HM Revenue and Customs v EB Central Services Ltd
| Jurisdiction | England & Wales |
| Judge | THE CHANCELLOR OF THE HIGH COURT |
| Judgment Date | 09 February 2007 |
| Neutral Citation | [2007] EWHC 201 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2006/APP/0588 |
| Date | 09 February 2007 |
[2007] EWHC 201 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Chancellor of the High Court
Case No: CH/2006/APP/0588
Mr Jeremy Hyam (instructed by HM Revenue & Customs) for the Appellants
Mr Mario Angiolini (instructed by Deloitte & Touche) for the Respondents
Hearing dates: 30 th January 2007
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Chancellor:
Introduction
EB Central Services Ltd and its subsidiary Excess Baggage Airports Ltd, to which I shall refer collectively as “the Taxpayers”, provide storage facilities for the personal luggage of passengers at Heathrow, Gatwick and Manchester Airports. They have accounted for VAT on the charges made for those services at the standard rate. In October 2003 the Taxpayers claimed that their charges should have been zero-rated. Then and thereafter they claimed substantial refunds of VAT overpaid. They contend that their services fall within items 6 and 11(a) of Group 8 in Schedule 8 to the VAT Act 1994 and should therefore be zero-rated in accordance with s.30 VAT Act 1994.
Those items are, so far as material, in the following terms:
“6 Any services provided for—
(a) the handling of ships or aircraft in a port, customs and excise airport or outside the United Kingdom; or
(b)the handling or storage—
(i) in a port,
(ii) on land adjacent to a port,
(iii)in a customs and excise airport, or
(iv)in a transit shed,
of goods carried in a ship or aircraft.
11 The supply—
(a) of services consisting of
(i) the handling or storage of goods at, or their transport to or from, a place at which they are to be exported to or have been imported from a place outside the member States; or
(ii) the handling or storage of such goods in connection with such transport;”
In respect of item 6 the Taxpayers claim that their services are properly to be regarded as
“..services..for…the storage…in a customs and excise airport…of goods carried in a[n]…aircraft”.
In the case of Item 11 they submit that their services are to be recognised as
or“…services consisting of..the…storage of goods, at…a place at which they are to be exported to or have been imported from a place outside the member states”
“the storage of such goods in connection with such transport”.
HMRC did not accept any of these contentions and, ultimately, the Taxpayers appealed to the VAT and Duties Tribunal from three specific decisions. The evidence adduced by them at the hearing in March 2006 included the results of a survey conducted on behalf of the Taxpayers in order to identify certain categories of passenger. That survey concluded that 95% of the luggage left in storage was carried on aircraft by passengers but only 76% of the luggage so left was carried to or from a place outside the EU. By their decision released on 16th June 2006 the VAT and Duties Tribunal upheld the Taxpayers' claim in respect of Item 11(a) but rejected it in respect of Item 6. Consequently they determined that 76% of the supplies should be zero-rated. HMRC and the Taxpayers now appeal from the Tribunal's conclusions in respect of item 11(a) and item 6 respectively.
The Facts
It is not disputed that this appeal lies in respect of a point of law only. The relevant facts are set out in paragraphs 9 to 12 of the decision. In paragraph 9 the Tribunal set out a number of matters which were common ground. They were:
(1) The service is provided wholly for passengers;
(2) Only passengers' luggage and personal effects are handled;
(3) The airline is not involved in any of these processes:
(4) All facilities are landside;
(5) The reasons why luggage are left by passengers appear to be limited to:—
(a) passengers arriving early for flights,
(b) passengers in transit,
(c) passengers whose flights have been delayed,
(d) passengers whose baggage has exceeded the excess limits,
(e) passenger's collecting ski-equipment;
(6) The terms and conditions of the left luggage service are that:
(a) the baggage is the personal property of the individual depositing it;
(b) the baggage does not contain items belonging to anyone else;
(c) the baggage has been in the owner's possession since it was packed;
(d) the baggage does not contain hazardous items, firearms, jewellery, explosives, food, live animals, animals or fish/products, or fresh produce;
(e) the baggage must be suitably packed for deposit in sealed containers, suitcases, bags, cartons or the like,
(f) the maximum liability per item of the Taxpayers is £200.
(7) The baggage is deposited by the passenger at the Appellant's excess baggage point, and it is returned to them at the same place and in the same condition after payment. ie the Appellants do not transport the baggage, or carry out any acts preparatory to such transportation.
The Tribunal found as facts that, as the Taxpayers claimed, the Taxpayers did not accept for storage any commercial goods and that 95% of luggage left with them was or had been carried on aircraft by passengers. In addition they concluded that 76% “of the supplies were for non-EU travel”. I understand that to be a conclusion that 76% of the luggage stored had accompanied a passenger who had come from or was going to a place outside the European Union. In addition the Tribunal found as a fact that none of the luggage had a sufficient business connection “to make it cargo”. Other general matters, including the details of the Taxpayers survey, are set out in paragraph 12.
The legislative history
Much of the argument before me focussed on the legislative background, in both Europe and United Kingdom, to the items with which I am directly concerned. Accordingly it is convenient to refer to them at this stage. The background starts with Finance Act 1972 by which VAT was first introduced. Schedule 4 set out descriptions of the goods or services to be zero-rated. Group 10 dealt with Transport. Item 4 covered the transport of passengers in certain limited categories. Item 5 covered the Transport of passengers and of freight to or from a place outside the United Kingdom. Item 6 provided for zero-rating of services for the handling of ships or aircraft or of goods carried in a ship or aircraft in a port or customs airport or in respect of such goods on land adjacent to a port.
The provisions dealing with VAT were re-enacted with amendments in the Finance Act 1983. The goods or services to be zero-rated were set out in Schedule 5 in which Group 10 dealt with Transport. They were similar to but not the same as those previously found in Group 10, Schedule 4 to Finance Act 1972. Item 5 was limited to freight. Item 6 continued to deal with the handling of ships or aircraft and the goods carried in them. Item 11 specified the supply of services outside the UK ancillary to the transport of goods. Item 12 covered supplies to “a person in his business capacity…who in that capacity belongs in a country other than the UK….of services consisting of…the storage of goods….at the place at which they are to be exported or have been imported…or of storage of such goods in connection with such transport”.
By the combined operation of s.16(4) Value Added Tax Act 1983 and Value Added Tax (Transport) Order 1990 SI 1990 No 752 item 6 was amended so as to include for the first time in sub-paragraph (b) “any services provided for…the…storage in a…customs and excise airport…of goods carried in a ship or aircraft”. Counsel for HMRC seeks to rely on the Explanatory Notes attached to this order, an Explanatory Memorandum and to statements made in the House of Commons by the Economic Secretary to the Treasury when introducing the order. In each case the phrase “goods carried in a ship or aircraft” has been summarised as “cargo”.
So far as the authorities put before me show, this was the state of UK domestic law at the time the relevant provisions of the Sixth Council Directive of 17 May 1977 on the Harmonisation of the laws of the Member relating to turnover taxes (“the Sixth Directive”) came into effect. As is well known the Sixth Directive introduced a common system of value added tax and a uniform basis of assessment. Article 28(2)(a) in the Title dealing with transitional arrangements provides that during the transitional period, which still continues:
“Exemptions with refund of the tax paid at the preceding stage and reduced rates lower than the minimum rate laid down in Article 12(3) in respect of the reduced rates, which were in force on 1 January 1991 and which are in accordance with Community law, and satisfy the conditions stated in the last indent of Article 17 of the second Council Directive of 11 April 1967, may be maintained.
Member States shall adopt the measures necessary to ensure the determination of own resources relating to these operations.”
The last indent of Article 17 of the Second Directive requires such exemptions or reduced rates to be conferred by measures taken only for “clearly defined social reasons and for the benefit of the final consumer”.
The earlier titles deal with territorial application, taxable persons, taxable transactions, chargeability, taxable amount, rates, exemptions, deductions and obligations. The title dealing with exemptions contains Articles 14 and 15. They require that Member States shall exempt the supplies thereafter described under conditions for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse. For present purposes the...
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HM Revenue and Customs v EB Central Services Ltd
...- Council Directive 77/388, art. 15(9), (13), 28(2). This was an appeal by Revenue and Customs against a decision of the High Court ([2007] BVC 466) that the supply of storage facilities by the taxpayers for the personal luggage of passengers at UK airports was mainly a zero-rated supply fo......