The Commissioners of Customs and Excise (Applicant/Respondent) v British Telecommunications Plc (Respondent/Appellant)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NOURSE,LORD JUSTICE AULD,LORD JUSTICE JUDGE |
| Judgment Date | 18 March 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J0318-13 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBCOF 97/0332 CMS4 |
| Date | 18 March 1998 |
[1998] EWCA Civ J0318-13
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CROWN OFFICE LIST
(Mr Justice Dyson)
Royal Courts of Justice
Strand, London WC2
Lord Justice Nourse
Lord Justice Auld and
Lord Justice Judge
QBCOF 97/0332 CMS4
MR D MILNE QC, MR R BALDRY and MISS E WILSON (instructed by Mr Alan Whitfield, Solicitor for British Telecommunications plc, London EC1) appeared on behalf of the Appellant Respondent.
MR M KENT QC and MR N RANDALL (instructed by the Solicitor for the Commissioners of Customs and Excise, London SE1) appeared on behalf of the Respondent Applicant.
Wednesday, 18th March 1998
In common with other very large companies, British Telecommunications Plc ("BT") purchases substantial quantities of motor cars directly from the manufacturers rather than through authorised dealers. We have been told that the annual number of cars thus purchased by BT is about 10,000. The manufacturers use third party transport companies to deliver the cars to BT, for which they make an additional charge, separate charges for VAT being made on the price of the car and the delivery charge respectively. BT claims that it is entitled to deduct the input tax which it pays to the manufacturers for the service of delivering the cars. Its claim was upheld by the London Value Added Tax Tribunal (Chairman: Mr M.P. Cornwell-Kelly) but rejected by Mr Justice Dyson on an appeal by the Commissioners of Customs and Excise to the High Court. BT now appeals against the judge's decision.
The relevant provisions of the Value Added Tax Act 1994 ("the 1994 Act"), the Value Added Tax (Input Tax) Order 1992 (SI 1992/3222) ("the 1992 Order") and the EC Council Directive 77/388 ("the Sixth Directive") are set out in the judgment of the judge, which is reported at [1997] STC 475. All references to pages in the judgment are to the pages in that report. The judgment also states the material facts and contains a summary of the relevant provisions of the six sample contracts between BT and Rover, Vauxhall, Citroën, Ford, Land Rover and Peugeot respectively which were placed before the tribunal. Extensive repetition of these matters is unnecessary.
The relevant United Kingdom legislation and Community law and the questions which arise can be summarised as follows. The basic provision is art. 7(1) of the 1992 Order, which provides that tax charged on the supply to a taxable person of a motor car shall be excluded from any credit under section 25 of the 1994 Act (credit for input tax against output tax). So the essential question is whether the service of delivery is or is not part of a single composite "supply" of the car within art. 7(1). If it is, the input tax is not deductible. If it is not, the input tax is deductible. This question itself depends, first, on whether the contractual arrangements between BT and the manufacturers give rise to two supplies for VAT purposes, namely a supply of a car and a separate supply of a service of delivery, or to a composite supply of a car; secondly, on whether the consideration paid for the service of delivery, be it a separate supply or part of a composite supply, is in any event required to be treated as part of the consideration for the car by virtue of art. 11A2(b) of the Sixth Directive.
The judge dealt with the second of those questions first. That, no doubt, was because he understood it to be common ground that if art. 11A2(b) had been implemented by being incorporated in our domestic law, then the Commissioners' appeal would have to be allowed; see p.482B. However, BT, through Mr Milne QC, maintains that it did not intend to make any concession to that effect. Certainly, it makes no such concession in this court. In other circumstances this might have caused a difficulty. But here it is unnecessary to decide whether a concession was made or not. No concession as to the construction or effect of an Act of Parliament can bind the court. Moreover, any concession made below, even if it is one which would bind the court, can be withdrawn with the leave of this court. If a concession was made here, it would clearly be right for BT to be given leave to withdraw it. The appeal must therefore be dealt with on the footing that no concession was made.
The judge, differing from the tribunal on this question, held that art. 11A2(b) had been implemented by section 19(2) of the 1994 Act. As will appear, BT's position now is that it matters not whether it has been implemented or not. It says that that provision, if implemented, does not prevent it from taking advantage of there having been, as it contends, a supply of a car and a separate supply of a service of delivery. The convenient course is therefore to deal first with the question whether the contractual arrangements gave rise to two supplies or one.
Mr Justice Dyson dealt with this question at pp.486E to 489F. Like the tribunal, he decided it in favour of BT. Having read passages from the judgments of Millett LJ in Commissioners of Customs and Excise v. Wellington Private Hospital Ltd [1997] STC 445, 462 and 464, and of McCullough J in Commissioners of Customs and Excise v. Leightons Ltd. [1995] STC 458, 462, and from the decision of the tribunal in the present case and having summarised the rival submissions of counsel, the judge expressed the view that the tribunal reached the right conclusion, largely for the reasons given by it and for those advanced by Mr Milne; see p.488E-F. He then added some observations of his own and made further references to authority.
In my judgment, notwithstanding the submissions of Mr Kent QC on behalf of the Commissioners, the judge's reasoning and conclusion on this question are unassailable. I adopt them in their entirety. However the test for non-deductibility is expressed,...
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