Stormseal (UPVC) Window Company Ltd; Probelook Ltd
Jurisdiction | UK Non-devolved |
Judgment Date | 28 January 1990 |
Date | 28 January 1990 |
Court | VAT Tribunal (UK) |
VAT Tribunal
VAT Tribunal
The following cases were referred to in the decision:
Celtic Football Athletic Co Ltd v C & E Commrs VAT(1983) 1 BVC 554
Football Association Ltd VAT(1985) 2 BVC 205,246; (1985) VATTR 106
Hopkins (J) (Contractors) Ltd VAT(1989) 4 BVC 619; (MAN/88/50) No. 3511
Ibstock Building Products Ltd VAT(1987) 3 BVC 539; (1987) VATTR 1
National Coal Board v C & E Commrs VAT(1982) 1 BVC 515
Northern Lawn Tennis Club VAT(1989) 4 BVC 622; (MAN/86/188) No. 3528
Pippa-Dee Parties Ltd; C & E Commrs v VAT(1981) 1 BVC 422
Assessment - Hotel expenses - Disallowance of input tax on hotel expenses paid by company for the accommodation of self-employed persons carrying out services for the appellant company - Whether company must account for output tax on the onward supply.
The issue was whether payment by the appellant for hotel expenses incurred by employees and self-employed subcontractors of the appellant was an onward supply of hotel accomodation by the appellant on which output tax must be accounted for.
The two appeals concerned a single business carried on by first Probelook and later Stormseal, but the business was always called Stormseal. The appellants were assessed to large sums by way of disallowance of input tax on hotel expenses paid by them for their workers. At the hearing of their appeals the only ground relied on to support those assessments was that the appellants should account for output tax on the onward supply of that hotel accommodation to their workers.
The appellants carried on the business of manufacture, supply and fitting of new and replacement windows and entrance doors throughout the United Kingdom. The appellant's head office was at Bury. It divided the country into areas each with a sales office and an installation depot. Each sales office was attended by a team consisting of sales manager and sales representatives canvassing manager and canvassers. There were also administrative staff. The appellants had about 400 sales representatives and 400 canvassers.
The canvassers, who usually worked in teams, collected enquiries by, inter alia, knocking on doors, often working in areas such as housing estates. All enquiries were reported to the sales office and if confirmed, a sales representative would be sent to visit and obtain the order. Orders were then referred to the installation depots for fulfillment.
Certain key personnel were the appellant's employees. The rest were self-employed. Canvassers were paid a basic salary and a one per cent commission and were expressly stated to be self-employed. Representatives were likewise paid a commission: Clause 9 of the contract expressly provided "All expenses whatsoever incurred by the Contractor in performance of this agreement shall be paid by the Contractor".
Canvassers and sales representatives (representatives) were employed to work in one of the areas into which the appellants divided the country for administrative convenience. However, representatives were frequently required to work away from their home and area and it might be necessary for such representatives to be accommodated overnight in hotels. Such accommodation was limited to essentials and was no more than was required to enable the representative to be in the area in order to discharge his services to the appellants. The accommodation was not regarded by the appellants as a reward or perk.
The hotel bill was sent direct to the appellants and settled by them. (The VAT included was deducted as input tax by the appellants in their returns.) The appellants' practice of settling hotel bills for its staff working away from home was well established to be a term of the agreement with every category of person working for them.
Held, allowing the companies' appeals.
1. The supply of hotel accommodation was made to the appellants, not to their representatives, as the presence of those representatives was required by the appellants to carry out the appellants' business. The appellants required and ordered the accommodation and were liable to pay for it: it was to the appellants that the hotels looked for payment and who in fact paid the bill.
2. There was no element of entertainment or hospitality involved in the provision of the accommodation and the representative gained no personal benefit from it.
3. There was no onward supply of the accommodation by the appellants to the representatives. It was not made available to the representative for his own use and benefit but for the appellants' purposes and was no different from the supply of materials or protective clothing by an employer to his workers.
4. The hotel accommodation was not provided as part of the consideration for a representative's services so as to constitute a reciprocal supply. The terms of their contract did not require a representative of the appellants to provide his own accommodation when asked to work away from home. On the contrary it was agreed the appellants would provide the accommodation.
5. The result was the same whether the representative was an employee or self-employed.
6. Accordingly the appellants could deduct input tax on the supply of hotel accommodation to them, and output tax was not chargeable as there was no onward supply of that accommodation by them.
[The tribunal set out the facts summarised above and continued as follows.]
Three points are to be noted: First, the word "supply" in its ordinary sense requires that the goods or services be passed from one person to another.
A person cannot be said to supply himself with his own goods or services merely by making use of them for his own purposes. That point is perhaps emphasised by the need for the Act to provide expressly for there to be a supply in certain instances,...
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