Redrow Group Plc
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 April 1995 |
| Date | 06 April 1995 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following were referred to in the decision:
C & E Commrs v Reed Personnel Services Ltd VAT[1995] BVC 222
Conoco Ltd VATVAT(MAN/94/307) No. 13,025; [1996] BVC 2172
"Intiem" CV v Staatssecretaris van Financiën VAT(Case 165/86) (1989) 4 BVC 180
P & O European Ferries (Dover) Ltd VAT(LON/91/2146 and 2532) No. 7846; [1992] BVC 955
Plessey Co Ltd VAT(LON/94/254) No. 12,814; [1996] BVC 2074
Supply - To whom made - Input tax - Whether recoverable by appellant - Estate agent's commission payable by appellant housebuilding company under terms of agreement - Whether supply made to appellant enabling it to reclaim input tax - Value Added Tax Act 1983, s. 2(1), 3(2) and 14(3) (Value Added Tax Act 1994 Value Added Tax Act 1994 section 4 section 5 subsec-or-para (2) section 24 subsec-or-para (1) section 24 subsec-or-para (2), ss. 4, 5(2) and 24(1), (2)); Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 17(2)art. 17(2)(a).
The issue was whether, in circumstances where a prospective purchaser of a property from a housebuilding company agreed to place the sale of his existing home in the hands of an estate agent nominated or approved by the company, the estate agent's services were supplied to the company so that it was entitled to reclaim the tax payable on the agent's fees as its input tax.
The appellant, Redrow, was the representative member of a group of 21 companies involved in constructing new houses for sale in the private sector. It had designed and put into operation a sales incentive scheme whereby, in order to progress the sales of its houses, its nominated estate agent became responsible for selling a purchaser's existing home and the company agreed to pay the agent's fees.
The advantage to the appellant was that by instructing the estate agent to handle the sale it could exert pressure to expedite it and thus more readily conclude a sale of one of its own properties. If a purchaser had already placed his property with an agent the appellant's agent took over the handling of the sale. In either case he paid a £50 refundable registration fee and accepted the agent's valuation figure. He could not reserve a specific Redrow home until a buyer had been found for his existing property. Once the Redrow purchase had been completed the estate agent invoiced the appellant for its fees. In the event that a prospective purchaser sold his property but did not purchase one from the appellant he had to make his own arrangements for the payment of the agent's fees.
The appellant reclaimed the tax on the estate agent's fees as its input tax and on 5 October 1993 the commissioners raised an assessment to recover this amount.
They contended that the estate agent's services were supplied not to the appellant but to the individual vendor, being the party instructing the agent to undertake the work and notwithstanding the fact that the appellant paid the fees.
The appellant contended that it was one of three parties to a contract, acting as a client of the estate agent which it chose and instructed. The appellant was contractually liable for the fees unless the purchaser did not buy a house from it.
Held, allowing the company's appeal:
1. The evidence showed that while a prospective purchaser was unquestionably a client of the estate agent instructed to sell his house this did not prevent the appellant also from being a client as principal. The estate agent's services were provided both to the appellant and the purchaser.
2. Further, under Directive 77/388, the sixth VAT directive, the right to deduct tax paid on inputs applied to goods and services connected with the pursuit of the taxable person's business. The agent's fees paid by the appellant formed part of its cost components and the tax was allowable input tax in its hands.
[The tribunal set out the facts summarised above and continued as follows.]
For the commissioners, Mrs Amanda Brown invited me, in determining the nature of the supply made by the estate agents, to consider the following observations of Laws J in C & E Commrs v Reed Personnel Services VAT[1995] BVC 222 [at p. 229]:
the concept of "supply" for the purposes of VAT is not identical with that of contractual obligation … it is perfectly possible that although the parties in any given situation may conclude their contractual arrangements in writing so as to define all their mutual rights and obligations arising in private law, their agreement may...
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