Primback Ltd v Commissioners of Customs and Excise (Case C-34/99)
| Jurisdiction | England & Wales |
| Judgment Date | 25 April 1996 |
| Date | 25 April 1996 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Stuart-Smith and Hutchison L JJ and Sir John May.
Justin Fenwick 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
Chaussures Bally SA v Belgian State (Case C-18/92) [1993] ECR I-2871
Craven (HMIT) v White ELRTAX[1989] AC 398; [1987] BTC 226
HJ Glawe Spiel- und Unterhaltungsgeräte Aufstellungsgesellschaft mbH & Co KG v Finanzamt Hamburg-Barmbek-Uhlenhorst VAT(Case C-38/93) [1994] ECR I-1679; [1994] BVC 242
Thorn EMI plc and Granada plc VAT(LON/91/2317 and 2316) No. 9782; [1993] BVC 792
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 - Value Added Tax Act 1983, Sch. 6, Grp. 5, item 3 (Value Added Tax Act 1994 schedule 9 group 5Sch. 9, Grp. 5, item 3 of the 1994 Act); Sixth VAT Directive 77/388 of 17 May 1977 (OJ 1977 L145/1),eu-directive 77/388 article 13(B) article 27art. 13(B)(d), 27; Customs Notice 727, Retail Scheme A, para.14.
This was an appeal by the taxpayer, Primback, against a decision of May J ([1994] BVC 268) upholding on different grounds a decision of the tribunal ((LON/92/1142) No. 10,460; [1993] BVC 1001) that a retail company offering an "interest-free credit" scheme was liable to account for VAT by reference to the advertised price rather than a smaller amount received from a finance company which provided the credit.
Primback traded as retail furniture sellers using the standard method of accounting for VAT under Retail Scheme A set out in Customs Notice 727 issued pursuant to the Value Added Tax (Supplies by Retailers) Regulations 1972 (SI 1972/1148). Primback offered goods for sale to the public on terms that allowed extended credit on terms described as "interest free". The customer paid the advertised price to a finance company by instalments over the credit period and the finance company paid to Primback a smaller sum than the price of the goods.
Customs contended that the supplies made by Primback were supplies of goods and the arrangements for credit facilities. There was no necessity to make an apportionment between the two elements since the credit arrangements were not a supply within the exemption for the provision of instalment credit in the Value Added Tax Act 1983, Sch. 6, Grp. 5, item 3 because the finance house and not Primback made the supply.
Further, Retail Scheme A should be construed so far as possible to achieve the same result as if the taxable transaction had taken place outside the scheme. The words in para. 14 in relation to credit arrangements, "as though you had received cash for the full amount payable" meant the full amount payable by the customer. The example given of credit arranged through a finance house taking ownership of the goods was only an example and the paragraph applied to the present case although the finance house acquired no title. The words "the full amount payable" meant the price to the customer.
Held, allowing Primback's appeal, Sir John May dissenting:
1. The "full amount payable" in para. 14 of Retail Scheme A meant payable to Primback by the finance company, the provider of credit. Once the words "you should treat the transaction as a cash sale to the third party" were allocated to the part of the paragraph embodying the rule rather than to the part containing the example, it made sense to interpret "as though you had received cash for the full amount payable" as meaning "payable by the third party to whom you are deemed to have sold it".
2. To construe para. 14 of the Retail Scheme as obliging Primback to pay VAT on the full advertised price of the goods rather than on the amount which they actually received from the finance company would be in reality to require payment of VAT on an exempt service, which would conflict with the exemption of the granting and negotiating of credit in eu-directive 77/388 article 13(B)art. 13(B)(d), para. 1 of the sixth directive and the principles relating to derogation embodied in eu-directive 77/388 article 27art. 27.
3. On a proper application of Retail Scheme A to the facts of the case, Primback, who had elected for the standard method of working out gross takings, were obliged to account for VAT only on the payments received by them from the finance company rather than on the invoice price to the customer.
Hutchison LJ: The appellants trade as retail furniture sellers. Like many retailers they offer goods for sale to the public on terms that allow extended credit on terms described as "interest free". It would be possible for the appellants simply to allow the customer to pay the price to them by instalments over the credit period but that is not what they do. Instead they involve finance companies in a tripartite arrangement whereby the finance company pays to the appellants a lesser sum than the price of the goods and the customer pays the total price to the finance company by instalments over the credit period. The question to which this appeal gives rise is whether the appellants are liable to pay VAT on the whole price or only on so much of it as they receive from the finance company. On 10 May 1993 the London VAT tribunal decided the matter in favour of Customs ([1993] BVC 1001) and on 26 July 1994 May J, on a different ground, upheld that decision. It is from the decision of May J ([1994] BVC 268), that this appeal is brought.
These are fully and clearly set out by May J at pp. 269-271, where he cites at length from the tribunal's decision. There is no need to repeat that summary: I shall however mention what appear to me to be the important features of the case:
1. The price at which the goods are offered on interest free credit terms has of course been fixed by the retailer at a level which allows him to make a profit even though what he actually receives from the finance company is significantly less. The evidence does not establish what happens when a customer does not wish to take advantage of the offer of interest free credit, but in the light of discussion during the argument I infer that if such a customer asks for a discount he is likely to be granted one. If he does not ask for a discount he will pay the full price. In either event the retailer will in his VAT return account for tax on the price actually received by him from the customer.
2. The evidence is this case shows that the mechanism by which the interest-free credit sale is achieved involves the following:
-
(a) A sales invoice is issued to the customer in the ordinary way, with an annotation as to interest free credit.
-
(b) At the same time the customer enters into a written loan agreement with the finance company to pay by stated instalments an amount equal to the total price or (if the retailer has taken a deposit) the total price less the deposit. The agreement authorises the finance company to pay to the retailer on or after the date of the agreement the amount of the credit.
-
(c) Perhaps surprisingly, there are no written agreements embodying the arrangements between the finance companies and the appellants, and terms vary from region to region, being orally agreed at local levels. However, the common features of the arrangements are-
-
(i) that the finance company does not acquire title to the goods and
-
(ii) that within a relatively short time after the sale the finance company pays to the appellants a sum arrived at by deducting from the price an amount representing the value of the credit extended to the customer.
-
3. No separate charge for credit is disclosed to the customer.
4. Such a transaction may accordingly be analysed as follows:
-
(a) The retailer sells the goods to the customer. The price paid by the customer is the advertised price. A term of the contract is that the customer is to be entitled, at no extra cost to himself, to pay the price by instalments over the stated credit period.
-
(b) The credit which the customer receives is arranged or procured by the retailer but is provided by the finance company. Accordingly, that which the customer pays to the finance company includes the cost of credit, and that cost is retained by the finance company when it pays to the retailer the lesser sum (which in truth represents the cost of the goods).
-
(c) Expressed in language appropriate to the law relating to VAT, the retailer has supplied (i) goods and (ii) arrangements for credit facilities; and the finance company has supplied credit facilities. That this is so is common ground between the parties.
When this case was decided the Value Added Tax Act 1983 was still in force, and accordingly it is to that Act rather than its successor, the 1994 Act, that reference must be made.
Section 2 of the Act obliges a taxable person who in the course of business supplies goods or services which do not constitute an exempt supply to charge VAT on that supply. Subsection (3) provides that the "Tax … is a liability of the person making the supply and (subject to provisions about accounting and payment) becomes due at the time of supply".
Section 3 provides that, subject to the provisions of Sch. 2 of the Act and Treasury orders made under subs. (3)-(6), a supply of goods or services is a supply for the purposes of the Act provided it is done for a consideration.
In considering, as I now do, s. 10 of the Act, it has to be remembered that the assessment in...
To continue reading
Request your trial
-
Commissioners of Customs and Excise v DFS Furniture Company Ltd (No 2)
...DFS accounted for VAT on the gross purchase price invoiced to the client. In Primback Limited v Commissioners of Customs and Excise [1996] STC 757 the Court of Appeal held that DFS was only obliged to account for VAT calculated on the net purchase price it received from the finance house. (......
-
Commissioners of Customs and Excise v DFS Furniture Company Ltd (No 2)
...ECR I-6307 Parekh v C & E Commrs VAT(1984) 2 BVC 200,025 Pegasus Birds Ltd v C & E Commrs VAT[2000] BVC 68 Primback Ltd v C & E Commrs VAT[1996] BVC 260 Primback Ltd v C & E Commrs VAT(Case C-34/99) [2001] BVC 315; [2001] ECR I-3833 R v Governor of Brockhill Prison, ex parte Evans (No. 2)EL......
-
HM & Customs v David Baxendale Ltd
...by contrast, as ancillary supplies which share the tax treatment of the principal supply ( CPP, cited above, paragraph 30, and Case C-'34/99 Primback [2001] ECR I-'3833, paragraph 45). 22. The same is true where two or more elements or acts supplied by the taxable person to the customer, be......
-
Peugeot Motor Company Plc v Commissioners of Customs and Excise
...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 Peugeo......