Trafalgar Tours Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 23 January 1989 |
| Date | 23 January 1989 |
| Court | Queen's Bench Division |
Queen's Bench Division.
Popplewell J.
Mr Frederic Reynold QC and Mr Roderick Cordara (instructed by HH Mainprice) for Trafalgar Tours Ltd.
Mr Guy Sankey (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
Apple and Pear Development Council v C & E Commrs VAT(Case No. 102/85) (1988) 3 BVC 274
C & E Commrs v Apple and Pear Development Council VAT(1986) 2 BVC 200,198
Value added tax - Supply for consideration - European definition of "consideration" - Taxpayer organised coach tours in UK - Parent company marketed the tours overseas - Taxpayer received 80 per cent of total advertised price - Whether VAT chargeable on advertised price or on amount received by taxpayer - Second EC Directive, eu-directive notrep article 8A Annex A, para. 13Art. 8A, . Annex A, para. 13; Sixth EC Directive,eu-directive notrep article 11AArt. 11A, para. 1(a).
This was an appeal by the taxpayer company from a decision of the London VAT Tribunal (1987) 3 BVC 617) that tax should be calculated on the full advertised price of coach tours provided by the taxpayer.
The taxpayer company, which organised coach tours of the UK, was a subsidiary of Trafalgar Tours International Ltd based in Bermuda. The parent company arranged for brochures describing the tours to be published in the countries in which other members of the group operated and determined the price, based on sterling costings provided by the taxpayer. The overseas companies obtained bookings from customers for whom the taxpayer provided the tours.
The brochures set out the terms on which the tours were sold and included a statement that the taxpayer was to be responsible to the passengers for the conduct of the tours.
At the end of a tour the taxpayer submitted an invoice to the parent company which paid to the taxpayer the sterling equivalent of an agreed percentage of the advertised price, usually 80 per cent.
Until 1985 the taxpayer accounted for tax by reference to the amount received from the parent company for the tours ("the net price") but, in August 1985, the Commissioners of Customs and Excise wrote to the taxpayer stating that from 1 March 1986 tax should be accounted for by reference to the brochure price.
In November 1985 an agreement, headed "Purchase Agreement" was made between the taxpayer and the parent company by which it was agreed that tours were to be sold by the taxpayer to the parent company for an agreed percentage of the brochure price.
The taxpayer continued to account for tax by reference to the net price and the commissioners assessed additional tax.
On appeal the VAT tribunal decided that the taxpayer supplied services to the customers, not to the parent company. The consideration received was therefore the brochure price paid by the customers and the difference between the brochure price and the net price was commission for services supplied by the parent company in marketing the tours. The tribunal took the view that the purchase agreement was merely a facade disguising the true position.
The taxpayer appealed to the High Court contending that the question was to be decided by reference to EC law. By the Sixth EC Directive,eu-directive notrep article 11AArt. 11, para. 1(a), VAT was chargeable on "everything which constitutes consideration". Consideration was defined by para. 13 of Annex A toeu-directive notrep article 8AArt. 8 of the Second EC Directive as: "everything received in return for the supply of goods or the provision of services". The correct amount was the amount raised on the invoice and received by the taxpayer. VAT was a tax on turnover, i.e. what was received, and what was received was not the amount which the customer paid but the amount which the parent company handed over. It was argued that in asking what was supplied, the tribunal had asked the wrong question. The right question was: What was received?
Held, dismissing the taxpayer's appeal:
1. The right question was: What was supplied, to whom and for what consideration? The answer to that question was that the taxpayer supplied tours to the customers at the brochure price.
2. The tribunal was entitled to find that the 1985 agreement, which was wholly inconsistent with the brochure, was a facade with a view to avoiding tax.
By a notice of motion dated 1 July 1988 the taxpayer, Trafalgar Tours Ltd, appealed against a decision of a VAT tribunal dated 15 July 1987. The grounds of appeal were that the tribunal erred in law in:
(2) holding that the supply of services made by the appellant were made to overseas passengers, whose identities were unknown to the supplier, and not to Trafalgar Tours International with whom it contracted for the making of the said supplies;
(3) drawing support for the above finding by enunciating the proposition that Trafalgar Tours International could not physically enjoy the services supplied, whereas the capability of the physical enjoyment of goods and services is not a pre-condition of the receiving of supplies for the purposes of value added tax;
(4) attaching undue weight to a reference in the evidence given by the sole witness for the appellant to the expression "commission" in relation to the consideration received by the appellant, implying that the use of the word in evidence was determinant of the legal relationship between the parties;
(5) holding that the agreement between the appellant and Trafalgar Tours International in force for the period in question constituted an attempt to conceal the substance and reality of the arrangements between the parties;
(6) deciding that the consideration for the supply of the appellant's services was the amount paid by the ultimate consumers, rather than the amount actually received by the appellant.
To continue reading
Request your trial
-
Debenhams Retail Plc v HM Revenue and Customs
... ... Between Commissioners for Her Majesty's Revenue and Customs (Formerly Known as the Commissioners of Customs and Excise) Appellant and Debenhams Retail PLC ... Trafalgar Tours Ltd. v. Customs and Excise Commissioners [1990] STC 127 , 135a ... ...
-
Trafalgar Tours Ltd v Commissioners of Customs and Excise
...article 11(A)(2)art. 11A(1)(a), (2)(b). This was an appeal by the taxpayer, a tour operator, against the decision of Popplewell J ((1989) 4 BVC 44) upholding a decision of the VAT Tribunal ((1987) 3 BVC 617) that VAT was chargeable on the full amount paid by the tourists who travelled on th......