Weight Watchers (UK) Ltd v HM Revenue and Customs Commissioner
| Jurisdiction | England & Wales |
| Judgment Date | 25 June 2008 |
| Date | 25 June 2008 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Sir Andrew Morritt C, Hooper and Lloyd L JJ.
Peter Mantle (instructed by the Solicitor for HM Revenue and Customs) for the appellant.
David Milne QC (instructed by Lovells LLP) and Greg Sinfield of Lovells LLP for the respondent.
The following cases were referred to in the judgment:
Beynon & Partners v C & E CommrsTAXWLR [2004] BTC 5,794; [2005] 1 WLR 86
Card Protection Plan Ltd v C & E CommrsECASTAX (Case C-349/96) [1999] BTC 5,121; [1999] ECR I-973
College of Estate Management v C & E CommrsTAX [2005] BTC 5,673
Edwards v BairstowTAXELR (1955) 36 TC 207; [1956] AC 14
Faaborg-Gelting Linien A/S v Finanzamt FlensburgECASTAX (Case C-231/94) [1996] BTC 5,391; [1996] ECR I-2395
Levob Verzekeringen BV v Staatssecretaris van FinanciënECASTAX (Case C-41/04) [2007] BTC 5,186; [2005] ECR I-9433
Value added tax - Supply of goods and services - Single or multiple supply - Taxpayer providing weight loss and weight management programme - Customers receiving handbook at first meeting and other printed matter at subsequent meetings - Whether enrolment and meeting fees consideration for single standard-rated supply - Whether separate zero-rated supply of printed materials - Customs' appeal allowed - Value Added Tax Act 1994, Value Added Tax Act 1994 section 30 subsec-or-para 2 schedule 8s. 30(2), Sch. 8.
These were appeals by the taxpayer and Revenue and Customs against a decision of the High Court concerning the VAT treatment of the consideration received from customers attending meetings of the taxpayer's weight loss and weight management programme.
The taxpayer company offered its customers a weight loss and weight management programme. Customers attending their first meeting paid a registration fee plus a meeting fee. Thereafter, a weekly meeting fee was charged. New members received a handbook together with other items at their first meeting and received leaflets and a monthly magazine at subsequent meetings.
The taxpayer claimed that the supplies delivered at meetings had two separate components: supplies of standard-rated services and facilities, and zero-rated supplies of printed materials, neither component being ancillary to the other. Customs took the view that there was a single standard-rated supply which it was artificial to split.
The VAT tribunal allowed the taxpayer's appeal, deciding that there should be an apportionment because there were mixed supplies of standard-rated services and zero-rated printed matter, although the zero-rated content of the supply at the first meeting was clearly greater (Decision No. 20,038; [2007] BVC 2,383).
The High Court allowed an appeal by Customs in part, holding that, although it was necessary to apportion the consideration received from customers attending their first meeting between standard-rated support services and zero-rated printed materials, it would be artificial to differentiate between those supplies at subsequent weekly meetings where the taxpayer was in fact making a single supply of weight loss services ([2008] BTC 5,129).
The taxpayer appealed the decision in relation to the subsequent meetings. Customs appealed the decision in relation to the first meeting.
Held, allowing Customs' appeal and dismissing the taxpayer's appeal:
1. In deciding whether there had been a single standard-rated supply for VAT purposes, the court had to have regard to all the circumstances and apply the relevant test on an objective basis. The court had to look at the transactions from the view point of the typical consumer rather than the supplier. The extent of the linkage between the relevant transactions had to be considered from an economic point of view, rather than, say, a physical, temporal or other standpoint. So regarded, the question then was whether it would be artificial to split them into separate supplies. The fact that the supplier had charged a single price for the aggregate of the transactions was a relevant circumstance but was not conclusive because that price might be apportioned. (Levob Verzekeringen BV v Staatssecretaris van Financiën (C-41/04) [2007] BTC 5,186; [2005] ECR I-9433 applied.)
2. Given the obvious interrelation between the first and subsequent meetings, the tribunal should have considered them in the order in which they occurred and tested the prima facie conclusions in relation to one category against the prima facie conclusions in relation to the other. The tribunal had erred in its conclusions in respect of both categories of meeting. It had erred in its consideration of the economic point of view and the typical consumer. The judge had been obliged to correct those errors of law but had failed to do so.
3. The correct legal test pointed clearly to the conclusions that there was a single standard-rated supply at meetings of each description in accordance with the original ruling of Customs. The purpose of a typical consumer being or becoming a member was to obtain the benefit of the weight loss programme marketed by the taxpayer. One of the cardinal features of that programme was the combination of the diets as taught in the handbook and the group therapy to be derived from the meetings. If it was the combination which the member was buying, then it made no sense from an economic point of view to pay or be charged separately for the meetings and the publications. It followed that the events of the first meeting, from the point of view of the enrolling member, were merely a necessary preliminary to obtaining the benefits of the programme as a whole at that and any subsequent meeting.
4. In those circumstances it was unnecessary to consider whether the judge applied sufficient or excessive circumspection in his treatment of the various decisions of the tribunal. An appellate court on an appeal on a point of law such as this was entitled to interfere with the decision of the lower court or tribunal on wider grounds than where the court was considering findings of fact. The characterisation of a supply for VAT purposes was a question of law. It might be that in some circumstances the different tests would lead to the same result but that did not mean that the tests were the same or applicable in the same circumstances. (Edwards v Bairstow [1956] AC 14; 36 TC 287 and Dr Beynon & Partners v C & E Commrs [2004] BTC 5,794 considered.)
Sir Andrew Morritt C: Introduction
[1] Membership of Weight Watchers (UK) Ltd ("WW") is open to those whose weight exceeds a level identified by reference to certain charts and who wish to reduce it. In January 2005 WW introduced for its members a weight loss and weight management programme entitled "Switch", the benefits of which are made available to members at meetings organised by WW. A person who seeks to become a member attends such a meeting and is enrolled, provided with, amongst other documents, the Switch Handbook and instructed how to use it. At that meeting the newly enrolled member, together with all the existing members attending that meeting are "weighed in", receive a leaflet and other printed matter and have the benefit of the address of the leader of that meeting. The newly enrolled member pays £9 for enrolment and £4.95 for the meeting; the existing member pays £4.95 for the meeting.
[2] On 11 March 2005 the appellants ("HMRC") ruled that for the purposes of VAT,
the components of the Weight Watchers classes, the classes and the printed matter together, [form] one supply of a (standard-rated) weight loss programme.
This ruling was disputed by WW. It appealed to the VAT and Duties Tribunal (Theodore Wallace Esq and Mrs Lynneth Salisbury JP). It contended that the events of the meetings gave rise to two separate supplies, namely a zero-rated supply of the printed materials and a standard-rated supply of the other goods and services. It accepted that, on this analysis, the price paid by the member, be it £13.95 or £4.95 should be apportioned. For the reasons explained in their decision released on 8 March 2007 ([2007] BVC 2,383; Decision No. 20,038) the Tribunal accepted the submissions of WW and allowed its appeal.
[3] HMRC appealed and their appeal came before Morgan J ([2008] EWHC 53 (Ch); [2008] BTC 5,129). He drew a distinction between the supplies made in relation to any given member at his or her first meeting and all other supplies to members attending meetings. He saw no sufficient reason for interfering with the decision of the Tribunal that the consideration paid by the new member at his or her first meeting, namely £13.95, was for separate supplies of services and printed materials. Accordingly he dismissed the appeal of HMRC "in relation to the transaction involved in the first meeting attended by a customer". But in the case of the transactions involved in subsequent meetings he considered that the consideration of £4.95 was paid for a single standard-rated supply of weight loss services.
[4] WW now appeals, with the permission of Sir John Chadwick, from the decision of Morgan J in relation to the subsequent meetings. HMRC appeals, with the permission we granted at the commencement of the hearing, from the decision of Morgan J in relation to the first meeting. The issue in relation to both appeals is, as originally formulated by the Tribunal,
whether customers of [WW], who attend weekly meetings at which they are weighed and can then remain to attend a talk and discussion period but in any event also receive a handbook and other printed material at the meetings, receive single standard-rated supplies of a weight-loss programme or separate supplies of zero-rated printed material and standard-rated support services.
[5] It is common ground that these appeals, both to the judge and to this court, lie on a point of law only. It is also common ground that the determination of the issue so formulated is one of law, Beynon & Partners v C & E...
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