Primback Ltd v Commissioners of Customs and Excise (Case C-34/99)
| Jurisdiction | England & Wales |
| Judgment Date | 26 July 1994 |
| Date | 26 July 1994 |
| Court | QBD (Crown Office List) |
Queen's Bench Division (Crown Office List).
May J.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by HH Mainprice) for the taxpayer.
Christopher Vajda (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
C & E Commrs v Diners Club Ltd VAT(1989) 4 BVC 74
C & E Commrs v Pippa-Dee Parties Ltd VAT(1981) 1 BVC 422
C & E Commrs v Scott VAT(1977) 1 BVC 139
Craven (HMIT) v White ELRTAX[1989] AC 398; [1987] BTC 226 (CA)
Value added tax - Taxable amount - "Interest-free credit" sales by retailer - Customers paid marked price to finance company - Finance company paid retailer marked price less interest charges - Whether "payment received" by retailer was the price paid by customer or amount of payment received from finance company - schedule 6 group 5Value Added Tax Act 1983, Sch. 6, Grp. 5, item 3 (see Value Added Tax Act 1994 schedule 9 group 5Sch. 9, Grp. 5 of the 1994 Act) - notice 727Customs Notice 727 (1987 edn), Retail Scheme A, para. 9(b), 14.
This was an appeal by the taxpayer from a decision of the VAT tribunal ([1993] BVC 1001) that a retail company offering an "interest-free credit" scheme under which the company itself effectively paid the interest charges by accepting a sum less than the retail price of goods from a finance company was to account for VAT on the full amount of the retail price.
The taxpayer was a retailer of furniture using the standard method of accounting for VAT under Retail Scheme A set out in Customs notice 727Notice 727. It advertised an "interest-free credit" scheme under which the customer would complete a personal loan form which was forwarded to a finance company and would be given an invoice for the goods stating the advertised price. When the goods were delivered to the customer the taxpayer would inform the finance company and the taxpayer received a cash payment of the published price of the goods less an amount reflecting interest charges over the period of the loan. There was no evidence of any formal written agreements between the taxpayer and the participating finance companies.
The question was whether, in calculating the taxable amount of an interest-free credit sale, the taxpayer was to be regarded as receiving the lesser sum which the taxpayer received from the finance company, the tax point being the date of the receipt, or the full retail price as advertised, the tax point being the date of the transaction with the customer. If the taxpayer was to be regarded as receiving the full retail price the question arose whether the schedule 6 group 5Value Added Tax Act 1983, Sch. 6, Grp. 5, which exempted the provision of credit, applied.
The case before the tribunal proceeded on the basis that the question to be considered was what, under para. 9(b)(i) of Retail Scheme A, were "the total payments received" by the taxpayer from the finance company. The tribunal held that it was to be inferred that the finance company would pay the taxpayer the full amount of the retail price of the goods and the taxpayer would pay the finance company an amount equivalent to interest on the loan to the customer. On that basis, the tribunal held that the "payment received" by the taxpayer was equivalent to the full interest-free loan and VAT was chargeable on that amount.
The taxpayer had argued that the proper inference should be simply that the finance companies would pay the taxpayer a net amount after deducting a "subsidy or discount".
Before the High Court Customs introduced a new point relying on para. 14 of Retail Scheme A, which enabled the retailer to account for output tax for credit sales in line with the exemption for credit in the schedule 6 group 5Value Added Tax Act 1983, Sch. 6, Grp. 5,where the retailer provided finance from his own resources. However, in a case such as the present where the credit arrangements were not disclosed to the customer, the transaction should be treated as a cash sale to the finance house as envisaged by para. 14 of the scheme and the retailer would have to include the sales in his "gross daily takings" as though he had received cash "for the full amount payable".
The taxpayer submitted that it was necessary to analyse what was in substance and reality being supplied. Looking at the entire transaction, the substance and reality was that the retailer supplied goods and arranged for an exempt supply of credit. The scheme of the legislation and of Retail Scheme A, including para. 14, was that the supply of credit should be exempt.
Held, dismissing the taxpayer's appeal:
It was not necessary to look at the details of the agreements between the retailer and the finance company. Both the schedule 6 group 5Value Added Tax Act 1983, Sch. 6, Grp. 5, item 3 and para. 14 of Retail Scheme A made a distinction between credit arrangements where a separate charge for credit was disclosed to the customer and where it was not. No separate charge for credit was disclosed to the customer where the interest-free credit scheme operated and the taxable amount was the full amount payable by the customer, i.e. the "interest-free" price.
The taxpayer appealed against a decision of the London VAT tribunal (chairman His Honour Judge Stephen Oliver QC). The grounds of the appeal were that the tribunal had erred in law in holding that the taxable amount on an "interest-free" credit sale was the full retail price of the goods rather than the full retail price less an amount deducted by a finance company received by the taxpayer.
May J: This is a statutory appeal from a decision of the London VAT tribunal dated 10 May 1993 (His Honour Stephen Oliver QC and Mr AJ Ring B Com, FTII, FCA). It concerns how retailers who use Retail Scheme A have to account to the commissioners for VAT when their customers buy goods on "interest-free credit" where this is achieved by a credit sale through a finance company; where the purchaser pays no separate sum for interest to the finance company but the retailer receives from the finance company less than the total of the payments made by the purchaser to the finance company; and where this fact and in particular the amount of the difference is not disclosed to the purchaser. The appellants, Primback, contend that VAT is payable on the lesser sum which they receive from the finance company and that the tax point is the date of that receipt. The commissioners contend that VAT is payable on the sum which in total the purchaser agrees to pay to the finance house and that the tax point is the date of the transaction with the customer.
The issue and the facts of this appeal may be taken directly from the tribunal's decision, as follows:
Primback Ltd, the appellant, is a retail trader. It sells furniture. It accounts for VAT using Retail Scheme A. Put shortly, this means that instead of Primback compiling its returns of output VAT for an accounting period by aggregating together the amounts of VAT shown in the invoices issued by it during that period (and subsequently making adjustments for, for example, bad debts), the unit of measurement of its output VAT is the...
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