EMI Group Plc
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 January 2006 |
| Date | 09 January 2006 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Aprile Srl v Amministrazione delle Finanze dello Stato (Case C-228/96) [1998] ECR I-7141
CR Smith Glaziers (Dunfermline) Ltd v C & E CommrsVAT [2003] BVC 249
Deville v Administration des Impôts (Case 240/87) [1988] ECR 3513
Dilexport Srl v Amministrazione delle Finanze dello Stato (Case C-343/96) [1999] ECR I-579
EC Commission v Italy (Case 360/87) ECR I-791
EC Commission v United Kingdom (Case 340/96) [1999] ECR I-2023
Grundig Italiana SpA v Ministero delle Finanze (Case C-255/00) [2002] ECR I-8003
Imperial Chemical Industries plc v ColmerTAX (HMIT) [1999] BTC 440
Larsy v Institut national d'assurances sociales pour travailleurs indépendants (Case C-118/00) [2001] ECR I-5063
Marks & Spencer plc v C & E CommrsVATVAT HL [2005] BVC 503; (Case C-62/00) ECJ [2002] BVC 622
Ministero delle Finanze v IN CO GE '90 Srl (Joined Cases C-10/97 to C-22/97) [1998] ECR I-6307
R v C & E Commrs, ex parte KayVAT [1997] BVC 128
R v Secretary of State for Transport, ex parte Factortame LtdELR (Case C-213/89) [1991] 1 AC 603; [1990] ECR I-2433
WH Smith Do-It-All Ltd v Peterborough CouncilELR [1991] 1 QB 304, 332 DC
Claim for repayment of tax - VAT paid in error - VAT accounted for in respect of free copies of CDs given out for promotional purposes - Whether free copies were "samples" or "business gifts" - EC Directive 77/388, the sixth VAT directive, art. 5(6) - Value Added Tax Act 1983, Sch. 2, para. 5(1), (2) and (2A) - Value Added Tax Act 1994, Sch. 4, para. 5(1), (2) and (3).Claim for repayment of tax - Implementation in UK legislation of provisions of Sixth Directive, art. 5(6) - Whether last sentence of art. 5(6) properly implemented in view of restrictive wording in Value Added Tax Act 1993, Sch. 2, para. 5(1), (2) and (2A) and Value Added Tax Act 1994, Sch. 4, para. 5(1), (2) and (3).Claim for repayment of tax - VAT paid in error - Time-limit for claims - Reduction of time-limit from six years to three years - European Court of Justice held (in Marks & Spencer plc v C & E Commrs HL [2005] BVC 503; (Case C-62/00) ECJ [2002] BVC 622) that UK legislation incompatible with Community law in failing to provide for a transitional period - Commissioners promulgate details of transitional period and conditions for making claims in Business Briefs 22/2002 and 27/2002 - Whether in those circumstance UK has complied with judgment in Marks & Spencer - Whether Business Briefs effective to provide required transitional period - Value Added Tax Act 1994, s. 80, as amended by Finance Act 1997.
The issues were firstly, whether the appellant should be accounting for VAT on gifts of free copies of music recordings and secondly, the meaning, effect and status of Business Briefs 22/2002 and 27/2002 issued by the Commissioners after release of Marks & Spencer plc v C & E Commrs HL [2005] BVC 503; (Case C-62/00) ECJ [2002] BVC 622, and the effect of those documents on the three-year time-limit applicable to the repayment of overpaid VAT.
The appellant was the representative member of a VAT group consisting of approximately 150 companies, many of which undertook the recording, publishing and selling of music. Prior to July 1996, the appellant and other companies carrying on similar business activities were members of another VAT group. The appellant and a subsidiary operated 13 separate record labels. Throughout the period in dispute, the appellant promoted its artists' music recordings by providing free copies of albums and singles on vinyl, tape and compact disc to the music media, advertising agencies, retail outlets, cinemas and others in a position to influence the level of exposure received by the artists. Free copies were also given to members of the appellant's staff and to others not in a position to publicise the artists. Typically, 2,500 promotional compact discs (CDs) would be distributed in respect of a single and up to 3,750 in respect of an album. During the period April 1987 to 30 June 2003, the appellant accounted for VAT on all the free copies distributed, but it later formed the view that VAT should not have been paid on any of these, excluding samples given to employees. The appellant submitted a claim for overpaid VAT in the sum of £3.3m on the basis that the UK legislation failed to implement art. 5(6) of the Sixth Directive and that under art. 5(6) no VAT was due. The Commissioners rejected the claim and maintained that art. 5(6) had been properly implemented in UK law.
With regard to the first issue of whether the appellant should be accounting for VAT in respect of the giving of promotional music samples, the parties were agreed that the tribunal could not resolve the issue with complete confidence without referring it to the European Court of Justice for a preliminary ruling. However, there was disagreement in respect of the questions to be asked. The parties left it to the tribunal to decide on the proper wording of the referral.
With regard to the second issue, the principal question which the tribunal had to answer was whether, in the events which occurred after the delivery by the European Court of its decision in Marks & Spencer the UK Government had provided a valid transitional period, or any transitional period, in respect of the curtailment of the limitation period from six to three years for making claims for repayment of tax. That involved the questions of whether this could properly be done retrospectively or could only be achieved prospectively, and whether the promulgation of Business Briefs 22/2002 and 27/2002 had the effect, or was capable of having the effect, of amending the UK legislation or providing, within the legislation, the transitional period which would render the legislative provisions relating to the curtailment of the time-limit compatible with Community law.
Held, referring the disputed matters to the European Court:
The following questions would be referred on the "samples" issue:
Having regard to:
article 5(6) of the sixth VAT directive of 17 May 1977 (77/388), and
para. 5(1), 5(2) and 5(2A) of Sch. 2 to the Value Added Tax Act 1983, and
para. 5(1), 5(2) and 5(3) of Sch. 4 to the Value Added Tax Act 1994,
the statement of facts in this case,
1. Does the last sentence of art. 5(6) of the Sixth Directive have direct effect?
2. Is the implementation of the last sentence of art. 5(6) of the Sixth Directive properly and fully effected by a member state if that member state restricts or limits the application thereof to:
(a) an industrial sample in a form not ordinarily available for sale to the public,
(b) a gift in the course or furtherance of a business where the cost to the donor does not exceed a specified sum,
(c) a gift of a sample of any goods,
(d) only one, or only the first, of a number of samples given by the same person to the same recipient where those samples are identical or do not differ in any material respect from each other, as in para. 5(1), 5(2) and 5(2A) of Sch. 2 to the Value Added Tax Act 1983?
3. Is the implementation of the last sentence of art. 5(6) of the Sixth Directive properly and fully effected by a member state if that member state restricts or limits the application thereof to:
(a) a "business gift" (as defined in para. 5(2ZA) of Sch. 4 to the Value Added Tax Act 1994) the cost of which, together with the cost of any other business gifts made to the same person in the same year, was not more than a specified sum;
(b) only one, or only the first, of a number of samples given by the same person to the same recipient where the samples are identical or do not differ in any material respect from each other; as in para. 5(1), 5(2), 5(2ZA) and 5(3) of Sch. 4 to the Value Added Tax Act 1994?
4. What is the meaning of the word "sample" in the last sentence of art. 5(6) of the Sixth Directive, if it differs by being broader or narrower, than the expressions "sample", "industrial sample", "gift", or "business gift", or any of those expressions, referred to in the UK legislation referred to above?
5. With respect to Questions 2(d) and 3(b) above, is the last sentence of art. 5(6) properly implemented if the words - "a person is given a number of samples" (in para. 5(2A) of Sch. 3 to the 1983 Act) and "any person is given a number of samples" (in para. 5(3) of Sch. 3 to the 1994 Act) - in the UK statutes are construed as referring to and being limited to one only of the employees of a corporate recipient, where samples are given for business purposes to a number of such employees, on the basis that the corporate person is the recipient and not the employee or employees individually?
The following questions would be referred on the "time" issue:
Having regard to the judgment of the Court in Marks & Spencer (Case C-62/00) and to the legislative history in the UK relating to the right to repayment of value added tax which the taxpayer was not liable to pay and having regard to the principle of legitimate expectations:
1. Has the United Kingdom Government complied with the judgment in Marks & Spencer by means of the Business Briefs 22/2002 and 27/2002, and in the absence of legislation, with respect to the provision of a sufficient transitional period for the reduction of the time-limit laid down by statute (s. 80 of the Value Added Tax Act 1994 as amended)?
2. Has the UK, by means of the Business Briefs 22/2002 and 27/2002, remedied or failed to remedy the breaches by the UK of Community law in introducing retrospectively a reduction of the six-year time-limit for making claims for repayment of tax paid erroneously to a three-year limit?
3. Has the United Kingdom acted contrary to the principles of Community law in introducing, by means only of the Business Briefs 22/2002 and 27/2002, a retrospective transitional period for the reduction of the time-limit from six years to three?
4. In the events which have occurred,...
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