Peugeot Motor Company Plc v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | The Hon Mr Justice Blackburne,Mr Justice Blackburne |
| Judgment Date | 09 October 2003 |
| Neutral Citation | [2003] EWHC 2304 (Ch) |
| Court | Chancery Division |
| Date | 09 October 2003 |
| Docket Number | Case No: CH/2002/APP/0856 |
[2003] EWHC 2304 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
ON APPEAL FROM THE VAT AND DUTIES TRIBUNAL
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Blackburne
Case No: CH/2002/APP/0856
CO/3173/99
Roderick Cordara QC and Paul Key (instructed by Penningtons) for the Appellants
Rupert Anderson QC (instructed by Solicitors for Customs and Excise) for the Respondent
Hearing dates: 6, 7, 8, 9, 12 and 16 May 2003
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.
Introduction
This is an appeal against a decision of the London VAT Tribunal (Chairman: Mr Theodore Wallace) ('the Tribunal') released on 27 May 1999. The decision involved two separate appeals, one by Peugeot Motor Company plc ('PMC' or, more simply, Peugeot), the other by Citroen UK Ltd ('CUK' or, more simply, Citroen). There was a merger between the two motor groups on 1 July 1993, since when the two companies have been subsidiaries of Peugeot SA. PMC is, or at the material time was, the representative member of a VAT group, which, since the merger, has included CUK. Mr Roderick Cordara QC and Mr Paul Key appear for the appellant taxpayers.
The appeals to the Tribunal were against decisions of the Commissioners (2 April 1997 in the case of Peugeot and 4 June 1997 in the case of Citroen) refusing claims under section 80 of the VAT Act 1994 for recovery of output tax in respect of motor insurance provided to end-users (effectively members of the public) of Peugeot and Citroen cars under business promotion schemes. Those decisions related to events which occurred in 1994 to 1996 in the case of Peugeot and 1990 to 1996 in the case of Citroen. (Citroen also appeals against other aspects of the refusal of its repayment claim going back to January 1987 with which the Tribunal's decision was not concerned and with which therefore this appeal does not deal.) Mr Rupert Anderson QC appears for the Commissioners.
In the case of Peugeot, the appeal concerns sales either by dealers within its VAT group direct to customers (some of which may have involved a finance house) or by a wholesale company within the VAT group to independent franchised Peugeot dealers (ie not within Peugeot's VAT group) who then sold to customers, again sometimes involving a finance house. In both categories of sale the customer (ie the end-user) received motor insurance supplied by Orion Personal Insurances Ltd ('Orion') for no additional payment, Orion being paid by Peugeot. Peugeot claimed repayment of output tax totalling £2,707,581 for the twelve VAT periods from 1 January 1994 to 31 December 1996 on the basis (as recorded by the Tribunal in paragraph 3 of its decision) 'that the consideration received by the VAT group for the supply of the cars should be reduced by the amount which PMC paid to Orion for the insurance.'
In the case of Citroen, the categories of sale were essentially the same, ie sales by a member of the VAT Group direct to the end-user or sales by a member of the VAT Group to the end-user but with the intervention of an independent dealer or through a finance house. In Citroen's case insurance was provided to customers by Direct Line Insurance plc ('Direct Line'). As regards that element of its repayment claim concerned with free insurance, the amount in question is £5,585,751 of which the Commissioners contend that £1,496,335 would be capped.
Although, from the point of view of the issues arising for decision, both before the Tribunal and before me, there is no practical distinction to be made between the facts which gave rise to the two decisions, I will set out a little later in this judgment the Tribunal's findings of fact in relation to each tax payer. The essential issue was the same in both cases: was the whole of the sums paid to the taxpayer by the purchasers of that taxpayer's motor vehicles taxable at the standard rate of 17.5% or was there an element of the sums so paid, having regard to the right to a supply of insurance services which (so it was argued) was provided along with the car itself, which was not so taxable? What in substance was contended by the taxpayers was that the taxable amount on the supply of cars by Peugeot and Citroen should be reduced by the amount that those two suppliers were charged by Orion and Direct Line for supplying insurance to the end-user at no charge to those persons. I refer to 'end-users' meaning effectively ordinary members of the public, ie the everyday car owner, as distinct from intermediaries (independent car dealers or finance houses) to whom the cars in question may have been first sold by Peugeot or Citroen, usually as an intermediate step, before being acquired by the members of the public to whom the motor insurance was provided. Effectively, the issue was: what was the taxable amount on the supply of the cars by Peugeot or, as the case may be, Citroen?
Relevant to this is that, although the selling of cars is a taxable activity (it plainly involves a taxable supply: see sections 1(1)(a), (2), 2(1), 3(1), 4 and 5(2)(a) of the VAT Act 1994), the provision of insurance and the making of arrangements for such provision are exempt. The insurance exemption is contained in article 13B of the Sixth Council Directive (of May 1977) on the harmonisation of the laws of the Member States relating to turnover taxes (77/388/EEC). So far as material, article 13B provides as follows:
"B
Other exemptions
Without prejudice to other Community provisions, Member States shall exempt the following under conditions, which they shall lay down for the purpose of ensuring the direct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse;
(a)
insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;
…"
The Directive has direct effect. The exemption also finds expression domestically in what is now group 2 of schedule 9 to the VAT Act 1994 (repeating, so far as material in identical terms, the provisions of schedule 6 to the VAT Act 1983) which includes within its scope " the making of arrangements for the provision of any insurance or reinsurance …".
Relevant also was a further provision contained in the Sixth Directive, namely article 11A(1)(a) which, so far as material, provides that:
"1. The taxable amount shall be:
or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies
The effect of the Tribunal's decision was that direct sales by Peugeot or, as the case may be, Citroen (ie sales by an entity within the relevant VAT group direct to the end-user, there being no intermediate sale to an independent dealer or finance house) were not distinguishable from the decision of the Court of Appeal in Primback Ltd v Customs and Excise Commissioners [1996] STC 757 ('Primback') with the result, although this was not in terms spelt out by the Tribunal, that so much of the purchase price received by Peugeot or, as the case may be, Citroen for the particular car should be reduced by the cost to it of providing the customer with motor insurance. But in the case of indirect sales (ie sales to end-users where there was an initial sale by the entity from within the VAT group to an independent dealer or finance house), the Tribunal held that the principles to be derived from Primback in the Court of Appeal did not apply so as to enable the taxable amount received by Peugeot (or Citroen) to be reduced (either by the amount paid out for the provision of motor insurance to the end-user or by any other sum) and neither did the principles to be derived from the decisions of the ECJ in Elida Gibbs v Customs and Excise Commissioners [1996] STC 1387 ('Elida Gibbs'), HJ Glawe etc, v Finanzamt Hamburg Barnbeck Uhlenhorst [1994] STC 543 ('Glawe') or Card Protection Plan Ltd v Customs and Excise Commissioners [1999] STC 270 ("Card Protection"). I will come to those decisions, except Glawe, in more detail later.
The result was that in part (as to direct sales) the appeals, so far as they had progressed, succeeded but in part (as to indirect sales) they failed. The Tribunal did not go into the question of how much exactly the Commissioners were obliged to repay. It does not appear that it was asked to do so.
The judgment
The facts as found by the Tribunal (most of which were not in dispute and were in any event based on an agreed statement) are set out in paragraphs 11–37 of the decision. So far as material those findings were as follows, dealing first with Citroen and then with Peugeot.
Citroen facts
"13. CUK was the UK importer for Citroen cars from France. The cars were sold to final purchasers in the UK via a network of independent franchised Citroen dealers and wholly-owned retail dealers which latter were part of the VAT group. In respect of all retail sales since the merger in 1993, CUK sold the cars to the dealers via a wholesale finance company, PSA Wholesale Ltd ("Wholesale"), which was also a member of the VAT group; there was no evidence that a wholesale subsidiary was involved in Citroen sales before the merger. The assumption must be however that if there was a wholesale subsidiary it was part of a VAT group which included CUK together with any wholly-owned dealers.
14. The outputs with which the appeal was concerned were therefore sales by Wholesale (or before the merger by CUK or a wholesale company in the CUK group) to independent dealers and sales by group dealers to customers or the finance houses.
15...
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