639
Les Fils de Jules Bianco & Anor v Directeur Général des Douanes et Droits Indirects (Joined Cases 331, 376, and 378/85) [1988] ECR 1099; [1990] 2 CEC 507
Moses v McFarlan ENR(1760) 2 Burr 1005
Music and Video Exchange Ltd; C & E Commrs vVAT[1992] BVC 30
Sinclair v Brougham & Anor ELR(1914) AC 398
Virgin Atlantic Airways Ltd VAT(LON/93/947) No. 11,096; [1994] BVC 691
Woolwich Building Society v IR Commrs TAX[1992] BTC 470
Supply - Supply of home correspondence courses in computer training comprising several elements - Whether single composite supply or separate supplies - Whether payment of examination fees, subscriptions to professional societies and costs of students' accommodation were disbursements attributable to taxable supplies - Whether subsequent reduction in consideration a rebate or discount - Reclaim for tax allegedly overpaid by mistake - Whether "unjust enrichment" a good defence to a claim for such repayment - Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 11(A)(3) article 11(C)(1)art. 11(A)(3)(b) and art. 11(C)(1); Finance Act 1989, s. 24(3).
The issue was whether the appellant was entitled to treat a part of the consideration it received as attributable to zero-rated supplies and a part to disbursements.
The appellant carried on business as a supplier of home correspondence courses in computer training. Initially Customs agreed that each course contained both taxable and zero-rated items. In 1988, Customs accepted that the appellant could apply an historical average tax percentage of 30 per cent to gross receipts to calculate its tax outputs. This was to continue only so long as it could be shown to be fair and reasonable.
In June 1991, the appellant's VAT consultant claimed that certain costs, namely society membership fees for students, examination fees and accommodation costs should have been treated as disbursements and taken out of the standard-rated element of the calculation. Accordingly the appellant revised its procedure on calculations after that date and made a repayment claim for £455,713. Customs rejected the appellant's claim for a repayment contending that, even if the appellant was entitled to such a reclaim, Customs could rely upon "unjust enrichment" to avoid making a repayment.
The tribunal had to decide: (1) was VAT overpaid because part of the payment made by students was not attributable to taxable supplies; and (2) if VAT was overpaid would unjust enrichment result from such overpayment.
All courses offered by the appellant had, as a basis, relevant sections of City and Guilds of London Institute Examination Courses ("C and G") for whom the appellant acted as an authorised examining body. In respect of the C and G fees the appellant completed the appropriate form including a list of names of the students, their courses, and fees applicable in each case to enable C and G to produce an invoice for the total sum due for payment. These fees formed a part of the overall consideration paid by each student and course fees were set with the presumption that all students would take the course through to completion.
Although most of the study by its students was done at home, some courses involved one or more days study in the centre and overnight accommodation might sometimes be necessary. The appellant compiled and supplied a list of recommended accommodation and the terms and conditions of the contract between the appellant and the student allowed for reimbursement of accommodation charges on presentation of a receipt. The appellant reimbursed students up to a maximum of £17.50 where they had incurred overnight accommodation costs. If the actual cost of the accommodation was less than £17.50 then only the actual amount was reimbursed. If students did not incur or claim for accommodation costs then no moneys were paid or refunded.
The appellant submitted that the consideration paid by the students for the course related to some items which were not supplied by it. The examination fees and subscriptions to professional bodies related to benefits which were supplied by the relevant board not the appellant. If the fee was initially attributable to a standard-rated supply (excluding the zero-rated printed material) the subsequent reimbursement of accommodation expenses and the payment of examination fees and membership subscriptions reduced the consideration for the standard-rated supplies by the appellant. Payment of membership fees could not be regarded as the supply of teaching by the appellant since such payment had no direct impact on the teaching services provided. The benefits of membership were benefits provided by the societies and in paying the subscriptions the appellant did so as agent for the students for this limited purpose. The appellant was, as a result of reimbursing the accommodation expenses and paying the examination and membership fees, entitled to adjust its VAT liabilities. The right to make the adjustments was expressly recognised in EC law. If the price was reduced after the supply took place the taxable amount should be reduced.
The commissioners submitted that the appellant was supplying a single course of computer training consisting of various elements for consideration in the form of one all-inclusive fee. There was no attribution of price to individual elements of the course save only in relation to zero-rated manuals and printed material. The items contended for by the appellant could not in law or in fact be treated as disbursements. The appellant, after deducting 30 per cent from the gross receipts to arrive at the concessionary zero-rated value, charged VAT on all the remainder including the examination fees and the subscriptions to professional bodies. There was no evidence to support the conclusion that the £17.50 charge for accommodation was a disbursement. It was not expressed as being a disbursement in the terms and conditions and it was paid for at enrolment as part of the all-inclusive course fee.
As far as unjust enrichment was concerned the principle was that the appellant ought to be restored to its previous position by being paid the amount of the overpayment, minus what it had "passed on" to its customers, in mitigation to the damage to itself. Unjust enrichment was part of EC law. Once it had been established that the levying of tax was contrary to EC law the national court had to be free to decide whether or not the burden of the charge had been passed on. In the instant case there was evidence to show that the appellant had passed on the burden to its customers.
In regard to the argument about unjust enrichment the appellant submitted that the defence by the commissioners of unjust enrichment could only succeed if the commissioners, upon whom the onus lay, could prove that the tax had been passed on. Even then, if the passing on of the tax had resulted in the loss of profit no unjust enrichment would arise as profits would have been lost. The appellant's fees were determined by open market principles. Sums claimed were sums which would have swelled its profits had it correctly appreciated that the proportion of fees attributable to those sums were outside the scope of VAT.
Held, dismissing the appeal:
1. Determination of the activities carried on by the appellant was a matter of primary fact for the tribunal. The tribunal had to ask itself the question was there a single supply of a comprehensive all-inclusive course of computer training for a single consideration or were there also separate supplies of examination fees, society subscriptions and accommodation costs which were in no way integral to the training course. Upon the facts found, the only true and reasonable conclusion was that there was a single supply for a single consideration.
2. The appellant contended that, because of payments by it of examination fees, accommodation charges etc., the consideration paid by the students had been reduced "after the supply took place" and accordingly under eu-directive 77/388 article 11(C)(1)art. 11(C)(1) of the sixth directive there was a reduction in the amount of VAT that was in consequence payable. The wording ofeu-directive 77/388 article 11(C)(1)art. 11(C)(1) was not apt to cover a situation, such as in the instant case, where the appellant was expending sums for examination fees, society fees or accommodation costs in fulfilment of an obligation it owed to its students and for which the students had paid in full at the outset. That was not a price reduction.
3. As regards accommodation costs the sum of up to £17.50 given to the students did not constitute "a reduction of price at which an article is lawfully offered to the customer" in...
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