HMRC v Pendragon
| Jurisdiction | UK Non-devolved |
| Judge | |
| Judgment Date | 17 May 1977 |
| Neutral Citation | [2012] UKUT 90 (TCC) |
| Respondent | 1) PENDRAGON PLC 2) STRIPESTAR LIMITED 3) PENDRAGON COMPANY CAR FINANCE LTD 4) PENDRAGON DEMONSTRATOR FINANCE LTD 5) PENDRAGON DEMONSTRATOR FINANCE NOVEMBER LTD 6) PENDRAGON DEMONSTRATOR SALES LTD |
| Appellant | UPPER TRIBUNAL TAX AND CHANCERY CHAMBER THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Appeal Number | FTC/29/2009 |
[2012] UKUT 90 (TCC)
Appeal number FTC/29/2009
VALUE ADDED TAX — margin scheme for second-hand goods —
arrangement by which motor dealer raised finance and became able to sell
demonstrator cars within margin scheme — whether abusive — yes — appeal
allowed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Appellants
- and -
1) PENDRAGON PLC
2) STRIPESTAR LIMITED
3) PENDRAGON COMPANY CAR FINANCE LTD
4) PENDRAGON DEMONSTRATOR FINANCE LTD
5) PENDRAGON DEMONSTRATOR FINANCE NOVEMBER LTD
6) PENDRAGON DEMONSTRATOR SALES LTD
Respondents
TRIBUNAL:
MR JUSTICE MORGAN and JUDGE BISHOPP
Sitting in public at Royal Courts of Justice, London on 10th, 11th, 12th and 13th May and
28th & 29th November 2011
Mr Nigel Pleming QC and Mr Owain Thomas (instructed by the General Counsel and
Solicitor to HM Revenue and Customs) for the Appellants
Mr Roderick Cordara QC and Ms Valentina Sloane (instructed by KPMG) for the
Respondents
© CROWN COPYRIGHT 2012
DECISION
TRIBUNAL JUDGES: Mr JUSTICE MORGAN and JUDGE BISHOPP
RELEASE DATE:
Introduction
1. This is an appeal to the Upper Tribunal (Tax and Chancery Chamber) by
the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”)
against the decision of the First-tier Tribunal (“the FTT”), released on 31st
July 2009. The FTT had allowed appeals by various taxpayers in the
Pendragon group of companies against assessments and other
determinations made by HMRC. It will be necessary in due course to refer
to the roles played by the various companies in the Pendragon group but
for most of the time we will be able to refer to the taxpayers collectively
as “Pendragon”.
2. The appeal is brought under section 11 of the Tribunals, Courts and
Enforcement Act 2007. Such an appeal can only be brought on a point of
law arising from the decision of the FTT. The appeal is brought with the
permission of Judge Bishopp granted on 12th October 2009.
3. The tax which is in issue in this case is VAT. The events which are
relevant took place in late 2000 and early 2001 and, accordingly, we will
refer to the provisions of the Sixth Council Directive 77/388/EEC (“the
Sixth Directive”), then in force, rather than its replacement, Council
Directive 2006/112/EC (“the VAT Directive”). It will also be necessary to
refer to the relevant national legislation which was in force at the relevant
time, principally the Value Added Tax Act 1994, the Value Added Tax
(Cars) Order 1992 and the Value Added Tax (Special Provisions) Order
1995.
4. On this appeal to the Upper Tribunal, Mr Nigel Pleming QC and Mr
Owain Thomas, instructed by the General Counsel and Solicitor to
HMRC appeared for HMRC and Mr Roderick Cordara QC and Ms
Valentina Sloane, instructed by KPMG, appeared for Pendragon. We are
grateful to counsel for the considerable assistance which they gave us.
The legislation
5. Article 2, as amended, of the First Council Directive (67/227/EEC) on the
harmonisation of legislation of Member States concerning turnover taxes
provided:
“The principle of the common system of value added tax
involves the application to goods and services of a general tax
on consumption exactly proportional to the price of the goods
and services, whatever the number of transactions which take
place in the production and distribution process before the stage
at which tax is charged.
2
On each transaction, value added tax, calculated on the price of
the goods or services at the rate applicable to such goods or
services, shall be chargeable after deduction of the amount of
value added tax borne directly by the various cost components.
The common system of value added tax shall be applied up to
and including the retail trade stage.”
6. Pursuant to article 11A of the Sixth Directive, the general rule as to the taxable
amount, in respect of which a taxable person was liable to account for VAT on a
supply of goods, was:
“ … everything which constitutes the consideration which has
been or is to be obtained by the supplier from the purchaser, the
customer or a third party for such supplies …”
7. Article 26a of the Sixth Directive (as introduced by Council Directive 94/5/EC)
provided for special arrangements which were applicable to second-hand goods,
works of art, collectors’ items and antiques and was in these terms:
“A. Definitions
For the purposes of this Article, and without prejudice to other
Community provisions
...
(d) second-hand goods shall mean tangible movable property that is
suitable for further use as it is or after repair, other than works of art,
collectors’ items or antiques and other than precious metals or precious
stones as defined by the Member States;
(e) taxable dealer shall mean a taxable person who, in the course of his
economic activity, purchases or acquires for the purposes of his
undertaking, or imports with a view to resale, second-hand goods and/or
works of art, collectors’ items or antiques, whether that taxable person is
acting for himself or on behalf of another person pursuant to a contract
under which commission is payable on purchase or sale
...
B. Special arrangements for taxable dealers
1. In respect of supplies of second-hand goods, works of art, collectors’
items and antiques effected by taxable dealers, Member States shall apply
special arrangements for taxing the profit margin made by the taxable
dealer, in accordance with the following provisions.
3
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