Dfds A/S
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 August 1994 |
| Date | 23 August 1994 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Beheersmaatschappij Van Ginkel Waddinxveen BV & Ors v Inspecteur der Omzetbelasting, Utrecht (Case C-163/91) 12 November 1992
Berkholz v Finanzamt [Tax Office] Hamburg-Mitte-AltstadtVAT(Case 168/84) (1985) 2 BVC 200,178
Lord Advocate v Babcock & Wilcox (Operations) LtdUNK[1972] 1 All ER 1130
Marleasing SA v La Comercial Internacional de Alimentación SA(Case C-106/89) [1990] ECR I-4135; [1993] 1 CEC 124
Yoga for Health Foundation v C & E Commrs VAT(1984) 2 BVC 200,044
Tour Operators' Margin Scheme - Place of Supply - Meaning of "has established its business" and "a fixed establishment" - Danish tour operator used wholly-owned UK subsidiary as agent supervising UK activities - Whether appellant had "established his business" so as to make margin supplies taxable in UK - Whether, given the presence of UK company's offices in the UK, the appellant had "fixed establishment" - Value Added Tax (Tour Operators) Order 1987 SI 1987/1806 section 5 subsec-or-para (2)(SI 1987/1806), art. 5(2); Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 26(2)art. 26(2).
The issue was whether the appellant had "established his business" or "a fixed establishment from which the travel agent has provided the service" (Directive 77/388, the sixth VAT directive,eu-directive 77/388 article 26(2)art. 26(2)) so as to make it liable for VAT in the UK in respect of its margin on package tours sold on its behalf in the UK.
The appellant was a shipping, travel and general transport company incorporated in Denmark. It had a wholly-owned UK subsidiary operating from Harwich which acted as its agent in selling package tours on its behalf.
Until 31 December 1988, the UK company sold elements of the package tours as principal for the appellant and paid VAT on the margin under the Tour Operators Margin Scheme (TOMS). From 1 January 1989, the UK company entered into an agency agreement with the appellant under which it was appointed the appellant's agent in the UK and acted as the central booking office for the appellant's passenger services. As agent it was required to provide "qualified sales and operational personnel" to ensure a marketing and administration service on the appellant's behalf and to market its activities within the framework of the appellant's overall strategy and policy. In return for its services the agent was to be paid 19 per cent on all passenger fares.
Oral evidence was given to the effect that the appellant sold 200,000 to 250,000 package tours annually and that the parent company in Denmark developed these and fixed prices in consultation with the local subsidiaries in each country where it operated, retaining the final decision on these matters so as to maintain control over the deployment of its capacity.
The appellant paid all marketing costs in the UK market including the costs of production of brochures, the purchasing of hotel accommodation and bus tours involved in the package tours and all shipping costs. The UK company paid its own staff and other administration costs out of its commission receipts.
By letter, dated 20 August 1993, Customs ruled that the appellant had been liable to register in the UK to operate TOMS with effect from 1 January 1989.
The commissioners contended that by agreeing with the UK company that the latter should carry out the administration of the its package holidays as its agent, the appellant had "established his business" in that member state within the meaning of eu-directive 77/388 article 26(2)art. 26(2) of the sixth VAT and SI 1987/1806 section 5 subsec-or-para (2)art. 5(2) of the Value Added Tax (Tour Operators) Order 1987 (SI 1987/1806). Further, a supplier could be taxed in the place in which there was located a "fixed establishment" from which the supplier's services were provided whether or not the establishment belonged to the supplier.
The appellant contended that it could not be said that it had established its business in the UK in the sense envisaged by the legislation and it did not itself have a fixed establishment from which the services were provided.
Held, allowing the company's appeal:
1. The words "has established his business" in the English version of eu-directive 77/388 article 26(2)art. 26(2)of the sixth VAT directive were clearly capable in their natural meaning of referring to the establishment of the "centre" or "headquarters" or "main seat" of the supplier's economic activity. In the light of evidence given as to the meaning of the corresponding words in the French and Danish versions it was to be concluded that this was the correct meaning to be attributed to the words. Since the appellant's "centre", "headquarters" or "main seat" was in Denmark the place of supply could not qualify as being in the UK under this head.
2. It was the fixed establishment of the supplier which was relevant to determining the place of supply. Here the fixed establishment was not that of the supplier (i.e. the appellant) so that it could not be taxed in the UK on the margin of its package tours marketed in the UK.
[The tribunal set out the facts summarised above and continued as follows.]
By letter dated 20 August 1993 the commissioners issued their decision that the Danish company is "liable to register in the UK to operate the Tour Operators Margin Scheme" with effect from 1 January 1989. This letter based the commissioners' decision on s. 8 of the Value Added Tax Act 1983. It was pointed out to the commissioners by the appellant that s. 8 of the Value Added Tax Act 1983 did not apply and that the relevant legislation was contained in SI 1987/1806 section 5art. 5 of the Value Added Tax (Tour Operators) Order 1987 (SI 1987/1806). By letter dated 31 March 1994 the commissioners stated that they no longer intended to rely upon the provisions of s. 8 of the Value Added Tax Act 1983, but would rely on SI 1987/1806 section 5 subsec-or-para (2)art. 5(2) of the Order.
SI 1987/1806 section 5 subsec-or-para (2)Article 5(2)of the Order provides that a "designated travel service" as defined inSI 1987/1806 section 3art. 3 of the Order should be treated as being supplied (and therefore taxable) in the member state in which "the tour operator" has "established his business" or "if the supply was made from a fixed establishment, in the member state in which the fixed establishment is situated".
It is common ground between the parties that the Danish company is a "tour operator" within SI 1987/1806 section 5 subsec-or-para (2)art. 5(2) and that the package tours sold by the Danish company through the agency of the [UK] company are, or involve, "designated travel services" within SI 1987/1806 section 3art. 3. It follows that the points to be determined are:
-
(2) whether the Danish company has "established [its] business" in the UK within the meaning of SI 1987/1806 section 5 subsec-or-para (2)art. 5(2); and/or
-
(3) whether the supply of the relevant package tour services was made from a "fixed establishment" within SI 1987/1806 section 5 subsec-or-para (2)art. 5(2) which is situated in the UK.
Since SI 1987/1806 section 5 subsec-or-para (2)art. 5(2) of the Order represents a modification of s. 6 and 8 of theValue Added Tax Act 1983 it is necessary to construeSI 1987/1806 section 5 subsec-or-para (2)art. 5(2) in the context of those sections. Further, since s. 6 and 8 of theValue Added Tax Act 1983 are designed to implement art. 9 of Directive 77/388, the sixth VAT directive, and the Order is intended to implement art. 26 of the sixth directive, it is also necessary to look at the provisions of the sixth directive in order to resolve any uncertainties of construction in the English legislation: see Marleasing SA v La Comercial Internacional de Alimentación SA (Case C-106/89) [1990] ECR I-4135; [1993] 1 CEC 124 at pp. 133-134, para. 8 and 9 (opinion of Van Gerven AG) where the established principle of construction is set out as follows:
The obligation to interpret a provision of national law in conformity with a directive arises whenever the provision in question is to any extent open to interpretation. In those circumstances the national court must, having regard to the usual methods of interpretation in its legal system, give precedence to the methods which enables it to construe the national provision concerned in a manner consistent with the directive.
We turn therefore to the terms of the relevant English and...
To continue reading
Request your trial
-
RAL (Channel Islands) Ltd
...showing that it merely acted "as an auxiliary organ of its parent." It does not appear from the original tribunal decision (No.12,588; [1995] BVC 1184) or the report for hearing for the ECJ at [1997] BVC 279, that the term "imposed" used by the Court of Justice did more than reflect the par......
-
The Chinese Channel Ltd (HK)
...Commrs VAT(1977) 1 BVC 116 British Sky Broadcasting Ltd VAT(LON/94/78) No. 12,394; [1995] BVC 1107 DFDS A/S VAT(LON/93/2396) No 12,588; [1995] BVC 1184 Dori v Recreb Srl (Case C-91/92) [1994] ECR I-3325 Interbet Trading Ltd (No. 2) VAT(1978) 1 BVC 1085 Marleasing SA v La Comercial Internaci......
-
WH Payne & Company
...1190 C & E Commrs v Johnson VAT(1980) 1 BVC 338 Chantrey Vellacott VAT(LON/91/1718) No. 7311; [1992] BVC 1442 DFDS A/S VAT(LON/93/2396) [1995] BVC 1184 Interbet Trading Ltd (No. 2) VAT(1978) VATTR 235; (1978) 1 BVC 1085 Kidd & Zigrino Ltd (1974) VATTR 173 Marleasing SA v La Comercial Intern......