Total UK Ltd v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 18 October 2007 |
| Neutral Citation | [2007] EWCA Civ 987 |
| Date | 18 October 2007 |
| Court | Court of Appeal (Civil Division) |
[2007] EWCA Civ 987.
Court of Appeal (Civil Division).
Mummery, Maurice Kay and Richards L JJ.
Christopher Vajda QC and Andrew Macnab (instructed by the Solicitor for HM Revenue and Customs) for the appellants.
John Walters QC and Barrie Akin (instructed by the Solicitor's Department of Total UK Ltd) for the respondent.
The following cases were referred to in the judgment:
C & E Commrs v Hartwell plcUNKVAT [2003] EWCA Civ 130; [2003] BVC 262
C & E Commrs v Primback LtdECASVAT (Case C-34/99) [2001] BVC 315; [2001] ECR I-3833
EC Commission v FranceECASVAT (Case C-481/98) [2001] BVC 302; [2001] ECR I-3369
EC Commission v GermanyECASVAT (Case C-427/98) [2003] BVC 205; [2002] ECR I-8315
Elida Gibbs Ltd v C & E CommrsECASVAT (Case C-317/94) [1997] BVC 80; [1996] ECR I-5339
Fischer v Finanzamt DonaueschingenECASVAT (Case C-283/95) [1998] BVC 431; [1998] ECR I-3369
JP Morgan Fleming Claverhouse Investment Trust plc v R & C CommrsECAS (Case C-363/05) 28 June 2007, not yet reported
Kuwait Petroleum (GB) Ltd v C & E CommrsECASVAT (Case C-48/97) [1999] BVC 250; [1999] ECR I-2323
Lex Services plc v C & E CommrsUNKVAT [2003] UKHL 67; [2004] BVC 53
Tesco plc v C & E CommrsUNKVAT [2003] EWCA Civ 1367; [2004] BVC 3
Value added tax - Output tax - Taxable amount - Sales promotion scheme - Gift vouchers - Points issued by supplier by reference to quantity of fuel purchased - Points redeemable in return for vouchers issued by retailers - Whether taxable amount to be reduced by cost of vouchers - Directive 77/388, eu-directive 77/388 subsec-or-para A article 11 subsec-or-para C article 11art. 11(A)(1)(a), 11(C)(1).
This was an appeal by Revenue and Customs against a decision of the High Court ([2007] BVC 245) that the transfer of vouchers by the taxpayer fuel company to redeeming customers under a sales promotion scheme operated to reduce the consideration obtained by the taxpayer in respect of its supplies of fuel resulting in a reduction in the amount by reference to which output tax was payable.
The taxpayer operated a customer loyalty scheme (known as "TOPS"). Purchasers of road fuel who were scheme members were awarded points and the points were redeemable for gift vouchers issued by retailers. The vouchers were purchased in bulk by the taxpayer at discount rates. A dispute arose concerning the value of the taxable supply made by the taxpayer. The Revenue rejected a claim by the taxpayer for the repayment of £1.6m overpaid output tax. The taxpayer took the view that the cost of providing face-value vouchers in the course of operating the scheme constituted a retrospective discount given to customers and reduced the taxable amount in accordance with art. 11(C)(1) of Council Directive 77/388 (the sixth directive).
Customs argued that there was no relevant relationship between the supply of vouchers and the consideration received by the taxpayer for the sale of road fuel. They considered that the supply of vouchers could not serve to reduce the original consideration provided by the customer for the fuel.
The VAT tribunal dismissed an appeal by the taxpayer (Decision No. 19,502; [2006] BVC 4,070) holding that the cost incurred by the taxpayer on the voucher to enable it to redeem TOPS points did not operate as a reduction in the price paid by the customer. Regardless of how the transfer of the voucher to the customer was characterised, it did not change the fact that the consideration obtained for the fuel remained the sum charged to the customer at the time of purchase. There was no relationship between the two supply chains, namely the sale of road fuel to the customer and the chain of supply commencing with the retailer's sale of a gift voucher for the taxpayer to use in the redemption process. Accordingly, the taxpayer's reliance on Elida Gibbs Ltd v C & E Commrs (Case C-317/94) [1997] BVC 80; [1996] ECR I-5339 was misplaced. The tribunal agreed with the opinion of the Advocate General in Kuwait Petroleum (GB) Ltd v C & E Commrs (Case C-48/97) [1999] BVC 250; [1999] ECR I-2323 that it was not possible to treat as a single economic transaction a series of events consisting of two distinct transactions: the sale of fuel coupled with the supply of stamps and the subsequent redemption of goods for those stamps.
The High Court allowed the taxpayer's appeal ([2007] BVC 245) on the basis that the case was covered by Elida Gibbs, which was authority for the proposition that where a trader supplied goods or services for a stated consideration, but under a sales promotion scheme was obliged to pay an amount away to the ultimate consumer or to an intermediary in the chain of supply, the consideration upon which the trader should be finally liable to VAT was reduced by the amount so paid away. Customs appealed to the Court of Appeal.
Held, allowing Customs' appeal:
1. The transfer of a voucher by the taxpayer to a customer redeeming his points under TOPS did not operate to reduce the consideration obtained by the taxpayer in respect of its supplies of fuel. To treat the transfer of the voucher as the grant of a retrospective discount or rebate on the price of fuel under art. 11(C)(1) of the sixth directive was to mischaracterise it. Nothing in the authorities supported such an approach.
2. An objective analysis was required, without regard to the parties' subjective intentions or motivation, and the scheme documentation played an important part in the analysis. It was important that the scheme's documentation did not describe the transfer of a voucher as a discount or rebate on the price of fuel. The earning of TOPS points and thereby of vouchers by the purchase of fuel was presented to customers as a means of obtaining extra goods or services from the selected retailers or the opportunity to make gifts to recognised charities. The focus was on the acquisition of something extra through participation in the scheme. There was no suggestion that the voucher constituted money-off or cash-back in respect of the purchases of fuel by which the points had been earned, or that the customer in some way paid less than the full price of the fuel purchased. That was underlined by the existence of multi-card TOPS accounts, where qualifying purchases of fuel could be made by family, friends or colleagues but it was only the primary cardholder who was entitled to redeem the TOPS points for vouchers. (Tesco plc v C & E Commrs [2004] BVC 3 and Lex Services plc v C & E Commrs [2004] BVC 53 considered.)
3. TOPS was a customer loyalty scheme, the purpose of which was to promote sales of the taxpayer's fuel by encouraging motorists to come back for repeat purchases. The reality was that the customer paid the full pump price for the fuel whether or not he was a member of TOPS and whether or not, if a member of TOPS, he earned sufficient points under the scheme to qualify for a voucher. The customer who received a voucher did not thereby receive a discount on the price of the qualifying purchases of fuel, but got something extra for the price he paid for the fuel. TOPS was a scheme under which the customer got more at the same price rather than the same at a lesser price. The voucher only had value if spent on the acquisition of something else; and it was difficult to see how it could be said to be a retrospective discount on past purchases of fuel. Such a voucher was materially different in its nature from a monetary refund or rebate of part of the price paid for fuel. (EC Commission v Germany (Case C-427/98) [2003] BVC 205; [2002] ECR I-8315 applied; Elida Gibbs Ltd v C & E Commrs (Case C-317/94) [1997] BVC 80; [1996] ECR I-5339 distinguished.)
4. The supply of fuel and the transfer of a voucher could not be said to be a single economic transaction. They were, or formed part of, separate transactions. It was difficult to see how the transfer of the voucher, if it was or formed part of one transaction, could amount to a reduction in the consideration paid for the fuel in a different transaction. To say that there were two different chains of supply, one relating to the fuel and the other to the vouchers, with no relevant linkage, was to express essentially the same point in a different way. (Kuwait Petroleum (GB) Ltd v C & E Commrs (Case C-48/97) [1999] BVC 250; [1999] ECR I-2323 applied.)
5. The fact that the taxpayer incurred a cost in purchasing the vouchers did not affect the resolution of the present issue. The situation was analogous to the incurring of a cost by the supplier to promote sales of fuel which was very different from obtaining a reduced consideration for the fuel itself and no reference for a preliminary ruling by the ECJ was required. (C & E Commrs v Primback Ltd (Case C-34/99) [2001] BVC 315; [2001] ECR I-3833 considered.)
Richards LJ:
[1] Total UK Limited ("Total") operates a sales promotion scheme called the Total Oil Promotion Scheme ("TOPS"). Customers who join the scheme and purchase sufficient quantities of fuel at Total filling stations are entitled to receive vouchers which can be used in payment for goods or services purchased from certain national retailers. This appeal concerns the VAT consequences of the transfer of those vouchers by Total to members of the scheme. Total contends that the taxable amount of its sales of fuel, on which it is liable to pay output tax, is reduced by an amount equal to the value of the vouchers transferred (that value being taken as the cost to Total of purchasing the vouchers from the retailers). Total's case failed before Sir Stephen Oliver QC, President of the VAT and Duties Tribunal ([2006] BVC 4,070), but succeeded on appeal before Sir Andrew Park, sitting as a judge of the High Court, whose judgment is reported at [2007] BVC 245. The Commissioners for HM Revenue and Customs ("the commissioners") now bring this further appeal.
[2] It is convenient to adopt the President's summary of the factual background...
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