Sinclair Collis Ltd v Commissioners of Customs and Excise (Case C-275/01)
| Jurisdiction | England & Wales |
| Judgment Date | 23 June 1999 |
| Date | 23 June 1999 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Henry, Ward and Schiemann LJJ.
David Milne QC and Rupert Baldry (instructed by Dario Garcia, solicitor, Imperial Tobacco Group) for the taxpayer.
Rupert Anderson (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
British Airports Authority v C & E Commrs VAT(1977) 1 BVC 97
British Airways plc v C & E Commrs VAT(1990) 5 BVC 97
British Railways Board v C & E Commrs VAT(1977) 1 BVC 116
C & E Commrs v Wellington Private Hospital LtdVAT[1997] BVC 251
C & E Commrs v Zinn VAT(1987) 3 BVC 174
Card Protection Plan Ltd v C & E Commrs VAT(Case C-349/96) [1999] BVC 155
EC Commission v United Kingdom VAT(Case 353/85) (1988) 3 BVC 265; [1988] ECR 817
Faaborg-Gelting Linien A/S v Finanzamt Flensburg VAT(Case C-231/94) [1996] BVC 436; [1996] ECR I-2395
Lubbock Fine & Co v C & E Commrs VAT(Case C-63/92) [1993] BVC 287; [1993] ECR I-6665
"Siberië" vof VAT(Case C-158/98) [1999] BVC 353
Stichting Uitvoering Financiële Acties (SUFA) v Staatsecretaris van Financiën VAT(Case 348/87) [1991] BVC 102; [1989] ECR 1737
Trewby (on behalf of himself and the members of Hurlingham Club) v C & E Commrs VAT(1976) 1 BVC 80
Webb v EMO Air Cargo (UK) Ltd WLR [1993] 1 WLR 49
Value added tax - Exemption - Licence to occupy land - Cigarette vending machines installed by taxpayer in pubs etc. - Whether a grant by the siteholder to the taxpayer of a licence to occupy land - Whether exempt supply to the taxpayer -Value Added Tax Act 1994 schedule 9 group 1Value Added Tax Act 1994, Sch. 9, Grp. 1, item 1; Sixth Council directive (Directive 77/388) of 17 May 1977 (OJ 1977 L145/1), eu-directive 77/388 article 13(B)art. 13(B)(b).
This was an appeal by the taxpayer against a judgment of Lightman J ([1998] BVC 335), allowing an appeal by Customs from a decision of the VAT and duties tribunal ((MAN/96/110) No. 14,950; [1997] BVC 2454), that an agreement granting the exclusive right to the taxpayer to operate and maintain its cigarette vending machines installed on the siteholders' premises was the grant of a licence to occupy land within the Value Added Tax Act 1994 schedule 9 group 1Value Added Tax Act 1994, Sch. 9, Grp. 1, item 1 and was thus exempt.
By agreement with the owner ("the siteholder") the taxpayer installed and operated cigarette vending machines in pubs, clubs, hotels, etc. The agreement stated that the siteholder granted to the taxpayer, in return for a share of the profits, the exclusive right and licence during the agreed term to install, operate and maintain its machines at the site.
The taxpayer contended that no licence to occupy land within the exemption was granted, but even if it was, the licence was incidental to the substantial supply of the exclusive right to sell cigarettes on the siteholder's premises was a taxable supply.
Held, dismissing the taxpayer's appeal:
1. The siteholder gave two promises in consideration of taking a share in the cigarette profits, namely a licence permitting the machine to be installed on its premises and granting a restrictive covenant not to allow competition. But the two elements constituted a single composite supply. From an economic point of view it would be artificial and arbitrary, if the installation was exempt and the restrictive covenant was taxable, to split the consideration and apportion part to an exempt supply and part to a taxable supply.
2. The primary aim of the taxpayer was to sell cigarettes. Preventing competition was a means for the better enjoyment of that principal service. Therefore, making the machine and its contents available to the public was the dominant element in the transaction to which the restrictive covenant was merely ancillary.
3. The right to install a machine on the siteholder's premises was the grant of a licence to occupy land within the exemption provided by eu-directive 77/388 article 13(B)art. 13(B)(b) of the sixth Council directive (Directive 77/388) for the "leasing or letting of immovable property" and item 1 of Value Added Tax Act 1994 schedule 9 group 1Grp. 1 of Sch. 9 to the Value Added Tax Act 1994. Permission to install a machine and operate it at the premises was a licence to place the machine on the site which it occupied for the agreed term. The cigarette machines were taking up space on the premises and were occupying the land they stood on or were annexed to: Trewby (on behalf of himself and the members of the Hurlingham Club) v C & E Commrs VAT(1976) 1 BVC 80distinguished; C & E Commrs v Zinn VAT(1987) 3 BVC 174 followed.
Ward LJ: The question in this appeal is whether an agreement to install a cigarette vending machine in a public house constituted a licence to occupy land and as such a supply exempt from VAT within Value Added Tax Act 1994 section 31 schedule 9 group 1s. 31 and Grp. 1 of Sch. 9 to the Value Added Tax Act 1994. Customs said that it was; the chairman of the tribunal said it was not; but Lightman J restored the commissioners' decision and gave leave to appeal to us.
The appellant, a part of the Imperial Tobacco Group, sells its cigarettes through coin-operated vending machines placed in public houses, hotels, clubs and leisure centres. These machines, which may be free-standing or fixed to a wall, are installed on the premises with the permission of the publican or hotelier, the "siteholder", pursuant to agreements which, though they differed in detail, all had the same legal effect. It is common ground between the appellant and Customs that the material terms upon which the case depends can be summarised as follows:
WHEREAS
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(a) The owner (i.e. the Appellant) is able to supply and maintain cigarette vending machines;
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(b) The Site-holder is the Owner of premises at which the Owner's cigarette vending machines can be positioned;
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(c) The parties wish to enter into this agreement containing the terms on which the said vending machines will be positioned at the siteholder's premises.
WHEREBY it is agreed as follows;
…
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(d) "machines" means vending machines supplied by the Owner for the sale of Products …
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(e) "Products" means cigarettes, cigars and tobacco products…
The siteholder hereby grants to the Owner the right and licence during the term to provide, install, operate and maintain the machines at the Premises of the Siteholder.
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(a) The machine shall be positioned in the premises at such sites as the Siteholder shall nominate as being the sites most likely to generate the maximum sale.
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(b) The Siteholder shall not unreasonably refuse his consent to the selection of such site as the Owner considers will be the most likely to generate the maximum sale.
…
…
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(b) Owner shall pay the Siteholder its proportion of the gross profit for each monthly period
The machines, all stocks of Products and all cash in the machines shall at all times remain the property of the Owner.
The Siteholder agrees:
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(a) That the Owner is hereby granted the exclusive right during the...
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