Ford Motor Company Ltd v R & C Commissioners
| Jurisdiction | England & Wales |
| Judge | The Chancellor:,Lord Justice Rix,Lord Justice Lloyd |
| Judgment Date | 19 December 2007 |
| Neutral Citation | [2007] EWCA Civ 1370 |
| Docket Number | Case No: A3/2007/0802 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 2007 |
[2007] EWCA Civ 1370
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT CHANCERY DIVISION
SIR DONALD RATTEE SITTING AS A HIGH COURT JUDGE
CH2006APP0756
The Chancellor of the High Court
Lord Justice Rix and
Lord Justice Lloyd
Case No: A3/2007/0802
Mr J Peacock QC & Mr P Walford (instructed by Ford Motor Company Ltd under the Bar Licensed Access scheme) for the Appellant
Mr R Anderson QC & Mr G Peretz (instructed by Customs & Excise Litigation) for the Respondent
Hearing dates : 21 & 21 November 2007
Judgement
Introduction
The appellant, Ford Motor Company Ltd (“Ford”), is the well-known manufacturer of cars. Within the United Kingdom it maintains a network of largely independent dealers through whom it sells its cars to the public. An associated company, Ford Credit, provides hire purchase and other finance to a purchaser of a Ford car who wants it. The customer buys the Ford of his choice from the dealer or Ford Credit as the case may be. From time to time Ford promotes the sales of its cars by offering, through the dealers, special deals or arrangements to buyers of specified models. The promotions with which this appeal is concerned consisted of offers of free insurance and free RAC breakdown service to buyers of particular Ford models in the period April 1994 to July 2005. Neither party suggests that the two services should be distinguished. Thus, in general, it is sufficient to consider the issues in relation to the promotion involving free insurance.
The broad outline of that promotion involved the publication by Ford of the availability of free insurance in respect of particular models purchased through one of its dealers. On approaching a dealer a prospective buyer of a relevant model was provided with a customer information sheet indicating the nature of the insurance available. If the prospective buyer wished to avail himself of the offer he, or the dealer on his behalf, completed a form with details of the buyer and of the car relevant to the offer of free insurance. This was done at the same time as completion of the order form for the purchase of the car. The details on the former were passed on to the relevant underwriter, Guardian Direct or Norwich Union, by the dealer and the relevant cover-note was available on taking delivery of the car. The buyer paid the dealer or Ford Credit for the car on the basis of an invoice which made no reference to insurance. The insurance documents provided to him on delivery of the car stated that the insurance premium was “£0.00”. The premium (together with the related insurance premium tax) received by the insurance company was paid by Ford.
In the period to which I have referred Ford accounted for VAT output tax in respect of the relevant cars, supplied by it to the dealer, on the invoiced price without any deduction referable to the cost to Ford of the related insurance. In due course Ford claimed that it had paid more output tax than that for which it was properly liable and sought repayment of sums, in aggregate, in excess of £10m. It claimed that some part of the price of the car paid by the buyer was for the insurance and that the transaction as a whole should be treated by Ford as giving rise to two supplies, namely (1) a standard rated supply of the car and (2) an exempt supply of the insurance. This contention was rejected by the respondent (“HMRC”) and, on appeal by Ford, by both the Tribunal (Rodney P Huggins Esq and Mrs J.M.Neill) and Sir Donald Rattee, sitting as an additional High Court judge of the Chancery Division. This, second, appeal of Ford is brought with the permission of Moses LJ.
Before the Tribunal and the Judge there were basically three issues, namely:
(1) did these promotional sales give rise to one supply or two? and if two
(2) was the supply relating to the insurance exempt? and if so
(3) was that insurance related supply ancillary to or subsumed in the standard rated supply of the car?
The Tribunal drew a distinction between supplies made before and after 23rd January 2004 and between promotions involving free insurance and free RAC breakdown service. They considered that only the free insurance promotion after that date gave rise to two supplies but that though the supply related to insurance would be exempt it could not be regarded as separate from that of the car itself. Sir Donald Rattee considered that no distinction could be drawn between sales before and after 23rd January 2004. He held that no part of the price paid by the buyer was consideration for the insurance so that there was only one taxable supply and that was standard rated. In those circumstances he did not deal with the second and third issues.
All three issues were argued before us. In addition Ford contends that certain facts, not expressly referred to by the Tribunal, must be treated as having been found or, if necessary, require a remission to the Tribunal. Further there was some dispute as to the order in which it is logical and convenient to consider the issues which do arise. To explain all these matters, the arguments before us and my conclusions it is necessary first to set out the relevant legislation and then to explain the facts found by the Tribunal and the conclusions of both the Tribunal and the Judge.
The Relevant Law
At the material time VAT was imposed on the supply of goods and services in the UK by the Sixth Directive (77/388/EEC) and VAT Act 1994. As is well known the first is of direct effect as well as implemented by the second. It is not suggested in this case that VAT Act 1994 conferred rights or imposed obligations in excess of those imposed or permitted by the Sixth Directive so, for the most part, it is sufficient to refer only to the relevant provisions of the Sixth Directive.
They are the following:
(1) Article 2:
“The following shall be subject to value added tax :
1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such …”
(2) Article 11A.1:
“the taxable amount shall be (a) in respect of goods or services … everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or the third party for such supplies …”
[and shall include as set out in Article 11A.2]
“(a) taxes, duties, levies and charges, excluding the value added tax itself.”
(3) Article 11A.3:
“the taxable amount shall not include
(a) price reductions by way of discount for early payment;
(b) price discounts and rebates allowed to the customer and accounted for at the time of supply;
(c) the amount received by a taxable person from his purchaser or customer as repayment for expenses paid in the name and for the account of the latter and which are entered in his books in a suspense account. The taxable person … may not deduct any tax which may have been charged on those transactions”.
(4) Article 13B(a):
“Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:
(a) insurance and reinsurances transactions, including related services performed by insurance brokers and insurance agents”.
The exemptions allowed by Article 13B(a) are contained in s.31(1) and Group 2 Item 4 contained in Schedule 9 to the VAT Act 1994. S. 31 provides:
“(1) a supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9…”
Schedule 9 Group 2 Item 4 has been amended from time to time. It is not suggested that in any of its forms it conferred an exemption in excess of what Article 13B(a) permitted. Accordingly it is not necessary to consider their terms.
The Facts
The facts as found by the Tribunal are set out in paragraphs 10 to 42 of their decision. Paragraphs 10 to 12 contain an introduction, the material parts of which I have already described in paragraphs 1 and 2 above. Paragraphs 13 to 16 describe the arrangements made before October 1998 with Guardian Direct Services Ltd. The Tribunal recorded:
“14. The main agreement was between Ford and Guardian Direct Services Limited who traded as RAC Insurance Services. The cover was comprehensive for one year, the cost of which was paid by Ford. The cover was restricted to the policy holder and up to five other named drivers aged 17 to 80. There was no refund of premium if the policy was terminated before the renewal date. Each customer had to complete and sign what was described as “the free insurance application form”. All advertising material referred to “Free insurance”.
15. The customers had to acquire the vehicle, register it and then take out the policy. Ford paid all the premiums. The purchasers filled in the Declaration forms which were faxed either to RAC Insurance Services or the Ford Insurance Centre.
16. Only specific models carried free insurance. In the period from 1 June to 25 September 1998 free insurance was available for Ka, Fiesta and Escort models. The other feature of this early arrangement before October 1998 was that only fixed premiums were charged by Guardian Direct to Ford. This was a basic estimate and did not reflect the risk element depending on the volume of sales.”
Paragraphs 17 to 22 dealt with the similar arrangements made with Norwich Union under an...
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