HM Revenue and Customs v Weight Watchers (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | The Chancellor |
| Judgment Date | 25 June 2008 |
| Neutral Citation | [2008] EWCA Civ 715 |
| Docket Number | Case No: A3/2008/0485 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 June 2008 |
[2008] EWCA Civ 715
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
MR JUSTICE MORGAN
Royal Courts of Justice
Strand, London, WC2A 2LL
The Chancellor
Lord Justice Hooper and
Lord Justice Lloyd
Case No: A3/2008/0485
CH2007APP0259
Mr Peter Mantle (instructed by The Solicitors Office) for the Appellants
Mr David Milne QC (instructed by Lovells LLP) and Mr Greg Sinfield (of Lovells LLP) for the Respondent
Hearing dates : 11 & 12 June 2008
Approved Judgment
Introduction
Membership of Weight Watchers (UK) Ltd (“WW”) is open to those whose weight exceeds a level identified by reference to certain charts and who wish to reduce it. In January 2005 WW introduced for its members a weight loss and weight management programme entitled “Switch”, the benefits of which are made available to members at meetings organised by WW. A person who seeks to become a member attends such a meeting and is enrolled, provided with, amongst other documents, the Switch Handbook and instructed how to use it. At that meeting the newly enrolled member, together with all the existing members attending that meeting are 'weighed in', receive a leaflet and other printed matter and have the benefit of the address of the leader of that meeting. The newly enrolled member pays £9 for enrolment and £4.95 for the meeting; the existing member pays £4.95 for the meeting.
On 11th March 2005 the appellants (“HMRC”) ruled that for the purposes of VAT
“the components of the Weight Watchers classes, the classes and the printed matter together, [form] one supply of a (standard-rated) weight loss programme.”
This ruling was disputed by WW. It appealed to the VAT and Duties Tribunal (Theodore Wallace Esq and Mrs Lynneth Salisbury JP). It contended that the events of the meetings gave rise to two separate supplies, namely a zero-rated supply of the printed materials and a standard-rated supply of the other goods and services. It accepted that, on this analysis, the price paid by the member, be it £13.95 or £4.95 should be apportioned. For the reasons explained in their decision released on 8th March 2007 the Tribunal accepted the submissions of WW and allowed its appeal.
HMRC appealed and their appeal came before Morgan J. He drew a distinction between the supplies made in relation to any given member at his or her first meeting and all other supplies to members attending meetings. He saw no sufficient reason for interfering with the decision of the Tribunal that the consideration paid by the new member at his or her first meeting, namely £13.95, was for separate supplies of services and printed materials. Accordingly he dismissed the appeal of HMRC “in relation to the transaction involved in the first meeting attended by a customer”. But in the case of the transactions involved in subsequent meetings he considered that the consideration of £4.95 was paid for a single standard-rated supply of weight loss services.
WW now appeals, with the permission of Sir John Chadwick, from the decision of Morgan J in relation to the subsequent meetings. HMRC appeals, with the permission we granted at the commencement of the hearing, from the decision of Morgan J in relation to the first meeting. The issue in relation to both appeals is, as originally formulated by the Tribunal,
“whether customers of [WW], who attend weekly meetings at which they are weighed and can then remain to attend a talk and discussion period but in any event also receive a handbook and other printed material at the meetings, receive single standard-rated supplies of a weight-loss programme or separate supplies of zero-rated printed material and standard-rated support services.”
The Facts
It is common ground that these appeals, both to the judge and to this court, lie on a point of law only. It is also common ground that the determination of the issue so formulated is one of law, Dr Beynon v HMCE [2005] STC 55, 62 paras 26 and 27 (“ Dr Beynon”) and College of Estate Management v HMCE [2005] STC 1597 paras 35 and 36 (“ College of Estate Management”). It follows that the essential starting point is the facts as found by the Tribunal. They are set out verbatim by the judge in paragraph 3 of his judgment. I will treat them as read. It is unnecessary in this court to go into the same detail as the Tribunal, but it is appropriate, without trenching on their exclusive preserve, to extract and summarise the material facts.
Switch consists of two alternative food plans, Full Choice and No Count. The former is based on an elaborate points system, the latter uses points in relation to food not on a permitted list. Switch includes what are described as 10 Winning Habits which members are encouraged to adopt. [Tribunal paras 5 to 8] There are about 6,000 to 6,500 meetings each week held in halls of various descriptions up and down the country and controlled by a 'Leader'. Attendance varies according to the time of year but may amount to about 80. Those who attend are either new members seeking to enrol, existing members or former members for whom it is cheaper to re-enrol rather than pay for missed weeks. [Tribunal paras 9 to 12]
All those attending the meeting are provided with that week's leaflet, a points tracker form for the week and, once a month, the magazine 'irresistible'. Those enrolling for the first time get a copy of the handbook, together with a points calculator and bonus booster. Those re-enrolling may not need another copy of the handbook or the points calculator and bonus booster. [Tribunal paras 12 to 15] The various publications are described by the Tribunal in paragraphs 20 to 24 of their decision. I should refer to the Handbook. This publication is 7 inches square and comprises 170 pages divided into seven sections. The section entitled 'Get Support' emphasises, in effect, the importance of group therapy and of the encouragement and support provided by the Leader and the other members present at the meeting.
Meetings last for about an hour. Members are 'weighed in' by the Leader, that is to say that they are weighed by the Leader and their weight that week is recorded. There is ample opportunity for conversation with other members while the weighing in progresses. Later they get the benefit of a talk by the Leader on some relevant topic and a group discussion. Those enrolling for the first time also get, at the end, an 'orientation' talk on how Switch works and how to navigate the Handbook. [Tribunal paras 17 to 19] The responsibility for the arrangements for the meetings and their venues rests with the Leaders and Area Managers appointed by WW. [Tribunal paras 25 and 26]
In addition WW provides weight loss programmes for At Home and On Line customers. They receive the printed material by post and on line respectively. The supply of the former is zero-rated and of the latter standard-rated. The terms and cost of membership are different. [Tribunal paras 11 and 27].
In relation to the transactions effected at the meetings the Tribunal concluded in paragraphs 56 and 57:
“56. In the present case although separate fees are charged at the initial meeting for registration and for attendance at that meeting, a customer cannot attend as a Member without paying the registration fee, except when there is a special promotion, and cannot register without paying the meeting fee for that week. We conclude that as a matter of contract and VAT law there is a single transaction at the first Meeting for a consideration comprising both fees. For this consideration the Member is supplied with the Handbook with Points Finder and Bonus Booster insert and is given an orientation talk in addition to the supplies made at weekly meetings thereafter; the Member is also given the right to attend further meetings without paying further registration fees.
57. Each time the Member attends a meeting thereafter there is a further transaction for a separate consideration. There is no contractual obligation to attend further meetings. No part of the further consideration is attributable to the Handbook and insert which has already been supplied or to the other printed materials already supplied. That Member already has the Handbook and thus only attends to obtain the services provided at the further meeting and the further printed materials.”
There is no challenge to these conclusions.
The Law
As is well known, art 2(1) Sixth Directive requires member states to subject to VAT
“the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such.”
Neither the Sixth Directive nor the VAT Act 1994 give any guidance as to how to identify a single supply consisting of a number of elements or the recognition of several distinct supplies in a single transaction. That guidance has been provided by the European Court of Justice. It is common ground that the test relevant to the issues in this case is that enunciated by the European Court of Justice in paragraph 22 of its judgment in the case of Levob Verzekeringen BV and another v Staatssecretaris van Financien ( C-41/04) [2006] STC 766 (“ Levob”) in the following terms:
“The same (sc.there is a single supply) is true where two or more elements or acts supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split.”
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