Network Insurance Brokers Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 12 February 1998 |
| Date | 12 February 1998 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Moses J.
Andrew Hitchmough (instructed by Springthorpe Holcroft & Bishop) for the taxpayer.
Robert Jay (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
Barclays Bank plc (No. 3) (LON/90/1361) No. 6469; VAT[1991] BVC 893
C & E Commrs v Civil Service Motoring Association VAT[1998] BVC 21
Countrywide Insurance Marketing Ltd (LON/93/257) No. 11,443;VAT[1995] BVC 580
Sparekassernes Datacenter (SDC) v Skatteministeriet (Case C-2/95)VAT[1997] BVC 509; [1997] ECR I-3017
Value added tax - Exempt or taxable supplies - Burial and cremation - Affinity group sought to provide fixed price funerals for its members - Taxpayer acted as intermediary between contributing members and funeral directors - Whether taxpayer "making … arrangements for or in connection with the disposal of the remains of the dead" - Value Added Tax Act 1994 schedule 9 group 8Value Added Tax Act 1994, Sch. 9, Grp. 8, item 2; Sixth VAT directive (Directive 77/388) of 17 May 1977 (OJ 1977 L145/1), Annex F, point 6.
This was an appeal by the taxpayer from a decision of the VAT and duties tribunal ((LON/96/804) No. 14,755; [1997] BVC 2269) that in acting as an intermediary between an affinity group and a provider of funerals at a fixed price for the members, it was not exempt from VAT.
The taxpayer was engaged by Leeds Hospital Fund ("the fund") to arrange and administer a scheme to provide fixed price funerals for the members of the fund. The taxpayer arranged with an undertaker that it would provide funerals for £1,000. For each member the fund paid £6 to the taxpayer which was paid to the undertaker, less a commission.
It was agreed between the taxpayer and the undertaker that the funeral services were to be provided by the undertaker to the representatives of deceased members of the fund.
The taxpayer appealed against VAT assessments contending that its supplies to the fund fell within the Value Added Tax Act 1994,Value Added Tax Act 1994 schedule 9 group 8Sch. 9, Grp. 8, item 2 which exempted "the making of arrangements for or in connection with the disposal of the remains of the dead". The assessments under appeal were issued in the transitional period during which, by eu-directive 77/388 article 28(1) article 38art. 28(1) and Annex F to the sixth VAT directive (77/388), "services supplied by undertakers and cremation services, together with goods related thereto" might be exempted by member states.
The tribunal concluded that, since UK legislation had to be construed, if possible, to correspond to Annex F to the sixth directive, the provision had to be limited to services performed by undertakers supplied to specific individuals. The tribunal concluded that there was not the necessary nexus between the arrangements made by the taxpayer to pay for funerals and the "disposal of the remains of the dead". The relevant chain of supply attracting the exemption was only from the undertaker to the representatives of the deceased members of the fund.
Held, dismissing the taxpayer's appeal:
1. The tribunal's construction of the UK exemption was too narrow. Full effect could be given to the directive by extending the scope of item 2 of Value Added Tax Act 1994 schedule 9 group 8Grp. 8 of Sch. 9 to the 1994 Act to services incidental to the burial of the dead such as a provision of a chapel of rest, transport for mourners and other incidents of funeral arrangements.
2. However, it was important to focus on the words "disposal of the remains of the dead", i.e. arrangements leading directly to that result, rather than "funeral services". The taxpayer's activities were concerned with the provision of funeral services rather than "the disposal of the remains of the dead". Those activities failed to qualify for exemption because they were a stage removed from the disposal of the remains of the dead. The legislation did not exempt arrangements leading to or in connection with the making of arrangements for the disposal of the remains of the dead. (C & E Commrs v Civil Service Motoring Association VAT[1998] BVC 21 distinguished).
Moses J: Introduction
Network Insurance Brokers Ltd ("NW") claim that it has been making exempt supplies in that it made arrangements with the Leeds Hospital Fund Ltd ("the fund") and Co-operative Wholesale Society Ltd ("CWS") "for or in connection with the disposal of the remains of the dead".
A VAT tribunal decided that the services NW supplied were not exempt. NW now appeals that decision. The issue is whether the services which the tribunal found as a fact were supplied by NW fall within the exemption under Value Added Tax Act 1994 schedule 9 group 8Grp. 8 of Sch. 9 to the Value Added Tax Act 1994 ("the 1994 Act").
Value Added Tax Act 1994 section 31Section 31 of the 1994 Act, provides that a supply is exempt if it is specified in Sch. 9.Value Added Tax Act 1994 schedule 9 group 8Grp. 8 of Sch. 9 provides under "Burial and Cremation":
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1. The disposal of the remains of the dead.
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2. The making of arrangements for or in connection with the disposal of the remains of the dead.
Under the sixth VAT directive, Directive 77/388, there are provisions which contain exemption from tax under eu-directive 77/388 article 28art. 28. Member states have the power during the transitional period to provide that certain activities are exempt. Those activities are set out in Annex F. Under point 6 ofeu-directive 77/388 article 38Annex F of the sixth directive it is provided there shall be exempt:
Services supplied by undertakers and cremation services, together with goods related thereto
.
The principles which it is necessary to apply to interpret those provisions are conveniently set out in a decision of the Court of Appeal in C & E Commrs v Civil Service Motoring Association Ltd (CSMA)VAT[1998] BVC 21 at p. 25C. Mummery LJ stated as follows:
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(1) "… it is for a United Kingdom court to construe domestic legislation in any field covered by a Community Directive so as to accord with the interpretation of the Directive as laid down by the European Court of Justice, if that can be done without distorting the meaning of the domestic legislation"
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Per Lord Kieth in Webb v Emo Air Cargo Ltd WLR[1993] 1 WLR 49 at p. 59.
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(2) If the words of exemption in Grp. 5 of Sch. 6 to the 1983 Act [in the instant case Value Added Tax Act 1994 schedule 9 group 8Grp. 8 of Sch. 9] are so clear and unambiguous that they are capable of only one meaning and that meaning fails to give effect to the provisions of eu-directive 77/388 article 13(B)(1)art. 13(B) of the directive [Annex F of the sixth directive]. It is not open to Customs to rely on the provisions of the directive, since to do so would be to allow the state to rely on its own failure to fulfil its obligation under the directive …
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(3) The exemptions provided for in eu-directive 77/388 article 13(B)(1)art. 13(B) [Annex F] and in the implementing provisions of the 1983 Act are to be interpreted strictly … though the court should not adopt an interpretation of [a directive] which "would restrict the exemption in a way which is not supported by the wording of the provision in question". (See Sparekassernes Datacenter (SDC) v Skatteministeriet VAT(Case C-2/95) [1997] BVC 509 at para. 56.)
The starting point must be the correct identification of services provided by NW. A short description of the context in which those services are supplied is to be found in para. 5 of the decision of the tribunal:
The appellant is a registered insurance broker and acted for a hospital fund which provided a funeral benefit for its members. At the request of the fund the appellant designed a specified funeral service to representatives of deceased members of the fund. The fund paid an annual fee for each member to the funeral directors, such payment being made through the appellant who retained a commission before forwarding the balance to the funeral directors.
This short description is amplified later on in the decision. The activities may be summarised as follows:
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(2) NW devised a specification for the funeral at the request of the fund, which provides a guaranteed service to members of the fund for a price of £1,000 (see para. 10 and 32 of the decision).
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(3) Once NW had introduced the fund to CWS, NW's relationship with CWS was contained in a marketing agreement. The marketing agreement provided amongst other things:
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(C) Affinity Groups in...
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