Schemepanel Trading Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 03 May 1996 |
| Date | 03 May 1996 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Potts J.
Robin Barlow (instructed by Edwards Geldard, Cardiff) for the taxpayer.
Stephen Richards (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
BLP Group plc v C & E Commrs VAT(Case 4/94) [1995] BVC 159
C & E Commrs v Apple and Pear Development Council VATVAT(1986) 2 BVC 200,198 (HL) and (1985) 2 BVC 200,080 (CA)
Neuvale Ltd v C & E Commrs VAT(1989) 4 BVC 88
Webb v Emo Air Cargo (UK) Ltd WLR[1993] 1 WLR 49
Value added tax - Input tax - Supplies treated as received after registration used in making supplies before registration - Stage payments for building work - Work sub-contracted by taxpayer and sub-contractor paid before registration by taxpayer - Whether claim for input tax depended on taxpayer being registered when supply of services used - Value Added Tax Act 1994 section 24Value Added Tax Act 1994, s. 24; Value Added Tax (General) Regulations 1985 (SI 1985/886), reg. 26; (SI 1995/2518 section 93Value Added Tax Regulations 1995 (SI 1995/2518), reg. 93).
This was an appeal by the taxpayer from a decision of the tribunal (chairman Dr AN Brice) ((LON/95/996) No. 13,647; [1996] BVC 2532) that input tax arising before a taxpayer was registered for VAT could not be deducted, even though the supplies were treated by the Value Added Tax (General) Regulations 1985, reg. 26 as having been received when invoices were issued after registration.
In 1994 the taxpayer provided building services to a nursing home and was paid for the work in four stage payments on 29 July, 1 September, 28 September and 29 November 1994.
The taxpayer was registered for VAT from 1 October 1994. Accordingly, no output tax was chargeable on the first three payments. The fourth payment, however, included output tax of £3,761.33.
The taxpayer had sub-contracted the work to another company, Rockmead, which it paid on receipt of invoices including VAT dated between 8 September and 29 November 1994.
The taxpayer submitted its first VAT return for the accounting period from 1 October to 30 November 1994, accounting for VAT in respect of the fourth payment received from the nursing home. The return claimed credit for input tax of £8,087, being the tax shown on the invoices from Rockmead.
The taxpayer contended that the services on which tax was paid were treated by reg. 26 of the 1985 regulations as taking place when the supplier issued an invoice or received payment. The definition of input tax in Value Added Tax Act 1994 section 24 subsec-or-para (1)s. 24(1) of the 1994 Act required that the taxpayer should be a taxable person when the supplies were received. It did not provide that he had to have been a taxable person when the supplies were used by him.
Held, dismissing the taxpayer's appeal:
1. The general principle of recoverable input tax was that the tax should be set off against tax on the outputs to which the inputs related. The fact that because of reg. 26 of the 1985 regulations, inputs were treated as having been received by the taxpayer at a time when it had become a taxable person did not mean that input tax paid before it became a taxable person was deductible. Those inputs still related to supplies which were made before the taxpayer was a taxable person and which were not subject to output tax: C & E Commrs v Apple and Pear Development Council VAT(1986) 2 BVC 200,198 (HL) and (1985) 2 BVC 200,080 (CA); Neuvale Ltd v C & E Commrs VAT(1989) 4 BVC 88 per Mustill LJ at p. 99H followed.
2. Section 24(1) referred to supplies made or to be made to a taxable person at a time when he was a taxable person and to supplies used or to be used for the purpose of his business at a time when he was a taxable person.
Potts J: Introduction
The taxpayer moves for an order that a decision of the VAT tribunal sitting at Cardiff on 29 September 1995 and released on 19 October 1995 ([1996] BVC 2532), in an appeal under Value Added Tax Act 1994 section 83s. 83 of the Value Added Tax Act 1994 ("the 1994 Act") whereby an appeal of the taxpayer was refused, be reversed and the taxpayer's appeal against Customs' decision be allowed.
The grounds of appeal are as follows:
1. The tribunal erred in law in holding that in order to qualify to deduct as input tax (under Value Added Tax Act 1994 section 24s. 24 of the 1994 Act), the tax charged on supplies made to the taxpayer by Rockmead Ltd, the taxpayer had to be a taxable person (as defined by s. 3 of that Act) both at the time those supplies were used by the taxpayer for the purpose of its business and at the later time when the supplies were deemed (by reason of Value Added Tax Act 1994 section 6s. 6 of that Act and the regulations having effect under it) to have been received by the taxpayer. The taxpayer contends that the right to deduct input tax arises if the taxpayer is a taxable person when the relevant supply is received, or deemed to be received, even if he was not also a taxable person when the supply was used by him.
2. The tribunal erred in law in holding that Council Directive 77/388/EEC on the harmonisation of the laws of the member states relating to turnover taxes (the sixth directivee), limits the phrase "taxable transactions" to transactions on which tax was actually charged and that input tax could only be deducted when it related to supplies used for such transactions.
3. The tribunal erred in law in holding that Value Added Tax Act 1994 section 24s. 24 of the 1994 Act should be interpreted in the light of the sixth directive and the case of IR Commrs v Apple and Pear Development Council VATVAT(1986) 2 BVC 200,198 (HL); (1985) 2 BVC 200,080 (CA), as limiting deduction of input tax to tax charged on the receipt of supplies used for the purpose of making supplies on which output tax was actually charged and/or to supplies used for the purpose of making taxable supplies by a taxable person while he was a taxable person.
The essential issue for determination before the tribunal and before this court, was whether the taxpayer was entitled to claim input tax in respect of supplies made to it after it was registered which supplies had been used by the taxpayer in making supplies before it was registered.
The tribunal found the following facts which were not disputed:
1. In 1994 the taxpayer provided building services to St Anne's Nursing Home, Chepstow, Gwent. The taxpayer was paid for the work in stages and received payments on account as follows:
29.07.94 |
£10,000 |
01.09.94 |
£15,000 |
28.09.94 |
£29,000 |
29.11.94 |
£25,254.63 |
£79,254.63 |
2. The taxpayer was registered for VAT from 1 October 1994. Accordingly, no output tax was chargeable on the first three...
To continue reading
Request your trial
-
RBS Deutschland Holdings GmbH v Her Majesty's Revenue & Customs, V 20267
...221 Bupa Purchasing Ltd v C&E [2003] STC 1203 Elida Gibbs [1996] STC 1387 Neuvale Ltd v C&E [1989] STC 395 Schemepanel Trading Ltd v C&E [1996] STC 871 BLP Group Plc v C&E [1995] STC 424 Abbey National plc v C&E [2001] STC 297 Halifax plc v C&E [2006] STC 919 Cadbury Schweppes plc v IRC [20......
-
HMRC v GraceChurch Management Services Ltd
...effect as the in decision the Apple and Pear case is the decision of Potts J in Schemepanel Trading Ltd v Customs and Excise CommrsVAT[1996] BVC 304. The case was about input tax which a company had borne at a time when it was not yet registered (because its turnover was too low) and so was......
-
BAA Ltd
...2 BVC 200,157 Royal and Sun Alliance Insurance Group plc v C & E Commrs VAT [2003] BVC 341 Schemepanel Trading Ltd v C & E Commrs VAT [1996] BVC 304 Securenta Göttinger Immobilienanlagen und Vermögensmanagement AG v Finanzamt Göttingen ECASVAT (Case C-437/06) [2010] BVC 766; [2008] ECR I-15......
-
BAA Ltd v HM Revenue and Customs
...[1985] ECR 655 Royal and Sun Alliance Insurance Group plc v C & E Commrs VAT[2003] BVC 341 Schemepanel Trading Ltd v C & E Commrs VAT[1996] BVC 304 Securenta Göttinger Immobilienanlagen und Vermögensmanagement AG v Finanzamt Göttingen ECASVAT(Case C-437/06) [2010] BVC 766; [2008] ECR I-1597......