Conoco Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 January 1997 |
| Date | 22 January 1997 |
| 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 102/86) (1988) 3 BVC 274
Boots Co plc v C & E Commrs VAT(Case 126/88) (1990) 5 BVC 21
British Railways Board v C & E Commrs VAT(1977) 1 BVC 116
Bulmer (HP) Ltd v J Bollinger SA UNK[1974] 2 All ER 1226
CILFIT (Srl) v Italian Ministry of Health (Case 283/81) [1982] ECR 3415
C & E Commrs v ApS Samex (Hanil Synthetic Fiber Industrial Co Ltd, third party) UNK[1983] 1 All ER 1042
C & E Commrs v Battersea Leisure Ltd VAT[1992] BVC 23
C & E Commrs v Music and Video Exchange LtdVAT[1992] BVC 30
De Gezamenlijke Steenkolenmijnen in Limburg v ECSC High Authority (Case 30/59) [1961] ECR 1
EC Commission v Federal Republic of Germany ('Kohlgesetz') (Case 70/72) [1973] ECR 813
Elida Gibbs Ltd VAT(LON/93/2601 and 1398) No. 12,809; [1996] BVC 2068
Empire Stores Ltd v C & E Commrs VAT(Case C-33/93) [1994] BVC 253
Italian Government v EC Commission (Case 173/73) [1974] ECR 709
Lubbock Fine & Co v C & E Commrs VAT(Case C-63/92) [1993] BVC 287
Naturally Yours Cosmetics Ltd v C & E Commrs VAT(Case 230/87) (1988) 3 BVC 428
R v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd, ex parte Else (1982) Ltd ELR[1993] QB 534
R v Royal Pharmaceutical Society of Great Britain, ex parte Association of Pharmaceutical Importers (Joined Cases 266 & 267/87) [1989] ECR 1295; [1989] 2 CEC 415
Trafalgar Tours Ltd v C & E Commrs VAT(1989) 4 BVC 222
Webb v Emo Air Cargo (UK) Ltd ICR[1993] ICR 175
Supply - Value of supply - Money-off coupons accepted by petrol retailers in lieu of cash - Coupons redeemed by appellant which abated selling price to retailers pro tanto - Whether rebate constituted discount on sale price so as to enable appellant to reduce amount of output tax payable on supplies to retailers - Whether abated amount consideration for promotional services supplied by retailers to appellant - Whether issues suitable for reference to European Court on preliminary matters of interpretation - Value Added Tax Act 1983, s. 3 and 10; Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 2(1) article 11(A)(1)art. 2(1), 11(A)(1)(a),eu-directive 77/388 article 11(A)(3) article 11(C)(1)(3)(b) and 11(C)(1).
The issue was whether the amount credited by the appellant to petrol retailers when it redeemed money-off coupons distributed to customers was: (1) part of the consideration for the supply of the petrol by the dealers to the customers which did not entitle the appellant to deduct input tax; or (2) consideration for supplies of promotional services by the retailers to the appellant which entitled the appellant to deduct input tax; or (3) a reduction in the value of the original supply of petrol by the appellant to the retailers which entitled the appellant to reduce its output tax on that supply.
The appellant sold JET branded petrol through about a thousand sites, some of which it owned. Other than under arrangements with a "commission operator", whereby the appellant owned the fuel until it was sold to a customer and in relation to which there was no dispute with Customs, the appellant sold petrol to the retailer which then sold it on to a customer, with the appellant and the retailer separately registered for tax and claiming input tax and accounting for output tax in the normal way.
In April 1993 the appellant launched a promotion of its petrol under the brand name "PriceLess". In order to make the promotion succeed it was necessary to involve all or most of its retailers. With this aim it induced them to enter into agreements whereby the appellant would promote its product by means of a powerful advertising package involving money-off coupons fully funded by the appellant in return for which each retailer would agree to a reduction in its margin. Typically, newspaper advertisements incorporated coupons offering £1 off any purchase price of petrol of £10 or more. Leaflets with money-off coupons were also distributed in the neighbourhood of participating outlets.
Under the scheme, a customer holding a coupon could buy petrol in return for cash and the coupon up to the value of the pump price. The retailer would accept the coupon which would be forwarded to the appellant who would then credit the retailer's account with the amount of the face value of the coupons.
On 31 January 1994 the commissioners raised an assessment in the sum of £259,321 on the basis that the payments made by the appellant to the retailers amounted to further consideration for the supplies by the retailers to the customers.
The appellant contended: (1) that the consideration for the supply of petrol by a retailer to a customer was the cash price paid by the latter and did not include the value of the coupon; (2) that the payments made by the appellant to the retailers were consideration for the supply by them to the appellant of services under the participation agreements so that the appellant was entitled to deduct input tax in respect of such payments; or (3), as an alternative to (2), that the redemption money paid to the retailers reduced the taxable amount of the original supply of petrol by the appellant and thus the amount of output tax payable.
The appellant submitted that a decision of the European Court of Justice was necessary to enable the tribunal to give a judgment in the present case.
The commissioners contended that the total consideration for the supply of petrol by the retailer to the customer was the cash received from the latter together with the redemption money for the coupon. Alternatively, the payment was a subsidy and therefore part of the overall consideration within the meaning of eu-directive 77/388 article 11(A)(1)art. 11(A)(1)(a) of the sixth VAT directive. The payment was not a discount by a seller to achieve a sale. The retailer had foregone nothing, having been compensated by the appellant. Also, that there had been no supply of services by the retailers to the appellant entitling the latter to deduct input tax in respect of such payments. Even if there had been such a supply, it was exempt as a financial service. Finally, that there had been no reduction of the price at which the petrol was sold by the appellant to the dealers and thus the appellant could not reduce the output tax on the supply.
The commissioners opposed a reference to the European Court of Justice on the basis that it was neither necessary nor appropriate.
Held, on a preliminary decision referring the issue to the European Court of Justice for a preliminary ruling on interpretation:
1. Since the decision under appeal for the tribunal related to the treatment by the appellant of its returns and not those of the retailers it would not be proper to decide the first issue, which concerned the consideration received by the retailers. In this respect the case was not on all fours with that of Boots Co plc v C & E Commrs (Case 126/88) VAT(1990) 5 BVC 21 where the coupons were both issued and redeemed by the company as a retailer.
2. The payments made by the appellant to the retailers were not made in return for any service rendered by the latter. All that the dealers did was to list and total the face value of the coupons and send them to the appellant when they became entitled to receive the refunds in full. The amount of the redemption payments was directly linked to the value of the reductions and the price of fuel sold to customers, as evidenced by the coupons, and was not directly linked to the value of anything done by the dealers. Since the application of EC law on this issue was so obvious as to leave no scope for any doubt as to the manner in which the issue was to be resolved the tribunal would not exercise its discretion in referring the second issue to the European Court of Justice for a preliminary ruling.
3. The principle in the Boots Co plc case that there was no consideration capable of being expressed in money given by the purchaser of the goods for the price reduction when he tendered a coupon, even if it was granted by the supplier of the goods for commercial reasons, was capable of applying in the instant case where the price reduction was granted by a previous supplier in the chain. Accordingly, it was appropriate for a reference to be made to the European Court of Justice for a preliminary ruling on this point.
[The tribunal set out the facts summarised above and continued as follows.]
6.1 Section 3(2)(a) of the Value Added Tax Act 1983 provides that "supply" includes all forms of supply, but not anything done otherwise than for a consideration. Section 3(2)(b) provides that anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services.
6.2 Section 10(3) of the Value Added Tax Act 1983 provides that if a supply is for a consideration not consisting or not wholly consisting of money its value shall be taken to be such amount in money as, with the addition of the tax chargeable, is equivalent to the consideration.
6.3 eu-directive 77/388 article 2(1)Article 2(1)of Directive 77/388, the sixth VAT directive, provides that the supply of goods or services effected for consideration … by a taxable person acting as such should be subject to VAT.
6.4 eu-directive 77/388 article 11(A)(1)Article 11(A)(1)(a) of the sixth directive provides that the taxable amount shall be everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies including subsidies directly linked to the price of such supplies.
6.5 eu-directive 77/388 article 11(A)(3)Article 11(A)(3)(b) of the sixth directive provides that the taxable amount shall not include price discounts and rebates allowed to the customer...
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