Empowerment Enterprises Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 February 2005 |
| Date | 21 February 2005 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Ambulanter Pflegedienst Kügler GmbH v Finanzamt für Körperschaften I in BerlinVAT (Case C-141/00) [2004] BVC 749
Becker v Finanzamt Münster-InnenstadtUNK (Case 8/81) [1982] 1 CMLR 499
C & E Commrs v Kingscrest Associates LtdVATVAT [2002] BVC 439; No. 17,244 [2001] BVC 2,326
C & E Commrs v University of Leicester Students' UnionVAT [2002] BVC 269
Christoph-Dornier-Stiftung für Klinische Psychologie v Finanzamt GieβenVAT (Case C-45/01) [2005] BVC 263
Clarke deceased No. 15,201VAT [1998] BVC 2,036
EC Commission v GermanyVAT (Case C-287/00) [2003] BVC 11
EllicottVAT No. 11,472 [1995] BVC 593
Expert Witness Institute v C & E CommrsVAT [2002] BVC 220
Gregg v C & E CommrsVAT (Case C-216/97) [1999] BVC 395
Institute of the Motor Industry v C & E CommrsVAT (Case C-149/97) [1999] BVC 21
James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) LtdELR [1978] AC 141
Re HoffmannVAT (Case C-144/00) [2005] BVC 41
Stichting Uitvoering Financiële Acties (SUFA) v Staatssecretaris van FinanciënVAT (Case 348/87) [1991] BVC 102)
Exempt supplies - Education - Tuition given privately by teacher who is director and employee of limited company - Directive 77/388, sixth VAT directive, art. 13(A)(1)(j) - Whether properly implemented in domestic legislation by Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 6Sch. 9, Grp. 6, item 2 - Whether domestic legislation compatible with sixth VAT directive.
The issue was whether art. 13(A)(1)(j) of the sixth directive was properly implemented, in respect of the provision of private tuition, by VATA 1994, Sch. 9, Grp. 6, item 2. Ultimately, the question for the tribunal was whether exemption can be claimed only by an individual, as opposed to some other form of legal entity such as a limited company.
The appellant company, trading as the Upleger Institute, carried on business as a provider of training courses in craniosacral therapy. The commissioners visited the appellant in May 2003 and became aware that tuition provided by the company, namely by Mr Page a director of the company, was being treated as an exempt supply for VAT purposes. The commissioners determined that, since the appellant company was not an eligible body under VATA 1994 item 1 of Grp. 6, all supplies of tuition were standard-rated. An assessment was duly issued in the sum of £7,977 plus interest.
The appellant submitted that art. 13(A)(1)(j) of the sixth directive had not been properly implemented by the domestic legislation and, therefore, that it could rely on the directive. In particular, the appellant contended that art. 13(A)(1)(j) included supplies not only by individuals, but also by any other legal entity. It must follow that tuition provided by Mr Page and other employees of the company qualified for exemption.
The commissioners argued that items 1 and 2 of Grp. 6 properly reflected art. 13(A)(1)(i) and (j). The appellant was not providing private tuition in terms of the domestic legislation and the teachers, including Mr Page, were not acting independently of the appellant. In the view of the commissioners, to qualify for exemption, the tuition had to be given privately and the appellant was not providing private tuition.
The tribunal examined the wording of the legislation and noted that item 2 of Grp. 6 required the tuition to be provided by an individual acting independently of an employer. If that item correctly transposed art. 13(A)(1)(j), then the appeal was bound to fail because the tuition given by the appellant company did not meet the criteria as it was not being supplied by an individual acting independently of an employer. The critical wording of art. 13(A)(1)(j) was "tuition given privately by teachers and covering school or university education". The tribunal decided that if the plain ordinary meaning of the words "tuition given privately by teachers" was applied, it was reasonably clear that the exemption was directed to an educational service given by an individual or individuals. The word "privately" was not intended to draw a distinction between the public sector and the private sector; nor did it relate to the contractual nature of the transaction whereby the teaching service was provided. The word "given" was qualified by both the words "privately" and "teachers". The service was to be given by the teacher. This may be distinguished with, for example, distance learning or interactive learning over the internet. These findings pointed towards the exemption being directed to not only the activity (tuition), but also to the manner in which the activity was given. Under this analysis, the exemption related to, and only to, the supply of tuition in a specified manner. The exemption said nothing of the legal form of the economic operator or taxable person supplying the service. On this basis alone, there was some doubt that the domestic legislation properly implemented art. 13(A)(1)(j), but this doubt was re-inforced by case law established in Gregg v C & E Commrs (Case C-216/97) [1999] BVC 395, Ambulanter Pflegedienst Kügler GmbH v Finanzamt für Körperschaften I in Berlin (Case C-141/00) [2004] BVC 749 and Re Hoffman (Case C-144/00) [2005] BVC 41 cited by the company.
Held, allowing the company's appeal:
1. Article 13(A)(1)(j) identifies only the activity (and the manner of its performance) which falls within the exemption. It does not identify the legal form of the taxable person carrying on the activity. The reference to teachers is not a reference to the legal form of the taxable person, but is descriptive, and prescriptive, of the activity in question. The words "tuition" and "teachers" complement each other.
2. No legal person supplying tuition given privately by a teacher is excluded from the exemption. To hold otherwise would infringe the principle of fiscal neutrality. To confine the exemption to a taxable person who is an individual would create significant anomalies.
3. The exemption in art. 13(A)(1)(j) has not been properly transposed into domestic legislation. Item 2 of Grp. 6 unjustifiably limits the scope of the exemption. Since the relevant provision in the sixth directive is sufficiently unconditional and precise, the appellant is entitled to succeed.
This appeal, heard on 19th January 2005, raises the question whether Article 13(A)(1)(j) of the Sixth Council Directive 77/388/EEC has been properly implemented by the Value Added Tax Act 1994 Schedule 9, Group 6 Item 2. These provisions, which are appended hereto, relate, in summary, to the supply of private tuition by teachers of subjects ordinarily taught in a school or university. Ultimately, the issue for decision is whether this particular exemption can only be claimed by an individual as opposed to some other form of legal entity such as a limited company.
Mr Bernard Rice, ATII, B J Rice & Associates, Chartered Accountants, 12 Wheatsheaf Close, Maidstone, Kent appeared on behalf of the Appellants. He produced a lengthy skeleton argument and a bundle of authorities. Gillian Carty, Shepherd & Wedderburn, solicitors, Edinburgh, appeared on behalf of the Respondents ("Customs"). She, too, provided authorities for our consideration. A Statement of Agreed Facts was tendered and was subject to agreed amendment in the course of the hearing. Parties also produced an agreed bundle of documents. We heard no oral evidence. There was no dispute on quantum. The amount of the disputed assessment is £7,977 plus interest.
The Statement of Agreed Facts, as amended, provides as follows:
(2) The Appellant is Empowerment Enterprises Limited, a company incorporated under the Companies Acts (Registration Number SC238709) and having its Registered Office at Easter Cottage, Fowlis Wester, Crieff, Perthshire PH7 3NL ("the Appellant Company").
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(3) The Present appeal is an appeal against:
(a) A decision of the Commissioners contained in a letter dated 25 September 2003 and
(b) An assessment to VAT issued by the Commissioners to the Appellant on 29 April 2004 in the sum of £7977 (excluding interest) in respect of the period 1 February 2003 to 31 October 2003. Item 5 of the Parties Joint Bundle of documents is a copy of said assessment dated 29 April 2004 and is equivalent to the original.
(4) The present appeal lies to the tribunal by virtue of:
(a) Section 83(b) of the VAT Act 1994 and
(b) Section 83(p) of the VAT Act 1994.
(5) The Appellant Company is registered for VAT purposes under VAT registration number 761 7374 14 and has been so registered since 1 February 2003.
(6) Prior to 1 February 2003, Mr John Page, a director of the Appellant Company was registered as a sole proprietor under VAT registration number 761 7374 14. He had been so registered since 1 June 1994.
(7) The Appellant Company trades under the name of the Upledger Institute and is engaged in the provision of training courses in Craniosacral Therapy.
(8) In 1998 an assurance visit was conducted by Murray McDonald, an Officer of HM Customs and Excise. At the time of the said assurance visit Mr John Page was carrying on business as a sole proprietor trading under the name of the Upledger Institute. As a result of the enquiries made by the Commissioners a decision was issued by them to the effect that the tuition supplied by Mr John Page did not qualify for exemption for VAT purposes in terms of Item 2 of Group 6 of Schedule 9 to the VAT Act 1994. That decision was appealed to the VAT tribunal (EDN/99/144). It was later conceded by the Commissioners that the supplies made by Mr Page personally did qualify for exemption for VAT purposes but that the supplies made by others for whom payment was made to the Appellant in that case did not.
(9) It was held by the tribunal in their decision in appeal number EDN/00/144 that the supply of tuition by persons other than Mr Page personally is not an exempt supply. The appeal was refused. Item 1...
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