Vivat Holdings Plc
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 September 1995 |
| Date | 15 September 1995 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Apple and Pear Development Council v C & E Commrs VAT(Case 102/86) [1988] ECR 1443; (1988) 3 BVC 274
BLP Group plc v C & E Commrs VAT(Case C-4/94) [1995] ECR I-983; [1995] BVC 159
Broadwell Land plc VAT(LON/92/1294) No. 10,521; [1994] BVC 503
C & E Commrs v Deutsche Ruck UK Reinsurance Co Ltd VAT[1995] BVC 175
C & E Commrs v Music and Video Exchange LtdVAT[1992] BVC 30
C & E Commrs v Pippa-Dee Parties Ltd VAT(1981) 1 BVC 422
C & E Commrs v Professional Footballers' Association (Enterprises) Ltd VAT[1993] BVC 38
C & E Commrs v Reed Personnel Services Ltd VAT[1995] BVC 222
C & E Commrs v Scott VAT(1977) 1 BVC 139
C & E Commrs v Telemed Ltd VAT[1992] BVC 3
D & K Builders & Sons (Ampthill) Ltd VAT(LON/88/1046) No. 4287; (1989) 4 BVC 1426
Holiday Inns (UK) Ltd VAT(MAN/91/1475) No. 10,609; [1994] BVC 543
IR Commrs v Holder TAX(1932) 16 TC 540
"Intiem" CV v Staatssecretaris van Financiën VAT(Case 165/86) [1988] ECR 1471; (1989) 4 BVC 180
London and County (A & D) Ltd v Wilfred Sportsman LtdELR[1971] 1 Ch 674
Lord Advocate v Largs Golf Club VAT(1985) 2 BVC 200,063
Northern Lawn Tennis Club VAT(MAN/86/188) No. 3528; (1989) 4 BVC 622
P & O European Ferries (Dover) Ltd VAT(LON/91/2146 and LON/91/2532) No. 7846; [1992] BVC 955
Polysar Investments Netherlands BV v Inspecteur der Invoerrechten en Accijnzen, Arnhem VAT(Case C-60/90) [1991] ECR I-3111; [1993] BVC 88
Ridgeons Bulk Ltd v C & E Commrs VAT[1994] BVC 77
Staatssecretaris van Financiën v Co-öperatieve Aardappelenbewaarplaats GA (Case 154/80) [1981] ECR 445
Thorn EMI plc (LON/91/2317) and Granada plc VAT(LON/92/316) No. 9782; [1993] BVC 792
Input tax - Guarantees of tenants' rent given to landlords - Landlords opted to tax leases - Appellant required to honour guarantees - Whether appellant the recipient of any supplies - Whether consideration given by landlords to appellant in return for payments under guarantee - Value Added Tax Act 1983, s. 3(2) and 14(3) (Value Added Tax Act Value Added Tax Act 1994 section 5 subsec-or-para (2) section 24 subsec-or-para (1) section 24 subsec-or-para (2)1994, ss. 5(2), 24(1) and (2)); Value Added Tax (General) Regulations 1985 (SI 1985/886) reg. 24; Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 11(A)(1) article 17(2)art. 11(A)(1)(a) and 17(2)(a).
The issue was whether the appellant was entitled to reclaim the VAT it paid on rents under leases which the appellant had guaranteed.
The appellant was the parent of an international group of companies making and distributing clothing. In 1986, it decided to diversify into the retail sector and acquired GS, a company which owned 55 retail properties. The appellant indemnified the directors of GS and its parent against claims arising out of guarantees by those directors in respect of leasehold properties.
During the next two years GS acquired further leasehold properties by grant or assignment. As a condition of agreeing to grant or assign leases some landlords required the appellant to guarantee the performance by GS of its obligations. In some cases they required the appellant to replace GS as lessee in the event of the latter's insolvency and in others the guarantee involved the payment of compensation for the loss of a tenant.
In December 1988, the appellant sold the issued share capital of GS but it remained bound by the guarantees. In September 1991, the company to which GS had been sold went into receivership and it became apparent that GS was in default of its obligations under certain leases. The landlords then claimed against the appellant under the guarantees. This resulted in the appellant paying more than £5m over four years. Since the landlords had elected to waive exemption from tax on some of the leases part of the amount thus paid included an amount in respect of VAT. In total, the appellant paid an additional £200,000 to the landlords as tax which it sought to reclaim as its input tax.
The appellant contended that the policy underlying Directive 77/388, the sixth VAT directive, was that the incidence of VAT should not be felt by fully taxable persons and that the guarantee payments were a cost component of the appellant's business. Something had been "done for a consideration" within the meaning of s. 3(2)(b) of the Value Added Tax Act 1983 by a landlord in agreeing to grant or assign a lease to a tenant in return for which the rent was paid and each time a payment was made or a tax invoice issued a tax point arose under the continuous supplies of services rules. The fact that the landlord was also supplying an interest in land to a tenant under the lease or that a guarantee might not be called upon was immaterial. An example of the latter was claims arising out of a contract of insurance in the decision of C & E Commrs v Deutsche Ruck UK Reinsurance Co LtdVAT[1995] BVC 175. There was no provision within the sixth directive for a residual category where there was consideration but no supply.
The commissioners contended that the payments made by the appellant under the guarantees were consideration in VAT terms for supplies made by the landlords to GS rather than to the appellant. To be entitled to claim credit under s. 14(3) of the Value Added Tax Act 1983 a supply had to be made "to him" and not to a third party. In terms of the law of contract consideration had been given by the appellant but this was not the same as giving consideration in VAT terms and the phrase "anything which is … done for a consideration" in s...
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