Trafalgar Tours Ltd v Commissioners of Customs and Excise
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 July 1987 |
| Date | 15 July 1987 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Betterware Products Ltd. v. C. & E. Commrs. VAT(1985) 2 BVC 200,100
C. & E. Commrs. v. Johnson VAT(1980) 1 BVC 338
C. & E. Commrs. v. Tarmac Roadstone Holdings Ltd. VAT(1985) 2 BVC 200,166
Nasim & Anor. v. C. & E. Commrs. VAT(1987) 3 BVC 54
Staatssecretaris van Financien v. Cooperatieve Vereniging Cooperative Aardappelenbewaarplaats UNK[1981] 3 C.M.L.R. 337
Supplies - Taxable supplies - Consideration for supplies - Value of consideration - Value Added Tax Act 1983 section 9 section 10Value Added Tax Act 1983, sec. 9 and 10.Sixth EC Directive (77/388/EEC). eu-directive 77/388 article 11Art. 11.
The appellant (the "Operator") carried on a business of providing coach tours in Europe from premises in London and disputed a decision of the Commissioners as to the manner of calculating tax on an identified tour taking place in March 1986. The calculation was based on the view taken by the Commissioners of the nature of supplies made by the appellant and the amount of consideration given in return thereof. The supplies of the tours were ultimately made to individuals in North America, Australia and New Zealand, the appellant being a subsidiary of Trafalgar Tours International Ltd. ("TTI") on behalf of whom it arranged the European tours and provided costings thereof. TTI arranged for brochures describing the tours to be published in countries where the tours were sold and determined the tour prices in local currencies, arranging the distribution of the brochures through various overseas subsidiaries to the travel agents who sold the tours. Following a European tour TTI would pay the appellant an agreed percentage of the advertised brochure price of the tours.
The appellant accounted to the Commissioners for tax on supplies made by it on the basis of the net amount received by the company from TTI for the tours it supplied. However, in 1985 the Commissioners altered their view of the correct method of accounting for tax on the supplies in question, ruling that the value of the supplies for tax purposes should be treated as being the prevailing advertised brochure price.
For the appellant it was contended that it supplied tours to TTI and the consideration for such supplies was the amount actually received in return. The tours were "supplied on" by TTI to its overseas subsidiaries as principals, so that the percentage of the gross receipts for the tours retained by TTI was not to be regarded as the consideration for marketing the tours overseas on behalf of the appellant.
For the Commissioners it was contended that the tours were supplied to the passengers and TTI procured such supplies as agents, the brochure price being the consideration.
Held, deciding that the tax due should be calculated on the basis that the supplies of services which the appellant made were to the passengers who travelled on the tours and not to TTI which was incapable of physically enjoying the services supplied. The consideration was the amount paid by passengers to the travel agents through whom they booked, which amounts could not be unascertainable by the appellant. The difference between the amount paid by the passengers and the net sum received by the appellant was the commission for services supplied by TTI in marketing the tours, and consequently an expense incurred by the appellant in the course of its business.
[The Tribunal set out the facts summarised above and continued as follows.]
… The Operator [Trafalgar Tours Ltd.] was registered as a taxable person with effect from 1 April 1973. On 4 May 1973 its Accountant wrote to the Commissioners stating (inter alia)-
The majority of our sales are made overseas by Agents and we have to cost any commission which is deducted from the gross amount paid to them by the passenger. This commission (worldwide) averages 20 per cent.
I would like your confirmation that our sterling price is that which is received after paying commission.
To that letter the Commissioners replied-
The proposals outlined in your letter of the 4th May I accept as a fair basis on which to calculate the VAT element of a ticket along with basing your calculations on a value after deducting commission.
So at all times the Operator has accounted for tax on the supplies which it made by reference to the net prices of the tours. And, as the services supplied to each passenger included both standard-rated elements (such as accommodation and catering) and zero-rated elements (such as transport) a formula was agreed between the Operator and the Commissioners and applied to determine the proportions of the net prices which should be attributed to the standard-rated elements. But in 1985 in the course of a control visit to the Operator another officer of the Commissioners took the view that the Operator should more properly account for tax on the supplies which it made by reference to the brochure prices rather than the net...
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