Peugot-Citreon Automobiles Limited v The Commissioners of Customs and Excise, V 18681
| Jurisdiction | UK Non-devolved |
| Judge | Colin BISHOPP |
| Judgment Date | 17 May 2004 |
| Respondent | The Commissioners of Customs and Excise |
| Appellant | Peugot-Citreon Automobiles Limited |
| Reference | V 18681 |
| Court | VAT & Duties Tribunal (UK) |
VAT — incentive scheme for sales staff of car dealers — scheme including provision of food, entertainment and accommodation for successful sales staff and their partners — whether business entertainment — whether input tax recovery precluded — VAT (Input Tax) Order 1992, art 5 — consideration given by recipients of entertainment — not business entertainment — whether instead provision of entertainment a taxable supply in return for non-monetary consideration — yes — appeal dismissed in part
MANCHESTER TRIBUNAL CENTRE
PEUGEOT-CITROËN AUTOMOBILES LIMITED Appellant
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THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: Colin Bishopp (Chairman)
Sitting in public in Birmingham on 9 March 2004
Simon Taylor and Murray Taylor, appellant’s tax managers, for the appellant
Rupert Anderson QC, instructed by the Solicitor for the Customs and Excise, for the respondents
© CROWN COPYRIGHT 2004
DECISION
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In this appeal Peugeot-Citroën Automobiles Limited, the well-known car manufacturer, challenges two assessments, each relating to the periods 03/01, 06/01 and 09/01, made in the alternative and notified to the appellant on 2 May 2002. Each assessment relates to the appellant’s “Gold Recognition” incentive scheme in which the sales staff of dealers selling its cars may participate Successful participants are rewarded by the supply to them by the appellant of certain benefits; those relevant to this appeal are essentially, the provision of accommodation, entertainment and food.
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The first assessment, which reflects the Commissioners’ view of the correct VAT treatment of those benefits, and which was referred to as the “preferred assessment”, assumes that they constitute “business entertainment” within the meaning of article 5 of the VAT (Input Tax) Order 1992 (SI 1992/3222), with the consequence that the appellant is precluded from recovering the input tax incurred by it in procuring the supplies from third parties. The second, the “alternative assessment”, is supported by the Commissioners only in the event that the preferred assessment is found to be incorrect. It depends upon the conclusion that the benefits are supplied in return for a consideration; if that is right the appellant is entitled to recover the input tax it has incurred but must account for output tax on the value of the supplies it makes. It was agreed that if I decide in the Commissioners’ favour in respect of the preferred assessment, I do not need to consider the alternative assessment. The appellant’s case is that both of the assessments are incorrect.
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I heard evidence from only one witness, Alison Stewart, who was at the material time the manager of the appellant’s sales motivation team, though I had the unchallenged statement of Robert Jeffery, whom I understand to be Mrs Stewart’s successor. Mrs Stewart and Mr Jeffrey described the manner in which the incentive scheme worked, which was also illustrated by printed material given to participants and potential participants. Participation was open to sales staff of Peugeot dealers (mostly independent, franchised dealers although one dealership is owned by the appellant itself). Those wishing to do so joined the Lion Sales Club. In each year awards of points were made for sales of new vehicles; participants were also required to complete some training and to have been participants in the scheme for a period of time, and it was possible to earn points in some other ways, but the essential purpose of the scheme was to maximise sales of new vehicles by rewarding those most successful in achieving those sales. There were some changes in the scheme from year to year, in the details of the manner in which points were earned, and there were some differences between the entitlements of those making individual retail sales and those selling in the fleet market, but those differences are immaterial to the dispute between the parties.
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The most successful participants could achieve “Gold Recognition Level”. The evidence indicated that some entered the scheme for competitive reasons (the appellant produced league tables and other material designed to encourage competition), and not merely because of the available rewards. However, there were tangible rewards which were designed to, and no doubt did, encourage the participants to greater efforts. That reward which is of relevance in this appeal was described (in the printed material relating to the 1999 scheme) in these terms:
“All Gold achievers will receive an invitation for you and your partner to the Lion Sales Club Gold Recognition Event. This event usually takes place in the early Spring—ie the 1999 Gold Recognition Event will take place in the early part of 2000.”
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In the earlier part of the period with which I am concerned it was not merely the best hundred (for example) of the participants who were entitled to attend the event, but all those, regardless of number, who achieved the requisite level, and there was then no means by which the appellant could modify the scheme as the year progressed in order to limit the number who qualified. Latterly, the rules were changed so that the number attending was limited to a pre-determined total. I do not, however, think that this change materially affects the issue I must decide.
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The Gold Recognition Event consists of a dinner dance followed by overnight accommodation in a hotel. As Mrs Stewart explained, the nature of the event was such that it would not be attractive if those attending could not bring their partners and it was for that reason that partners were invited as well. Some of the appellant’s marketing personnel also...
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