General Motors Acceptance Corporation (UK) Plc
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 June 1999 |
| Date | 18 June 1999 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
BP Supergas Anonimos Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion v Hellenic Republic VAT(Case C-62/93) [1995] BVC 385
Blasi v Finanzamt München I VAT(Case C-346/95) [1998] BVC 247
British Railways Board v C & E Commrs VAT(1977) 1 BVC 116
C & E Commrs v Battersea Leisure Ltd VAT[1992] BVC 23
C & E Commrs v Leightons Ltd VAT[1995] BVC 192
C & E Commrs v Lloyds TSB Group Ltd VAT[1998] BVC 173
C & E Commrs v Reed Personnel Services Ltd VAT[1995] BVC 222
C & E Commrs v Sinclair Collis Ltd VAT[1998] BVC 335
C & E Commrs v Wellington Private Hospital LtdVAT[1997] BVC 251
Card Protection Plan Ltd v C & E Commrs VAT(Case C-349/96) [1999] BVC 155
EC Commission v United Kingdom VAT(Case 353/85) (1988) 3 BVC 265
Faaborg-Gelting Linien A/S v Finanzamt Flensburg VAT(Case C-231/94) [1996] BVC 436
Finanzamt Bergisch Gladbach v Skripalle VAT(Case C-63/96) [1997] BVC 443
Helby v Matthews ELR[1895] AC 471
Ivory & Sime Trustlink Ltd v C & E CommrsVAT[1998] BVC 191
Kelly v Lombard Banking Co Ltd WLR[1959] 1 WLR 41 (CA)
Muys' en De Winter's Bouw- en Aannemingsbedrijf BV v Staatssecetaris van Financiën (Case C-281/91) [1993] ECR I-5405
Skatteministeriet v Henriksen VAT(Case 173/88) (1989) 5 BVC 140
Sparekassernes Datacenter (SDC) v Skatteministeriet VAT(Case C-2/95) [1997] BVC 509
Weissgerber v Finanzamt Neustadt an der Weinstrasze VAT(Case 207/87) [1991] BVC 40
Exemption - Hire-purchase agreements - Finance company - "Option fee" charged by finance company for option to purchase vehicle - Whether part of consideration for supply of credit - Value Added Tax Act 1994 schedule 9 group 5Value Added Tax Act 1994, Sch. 9, Grp. 5, items 2, 3 and 4 and Note (3); Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 13(B) article 13(B)art. 13(B)(d)(1) and 13(B)(d)(3).
The issue was whether an option fee charged by a finance house under a hire-purchase agreement was part of the consideration for an exempt supply of credit.
The appellant, whose ultimate parent company was General Motors Corp, was a wholesale dealer in motor cars, purchasing from Vauxhall Motors Ltd all Vauxhall cars intended for sale within the UK and selling them on to retail dealers. It also carried on certain retail activities itself, among which was repurchasing vehicles from retailers which were then sold on hire purchase to customers. The appellant used standard-form hire-purchase agreements for all its customers with dual purpose forms which could be used with agreements which were regulated by the Consumer Credit Act 1974 and those which were not. The forms had a payment schedule which had to be completed and which stated the cash price of the vehicle, from which was deducted any cash deposit and trade-in value of a customer's vehicle, with the result being shown as "Amount of Credit". The next line was "Total Charge for Credit", of which the principal component was the "Hire charges". The other component in the form of agreement adopted from 1 April 1992 was described as "Option Fee £30 (inc £4.47 VAT)". Adding together the amount of credit and the total charge for credit reduced the "Total of subsequent payments" which were payable by monthly instalments, commencing on the day one month after the agreement. The "Option fee" was a front end payment which was shown as being payable with the first instalment as a separate item. The form was revised in August 1995 and in its amended form the Total Charge for Credit was shown as "Hire Charges £… plus Option Fee of £… (inc £… VAT)", the figures being inserted before the customer signed the agreement. The amount of the Option Fee was increased to £50 with effect from 1 June 1995. In the form of agreement, the customer's declaration stated that by signing the agreement he represented and declared that he had read and understood the Terms and Conditions printed on the back of the form, which included a clause stating "if you have paid the Option Fee stated in the schedule with your first payment and have complied with terms of this agreement … then you may purchase the Goods either (a) at any time, by paying the rate of the Total Amount Payable … , or (b) at the end of the hiring, so long as you have paid to us the Total Amount Payable in respect of the Goods …" A dealer mentioned the amount of the Option Fee, but it was never negotiable. If it proved to be a sticking point the dealer was likely to offer to let the customer have some optional extra item for the vehicle free of charge. Where a hire-purchase agreement was terminated early and title to a car had not passed to a customer and the vehicle was repossessed no part of the Option Fee was refunded. From the appellant's point of view, the Option Fees were always regarded as integral to the hire charges and as part of the same income stream as a contribution towards its costs. The amount charged was market driven and did not relate to any specific costs. It was required by regulations made under the Consumer Credit Act 1974 to be taken into account in determining the Total Charge for Credit. In 1996 and 1997, three claims were made by the appellant for repayments of amounts paid as VAT on Option Fees amounting in total to £2,685,593, which were rejected by the commissioners.
The appellant contended that the amount described as the option fee could not be additional consideration for the taxable supply of the vehicle, since that had already been established. It was thus either consideration for the supply of credit or for a completely separate supply of services. Fees which were charged in an ancillary way to credit had to be treated in the same way and the fact that there was an income stream of separate charges did not result in there necessarily being two supplies. The fee was not related to any cost of transferring title to the customer on completion of the agreement, but had everything to do with the process of granting credit, which was the sole commercial rationale for the agreement. As an alternative submission, the appellant contended that the limit of £10 in Value Added Tax Act 1994,Value Added Tax Act 1994 schedule 9 group 5Sch. 9, Grp. 5, item 4 for exempting the provision of administrative arrangements and documentation in connection with credit was a domestic law measure which was not justified as being within a member state's margin of discretion and so should be ignored. A further submission was made that the appellant could rely upon Directive 77/388, the sixth VAT directive,eu-directive 77/388 article 13(B)art. 13(B)(d)(1 ) as having direct effect, so that the trader was deemed not to have formally passed on the tax to the person receiving his services so as to entitle the recipient to deduct the input tax.
The commissioners contended that the amount paid was for the option of the customer to purchase the vehicle upon completion of the agreement and there was no other payment to which the option could relate. This was the same under zero per cent finance agreements under which the fee was still paid. It was necessary to consider closely the terms of the agreement and not simply look at the substance of the transaction. On an objective analysis of the contracts, the tribunal could not conclude that the fee was part of an overall charge for credit rather than for the option. It could be considered either as an option which was separate from the goods themselves or as additional consideration for the supply of the vehicle.
Held, dismissing the...
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