Kingfisher Plc v Commissioners of Customs and Excise
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 November 2000 |
| Date | 09 November 2000 |
| Court | Value Added Tax Tribunal |
Chancery Division.
Neuberger J.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Ernst & Young) for Kingfisher plc.
Rupert Anderson (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
Argos Distributors Ltd v C & E Commrs VAT(Case C-288/94) [1997] BVC 64
Boots Co plc v C & E Commrs VAT(Case 126/88) (1990) 5 BVC 21
Chaussures Bally SA v Belgian State (Case C-18/92) [1993] ECR I-2871
C & E Commrs v Diners Club Ltd VAT(1989) 4 BVC 74
C & E Commrs v Telemed Ltd VAT[1992] BVC 3
Davies v C & E Commrs VAT(1974) 1 BVC 23
Elida Gibbs Ltd v C & E Commrs VAT(Case C-317/94) [1997] BVC 80
First National Bank of Chicago v C & E Commrs VAT(Case C-172/96) [1998] BVC 389
High Street Vouchers Ltd v C & E Commrs VAT(1990) 5 BVC 89
HJ Glawe Speil- und Unterhaltungesgeräte Aufstellungsgesellschaft mbH & Co KG v Finanzant Hamburg-Barmbeck-Uhlenhorst VAT(Case C-38/93) [1994] BVC 242
Value added tax - Value of supply - Determination of value - Payment for goods by means of cash vouchers - Vouchers issued by finance company - Taxpayer accepting vouchers from customers in exchange for goods - Taxpayer entitled to reimbursement from finance company of cash value of vouchers less an agreed discount - Whether tax to be charged by reference to the value of the goods supplied less amount of discount due to finance company - Whether finance company made exempt supply to taxpayer in return for discount - Value Added Tax Act 1994 schedule 9 group 5Value Added Tax Act 1994, s. 19(2), Sch. 9, Grp. 5 - Sixth Council directive (Directive 77/388).
Provident Personal Credit Ltd sold vouchers to customers for their face value. The customer was entitled to use the vouchers to pay for goods at participating retailers, one of which was Woolworth. The underlying agreement between Provident and Woolworth provided for vouchers used in Woolworth stores to be redeemed by Provident at their face value less a ten per cent discount. When Woolworth supplied goods to a customer who paid by vouchers, it accounted for VAT on the basis that the consideration was equal to the face value of those vouchers. Woolworth appealed to the VAT tribunal, arguing that it should have accounted for output tax on 90 per cent of the face value only; or that the supplies made by Provident in return for the discount were standard rated, thus enabling input tax recovery by Woolworth. The tribunal rejected both arguments and Woolworth appealed (No. 16,332; [2000] BVC 2152).
(1) Whether Woolworth should have accounted for output tax on the basis of the consideration that it received from Provident, instead of on the face value of the vouchers.
(2) Alternatively, whether the services provided by Provident to Woolworth, for a consideration equal to the discount, were exempt supplies.
Held, dismissing the appeal:
1. Output tax was properly accounted for on the basis of the face value of the vouchers. Chaussures Bally SA v Belgian State(Case C-18/92) [1993] ECR I-2871 followed. There were differences between that case and this, but they were not of the essence and did not justify a different conclusion. Boots Co plc v C & E Commrs VAT(Case 126/88) (1990) 5 BVC 21, Argos Distributors Ltd v C & E Commrs VAT(Case C-288/94) [1997] BVC 64 and Elida Gibbs Ltd v C & E Commrs VAT(Case C-317/94) [1997] BVC 80distinguished because in each of those cases the retailer or supplier gave the discount or rebate direct to the customer. Woolworth's argument overlooked the reality of the arrangement, which was that Provident was providing a service to Woolworth.
2. The services provided by Provident were exempt. They fell within the ordinary meaning of the exemption set out ineu-directive 77/388 article art. 13B para 2para. 2 of art. 13(B)(d) of the sixth Council directive (Directive 77/388) and possibly also eu-directive 77/388 article para 3para. 3. As was to be expected, the arrangements also fell withinValue Added Tax Act 1994 schedule 9 group 5item 1 of Grp. 5 in Sch. 9 to the Value Added Tax Act 1994. C & E Commrs v Diners Club Ltd VAT(1989) 4 BVC 74 and Chaussures Bally SA v Belgian State (Case C-18/92) [1993] ECR 1-2871 followed.
Neuberger J: Introduction
1. This is an appeal brought by Kingfisher plc ("Kingfisher") against a decision of the VAT and duties tribunal, chairman Mr Stephen Oliver QC, ("the tribunal") released on 23 October 1999. Kingfisher appealed to the tribunal because the commissioners of Customs and Excise ("the commissioners") had rejected its claim for a repayment of overpaid output tax and its alternative claim that it had under-claimed input tax in the same amount.
2. Kingfisher is a representative member of a VAT group, whose membership includes a number of high street retailers. The specific appeal to the tribunal concerns transactions to which Woolworth ("Woolworth") had been a party, pursuant to a scheme entered into with Provident Personal Credit Limited ("Provident"). That scheme works as follows. Provident is in the business of providing credit facilities, which include selling vouchers to customers. These vouchers enable the customer to purchase goods from retailers who are members of the scheme. Provident's customers usually purchase these vouchers on credit. Indeed, it is hard to imagine why a customer would buy a voucher for cash. If a customer pays a cash sum equal to the face value of a voucher, he receives no apparent benefit: anything he could do with the voucher he can do with cash, but there is much he could do with cash that he could not do with the voucher. Be that as it may, the vouchers have a printed face value, and a statement from Provident in these terms:
We authorise retailers with Provident trading accounts to charge our account to the sum shown.
3. A retailer wishing to be in the scheme enters into an agreement ("the agreement") with Provident, which includes provisions to the following effect:
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(i) The retailer agrees to supply goods to any customer who presents a voucher for the face value of the voucher "at prices which are the same as the advertised cash prices [i.e. the shelf prices] of the retailer and [to] invoic[e] Provident with the price of those goods supplied";
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(ii) "The retailer authorises Provident to deduct discount from the invoice submitted by the retailer" at certain specified rates. The discount agreed between Provident and Woolworth was ten per cent;
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(iii) Provident agrees to settle such invoices after deduction of the agreed discount in accordance with its standard terms, payable by cheque;
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(iv) The agreement can be determined by either party on two months notice;
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(v) The trading terms and conditions referred to include various warranties by the retailer, including, for instance, warranties as to the standard of the goods supplied.
4. Woolworth was one of about 25 retailing organisations which participated, indeed, I think, still participate, in this scheme. If a customer presents the retailer with a voucher whose face value is precisely equal to the shelf price of the goods he wishes to purchase, there is a straightforward exchange of voucher for the goods. If the shelf price of the goods is greater than the face value of the voucher, then the customer has to make up the difference with another voucher or cash. If the shelf price of the goods is less than the face value of the voucher, then Woolworth gives change in a voucher or vouchers of smaller denominations or (in so far as the change or balance is less than £1) in cash.
5. In relation to goods sold pursuant to this scheme, Woolworth have paid VAT on the basis that the supply which takes place when it transfers goods to a customer on the presentation of a voucher is at a price equal to the full face value of the voucher. Thus, if one takes a customer who purchases from Woolworth goods whose shelf price is £10 with a voucher of £10 face value, Woolworth has paid VAT calculated on the basis that the supply that takes place is for a consideration of £10.
6. Kingfisher's first contention before the tribunal (and before the court) is that Woolworth should have accounted for output tax on the supplies of goods to customers who presented vouchers on the basis of the consideration received from Provident, i.e. on the basis of a supply whose value was £9 in the example I have given, rather than on the basis of the face value of the voucher or the shelf price of the goods, namely £10. The commissioners contend (as they did before the tribunal) that this is wrong, and that the correct analysis is that the taxable amount on the supply of goods is the face value of the vouchers, namely £10, and that Provident supplied Woolworth a service in return for commission of ten per cent, i.e. £1. The tribunal agreed with the commissioners on this issue.
7. Kingfisher's alternative contention, as it was before the tribunal, is based on the assumption that the commissioners' argument on the first point is correct. Kingfisher's second point is that the supply of services by Provident was not, as the commissioners contended, an exempt supply. If that is correct, then, in financial terms, the result is substantially the same for Woolworth and the commissioners as if Kingfisher had succeeded on its first point. The tribunal, however, rejected Kingfisher's second point as well.
8. I shall consider Kingfisher's two points in turn.
9. As is so often the case in connection with VAT appeals, it appears to me that the outcome of this appeal depends on how one analyses, possibly even how one categorises, the tripartite arrangement between Woolworth, Provident and the customer, which arises under the scheme.
10. Kingfisher's analysis is as follows:
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(i) as between Provident and the customer, Provident supplies the...
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