R & C Commissioners v RBS Deutschland Holdings GmbH
| Jurisdiction | Scotland |
| Judgment Date | 13 January 2006 |
| Date | 13 January 2006 |
| Court | Court of Session (Inner House - Extra Division) |
Court of Session (Inner House, Extran Division).
Lord Osborne, Lord Clarke and Lady Dorrian.
HW Currie QC and Julian Ghosh (instructed by Shepherd & Wedderburn) for the appellants.
Colin Tyre QC (instructed by MacRoberts) for the taxpayers.
The following cases were referred to in the judgment:
Emsland-Stärke GmbH v Hauptzollamt Hamburg-JonasECAS (Case C-110/99) [2000] ECR I-11569
Gemeente Leusden v Staatssecretaris van FinanciënECASVAT (Joined Cases C-487/01 and C-7/02) [2006] BVC 740; [2004] ECR I-5337
Halifax plc v C & E Commrs, BUPA Hospitals Ltd v C & E Commrs, University of Huddersfield Higher Education Corp v C & E CommrsECASECASECASVAT (Cases C-255/02, C-419/02 and C-223/03) [2006] BVC 377; [2006] ECR I-1609
Value added tax - Tribunal - Power to stay proceedings - Application to stay proceedings pending decision of European Court of Justice - Whether tribunal erred in refusing to grant stay.
This was an appeal by the taxpayer against a decision of a tribunal (No. 19,055; [2005] BVC 4,084) refusing a stay of proceedings pending the judgment of the European Court of Justice in another case.
The taxpayer carried on business in Germany and was a wholly-owned subsidiary of the Royal Bank of Scotland. It was registered for the purposes of UK VAT as a non-established taxable person. The taxpayer purchased new motor cars from UK suppliers for lease to UK customers for the use of their employees. The taxpayer reclaimed input tax on the purchase of the cars, but did not pay output tax in either the UK or Germany on the supplies made by way of lease agreement on the basis that the supplies were outside the scope of both the UK and German VAT legislation.
The taxpayer considered that it had developed a form of lease which, under the German rules, involved the supply of goods, but, under UK law was treated as a supply of services. Consequently no VAT was payable in either country on the supply during the currency of the leases. The cars were sold in the UK at the end of the period of the leases when output tax on the sales was paid and rendered to Customs. The taxpayer claimed credit for input tax on the purchase of the cars, but made no charge to output tax when leasing them to a UK customer.
Customs took the view that the taxpayer was not entitled to claim credit for input tax on the vehicles purchased as they had not been purchased to be used for the purposes of a business carried on by the taxpayer. Alternatively, they argued that the taxpayers and their customers had artificially created conditions to obtain a tax advantage, against the spirit and purpose of the VAT legislation, contrary to the EU doctrine of abuse of rights. Accordingly, the taxpayer's claim to recover input tax on the purchase of the vehicles should be refused.
The taxpayer appealed against the refusal of its input tax claims. When the matter reached the tribunal, the Advocate General had delivered an opinion in cases before the ECJ (Cases C-255/02, C-419/02 and C-223/03 Halifax plc v C & E Commrs, BUPA Hospitals Ltd v C & E Commrs and University of Huddersfield Higher Education Corp v C & E Commrs), concluding, inter alia, that the prohibition of abuse of right as a principle of interpretation was not relevant where the economic activity carried out might have some explanation other than the attainment of tax advantages.
Accordingly, Customs applied to the tribunal for a partial stay of the proceedings in relation to the EU principle of abuse of right pending the delivery by the ECJ of its judgments in the cases of Halifax and others. The tribunal refused the stay on the ground that the abuse of rights issue had been answered by the Advocate General.
Held, allowing the taxpayer's appeal:
The tribunal had erred in law by adopting an approach to the case based on the Advocate General's opinion, even though it had recognised that that opinion might not necessarily be followed by the ECJ and by reaching a firm conclusion about the abuse of rights element in the taxpayer's case without holding a full hearing on that matter. Accordingly, its decision in relation to its refusal to grant a partial stay of proceedings would be quashed. The tribunal had misdirected itself in law in relation to its decision not to allow a partial stay by proceedings upon a view of the law which could not be regarded as affirmed. Until the ECJ pronounced on the matter, it was difficult to understand how the tribunal could have proceeded in that way. In the circumstances, a stay of proceedings to the extent sought by Customs was granted.
[1] The respondents carry on business providing banking and leasing services from premises in Frankfurt am Main in the Federal Republic of Germany. They are registered for the purposes of UK VAT as a non-established taxable person under registration number 674 3878 86. They are a wholly owned subsidiary of the Royal Bank of Scotland Group of Companies.
[2] The respondents purchase assets, more particularly new motor cars, from UK suppliers. These are subsequently leased to UK customers for a prime period of no more than two years and are used for business and private purposes by employees of the UK customers. The respondents reclaim input tax on the purchase of the assets, but do not pay output tax in either the UK or Germany on the supplies made by way of lease agreement, asserting that the supplies are outside the scope of both the UK and German VAT legislation. A lease of a motor car may be treated either as a supply of goods or of services. Normally such a lease is treated as a supply of services, but it will be treated as a supply of goods if ownership of the asset passes on the date of the final instalment payable. To the extent that such leases are treated as supplies of goods, they are subject to VAT in the state where the goods are located when supplied. To the extent that such leases are treated as a supply of services, they are taxed in the state where the lessor has established his business. All member states of the European Union ought to establish and interpret rules relating to the characterisation of such leases, so that they are treated in an identical manner. In practice, differences exist.
[3] It was stated to us on behalf of the appellants that the respondents had developed a form of lease which, under the relevant German rules, was treated as involving the supply of goods, but, under UK rules, was to be treated as a supply of services. The practical consequence of these characterisations was that no VAT was payable in either country on the supply during the currency of the lease. The leases were for periods of less than two years. During the currency of the leases, the motor cars concerned remained in the UK and, at the end of the period of the leases, were sold there, when output tax on sale was paid and rendered. In pursuance of these arrangements, the respondents claimed credit for input tax on the purchase of the motor...
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O'Donnell
...neither party referred to it, I consider that the correct approach is to be derived from R & C Commrs v RBS Deutschland Holdings GmbH VAT[2008] BVC 16 where the Court of Session as the Court of Exchequer in Scotland held (at [22]) that a tribunal or court might sist, or stay, proceedings ag......
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Daryanani and Others (t/a Teletape)
...The taxpayers referred to the decision of the Inner House of the Court of Session in R & C Commrs v RBS Deutschland Holdings GmbHVAT[2008] BVC 16 ("RBS Deutschland"), which overturned the Tribunal's refusal to stay the appeal pending the decision of the CJEU in Halifax plc v C & E CommrsECA......
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London School of Marketing Ltd
...(“Peel”) the Tribunal set out a two-stage test for when a tribunal may stay a case following R & C Commrs v RBS Deutschland Holdings GmbH [2008] BVC 16 and Coast Telecom Ltd [2012] TC 01993.[7] It was said in Peel at [9] that a tribunal may stay a tribunal case a decision in another court w......
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Gandalf IT Ltd ((in Administration)) and Others
...I was referred to the decision of the Inner House of the Court of Session in the case of R & C Commrs v RBS Deutschland Holdings GmbHVAT[2008] BVC 16 and in particular the test suggested there of first considering whether the decision in the other case would be of material assistance to res......