Healthspan Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 27 April 2018 |
| Neutral Citation | [2018] UKFTT 241 (TC) |
| Date | 27 April 2018 |
| Court | First-tier Tribunal (Tax Chamber) |
[2018] UKFTT 0241 (TC)
Judge Anne Redston
Ms Nicola Shaw QC instructed by PricewaterhouseCoopers LLP appeared for the appellant
Mr Sarabjit Singh of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax (VAT) – Goods despatched from warehouse in Netherlands delivered to UK customers – Whether under a contract with the supplier of the goods, or under a contract with separate company – Article 33 of the PVD – Whether goods despatched or transported by or on behalf of the supplier – Whether reference should be made to the Court of Justice (ECJ) – Held: separate contract for some but not all the supplies – Where no separate contract, appeal dismissed – Where separate contract, reference to ECJ.
The First-Tier Tribunal (FTT) dismissed the appeal and held the supplies were made on behalf of the appellant but there should be a reference to the ECJ on the meaning of “by or on behalf of the supplier in the context of distance selling”.
Healthspan Limited (“Healthspan”) sold non-prescription health products to retail customers, who placed their orders using the internet, phone and mail order. Between 1 April 2012 and 31 January 2016 (“the relevant period”), the overwhelming majority of Healthspan's products were despatched from a warehouse in the Netherlands and delivered to customers in the UK. This decision concerned only those products (“the goods”). Most of the goods were delivered by post but some were delivered by courier.
On 24 May 2016, HM Revenue & Customs (“HMRC”) issued a decision (“HMRC's Decision”) by which they decided that during the relevant period the goods had been delivered “by or on behalf of the supplier” and so came within art. 33 of the Principal VAT Directive (“the PVD”), implemented in the UK by VATA 1994, s. 7(4), and that the goods had therefore been supplied in the UK; and to register Healthspan for VAT retrospectively, with effect from 1 April 2012.
Healthspan appealed to the FTT on the basis that its customers had contracted with a separate company for delivery of the goods. That company was “Wial Computer and Data Services” (“Wial CDS”), trading as “PostDirect”; it was a subsidiary of a Netherlands company called Wial BV (“Wial”).
On 17 July 2017, HMRC applied to the Tribunal, asking that it make a reference to the ECJ of the European Union to obtain a ruling on the meaning of the phrase “by or on behalf of the supplier” in art. 33; Healthspan opposed HMRC's application. HMRC also asked that the Tribunal make that reference before the substantive hearing of the appeal. The application was heard on 17 November 2017 before Judge Mosedale. On 18 December 2017 she issued her decision, declining to make a reference to the ECJ, and directing that the hearing go ahead as listed.
Judge Anne Redston's verdict on the case ran to 59 pages and was dealt with in a number of parts the main ones being:
- Part 1 – the general facts relating to the agreements
- Part 2 – Phone sales
- Part 3 – Online sales
- Part 4 – Mail order sales
- Part 5 – Title to the goods and refunds
- Part 6 – Legal developments and economic reality
- Part 7 – Submissions and discussion
- Part 8 – Reference to the ECJ
Each of the facts of the contracts in Parts 1 to 5 were described in detail including the arrangements and the terms and conditions relating to the type of sale.
Miss Shaw (for Healthspan) submitted that the words “on behalf of the supplier” in art. 33 meant that someone else must carry out the delivery as “a representative, agent or proxy of the supplier”, and that PostDirect did not have that role in relation to Healthspan.
Miss Shaw said that whether a person was acting “on behalf of” the supplier should be ascertained from the contractual arrangements, because they will normally represent the economic and commercial reality. Here, the customer had contracted with PostDirect for delivery of the goods, while Healthspan “does nothing other than introduce PostDirect to the customer”.
Mr Singh (for HMRC) submitted that the VAT Committee's “broader interpretation” of art. 33 was correct. As a result, “regard must be had to the economic reality and not only the contractual arrangements between the supplier, the transporter and the customer”. In his submission, as a matter of economic reality, the goods were delivered “on behalf of” Healthspan.
It has been well established that where there was more than one contractual arrangement between different parties, regard must be had to “the whole of the relationships between the various parties” and “the surrounding circumstances in so far as they were known to both parties”.
In this case there were four contracts: the Warehouse Agreement and the Payment Agreement, both of which were between Healthspan and PostDirect; Healthspan's T&Cs and PostDirect's T&Cs. Taking into account the information in those contracts, together with the further terms and other surrounding circumstances, Healthspan was closely involved with the delivery of the goods, and took responsibility for remedying problems which arose,
The judge was unsure whether it necessarily followed from those findings that PostDirect was acting “on behalf of” Healthspan when it delivered the goods.
There were three difficulties with pressing ahead and deciding this case without a reference: (1) the lack of any ECJ authority on the meaning of “on behalf of”; (2) the lack of any relevant UK authority; and (3) whether the New Directive assists with the interpretation of art. 33.
The judge commented that there was no ECJ authority on the meaning of “on behalf of”. Her second difficulty was that there was no relevant UK authority. Her third difficulty was with the New Directive, and its background. Both parties sought to rely on that Directive. However, neither party had put forward any case law authority on the extent to which a later Directive could be used to interpret its predecessor. This was not a straightforward matter of precedent.
In HP Bulmer Ltd v J Bollinger SA [1974] Ch 401 (“Bulmer”) Lord Denning gave the following guidelines as to whether a reference was “necessary”: the point must be conclusive; there must be no previous ECJ ruling; the issue must not be “acte clair” and the facts must have been found.
Having considered the case law referred to above, the judge concluded that obtaining a ruling from the ECJ on the meaning of “on behalf of” in art. 33 was necessary. It was “critical” to the issue to be decided, She found the facts, and the other tests set out by Lord Denning in Bulmer were met. However she exercised her discretion to request a ruling. The judge discussed if a reference should be jointly made with SportsDirect. She decided against that as Healthspan's position was much further advanced than that of SportsDirect, so waiting inevitably would mean delay, and the extent of that delay was unknown. There could be adjournments or directions hearings; there could be difficulties with agreeing a hearing date; and the decision itself, setting out the findings of fact, could take some time to be issued. It was also possible that the tribunal might, for whatever reason, decide not to make a reference.
The questions to be referred were a matter for this Tribunal rather than the parties. She has sent a copy of her draft reference to the parties and invited them to provide their observations. She would consider these before finalising and submitting the reference.
The judge found that Healthspan's supplies of goods to phone customers, and all supplies of goods sent by courier, were made “on behalf of” Healthspan and so came within art. 33.
As stated in the case the world of distance selling is expanding almost exponentially so it is crucial the VAT treatment is clear. Accordingly the judge made the decision that this area needs to be referred to the ECJ for the clarity of what treatment should be accorded. It will be interesting to review the area when the matter has been opined upon by the ECJ however that may be sometime in the future.
| INDEX |
Para |
|
| Introduction and summary |
1 |
|
| Judge Mosedale's decision on application for reference |
10 |
|
| The law on distance selling, and the issue in dispute |
15 |
|
| The parties' submissions in outline |
24 |
|
| The evidence |
26 |
|
| English contract law |
36 |
|
| The statement of agreed facts |
39 |
|
| Findings of fact |
42 |
|
| Part I: General facts relating to the arrangements |
43 |
|
| Organising the arrangements |
43 |
|
| The Payment Agreement |
59 |
|
| The Warehouse Agreement |
63 |
|
| Picking and labelling |
72 |
|
| The FAQs |
77 |
|
| The delivery charge and the discount |
82 |
|
| Other findings of fact about the arrangements |
90 |
|
| Sales by channel |
99 |
|
| The VAT Committee and afterwards |
102 |
|
| Part 2: Phone sales |
108 |
|
| Part 3: Online sales |
130 |
|
| Findings of fact |
130 |
|
| Is there a PostDirect/customer contract for postal deliveries |
146 |
|
| Is there a PostDirect/customer contract for courier deliveries |
149 |
|
| Part 4: Mail order sales |
161 |
|
| Part 5: Title to the goods and refunds |
170 |
|
| EU Directives on distance sales |
171 |
|
| Findings of fact about waivers and refunds of delivery charges |
181 |
|
| Refunds/waivers of delivery charges: discussion |
193 |
|
| Title to the goods |
202 |
|
| Part 6: Legal developments and economic reality |
212 |
|
| The Working Paper |
213 |
|
| Case law on contractual terms and economic reality |
215 |
|
| The Guidelines |
219 |
|
| The New Directive |
221 |
|
| Part 7: Submissions and discussion |
225 |
|
| Part 8: Reference to the CJEU |
262 |
|
| The law and its application |
262 |
|
| SportsDirect |
268 |
|
| The Tribunal's view |
275 |
|
| The terms of the reference |
277 |
|
| Disposition and appeal rights |
279 |
[1] Healthspan Limited (“Healthspan”) sells non-prescription health products to retail customers, who place their orders using the internet, phone and mail order....
To continue reading
Request your trial
-
Healthspan Ltd
...had been supplied “on behalf of” Healthspan, and so came within article 33. [7] The decision was issued on 27 April 2018 under reference [2018] TC 06474 (“the Decision”). By the Decision: I decided that goods ordered by phone, and those delivered by courier, I were delivered on behalf of He......