Institute of Chartered Accountants in England and Wales v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | LORD SLYNN OF HADLEY,LORD LLOYD OF BERWICK,LORD HOFFMANN,LORD HOPE OF CRAIGHEAD,LORD HUTTON |
| Judgment Date | 25 March 1999 |
| Judgment citation (vLex) | [1999] UKHL J0325-2 |
| Date | 25 March 1999 |
| Court | House of Lords |
[1999] UKHL J0325-2
HOUSE OF LORDS
Lord Slynn of Hadley
Lord Lloyd of Berwick
Lord Hoffmann
Lord Hope of Craighead
Lord Hutton
My Lords,
Two questions have been raised on this appeal. The first is whether section 4 of the Value Added Tax Act 1994 and article 4 of the Sixth Council Directive 77/3881 E.E.C. of 17 May 1977 ("the Directive") make chargeable to Value Added Tax certain activities carried out by the Institute of Chartered Accountants in England and Wales with the consequence that the Institute can claim repayment or set-off of Input Tax paid on goods and services supplied to the Institute, the latter being the real purpose of these proceedings. If the activities are chargeable to tax, then the second question arises as to whether the Institute is a body governed by public law and whether it engages in these activities as a public authority, in which case the Institute is not considered a taxable person in respect of these activities. If they are not so chargeable to tax (as the Commissioners, the V.A.T. Tribunal, Tuckey, J. and the Court of Appeal held) then the second question does not arise for decision.
By the Directive, "the supply of goods or services effected for consideration … by a taxable person acting as such" is subject to V.A.T. (article 2) and by article 4, "'taxable person' shall mean any person who independently carried out in any place any economic activity specified in paragraph (2), whatever the purpose or results of that activity."
"(2) The economic activities referred to in paragraph (1) shall comprise all activities of producers, traders and persons supplying services, including … activities of the professions.
"(5) State, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions."
By the Act of 1994, section 4: "V.A.T. shall be charged on any supply of goods or services made in the United Kingdom where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him" and a taxable person is one who "is, or is required to be, registered under this Act" (section 3). "'Supply'… includes all forms of supply, but not anything done otherwise than for a consideration;" and "anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services" (section 5).
By section 94 of the Act:-
"(1) In this Act 'business' includes any trade, profession or vocation.
(2)Without prejudice to the generality of anything else in this Act, the following are deemed to be the carrying on of a business—
(a)the provision by a club, association or organisation (for a subscription or other consideration) of the facilities or advantages available to its members;".
There is no issue that for some purposes the Institute is a person registered for V.A.T. and is a taxable person, though membership subscriptions are exempt from V.A.T. under Schedule 9 Group 9 of the Act of 1994. The question is whether in carrying out functions under three statutes, the Institute is such a person, though it is common ground that the mere fact that it is carrying out functions pursuant to statutory powers does not mean that the Institute cannot be such a person.
The three functions arise in this way.
The Financial Services Act 1986 provides that a person may not carry on "investment business" unless authorised pursuant to the Act. One way of becoming authorised is through "a recognised professional body" recognised by the Securities Investment Board as delegate of the Secretary of State (Financial Services Act 1986 (Delegation) Order 1987 S.I. 1987/942). To be recognised, a body must regulate the practice of a profession (Schedule 3, paragraph 2) and be able effectively to monitor the person certified by it under the Act and to maintain high standards of integrity. The Institute's "Capital Investment Business Regulations" were approved by the Board so that the Institute was recognised as a body able to issue Certificates of Authorisation to its members so that they could carry on investment business. Under those Regulations an "Authorisation Committee" was established which, through its delegate, Joint Monitory Unit Limited, issued or refused, renewed or revoked authorisations to carry on such business, and which monitored the activities of authorised firms. Fees, fixed in part by reference to the type of authorisation granted and to the size of the firm, were payable by authorised firms to meet the costs of implementing the regulation. The Guidance Notes attached to the Regulations provided in note 115, "The purpose of the Act is to protect the investing public. The Institute has accepted its responsibilities as an R.P.B. in that light."
Under the Companies Act 1989, to be eligible for appointment as a company auditor, a person must be so eligible under the rules of a recognised supervisory body of which he is a member. Again, the body must be recognised by the Secretary of State and satisfy the necessary criteria. The object of these provisions is to see that only fit and proper persons are so appointed and that their activities are monitored. The Institute was recognised as a supervisory body in 1991 and it appointed a Registration Committee with the task of receiving applications for registration and making enquiries about the activities of members either itself or through the J.M.U. as its agent. The costs of implementing the Regulations are recovered through fees.
Under the Insolvency Act 1986, the Institute was accepted as a recognised professional body and regulations were drawn up which required the Practice Regulation Directorate of the Institute to appoint a Licensing Committee with the power to grant or refuse, review or terminate licences to practise as an insolvency practitioner and to investigate the activities of members. Again, monitoring activities can be delegated as they were by the Institute to the Joint Insolvency Monitoring Unit Limited.
Although in 1993, there was a surplus of fees over expenditure in respect of each of the licensing activities, the fees charged, the Tribunal was told, are determined so as to enable the Institute to break even, taking one year with another.
It is thus clear that in respect of these three activities, the Institute's regulatory functions are essentially for the protection of members of the public.
There is a difference in the wording between section 4 of the Act and articles 2 and 4 of the Directive. Thus the Act refers to "taxable supply made by a taxable person in the course or furtherance of any business carried on by him". The Directive refers to the supply of services, "effected for a consideration by a taxable person" and taxable person means a person who independently carried out any economic activity, including "the activities of the professions." The Act must so far as possible be construed so as to give effect to the Directive ( Marleasing S.A. v. La Comercial...
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