24 January 2001
Tax cases
No room for horses
No room for horses
Tax cases
No room for horses
The taxpayer owned a property which comprised a farmhouse, stabling and an outhouse with surrounding land extending to about seven-and-a-half hectares. The stabling was used for keeping horses and the taxpayer also erected a further building for use as a riding school. On a disposal of the property, he contended that all the land was required for the reasonable enjoyment of the dwelling house as a residence because of the equestrian interests of himself and his family whilst living at the property. He was unsuccessful on appeal to the Special Commissioners and the case then proceeded to the High Court. The central point was that, because of the stabling at the property, more land was required in order for the occupier to enjoy the property as it stood, since it would not otherwise be possible to keep horses if the surrounding land were inadequate for the purpose.
In the High Court it was held that it was not possible to extend the capital gains tax exemption at the property on account of the use of the land for keeping horses. The house itself could be enjoyed as a residence without the equestrian activities. If the taxpayer's contention was correct, the exempt area of land with any house could vary in accordance with the hobbies of the person occupying it at the date of its disposal. Accordingly the appeal was dismissed.
(Longson v Baker, High Court, Chancery Division, 16 November 2000.)
Exempt insurance services
Century Life agreed to act as Lincoln Assurance's agent and intermediary between Lincoln and its policyholders to review all pension policies issued by Lincoln to determine if there had been any misselling between 29 April 1988 and 30 June 1994.
Customs assessed Century Life to VAT in respect of the services provided to Lincoln. The tribunal dismissed Century's appeal that the services were exempt as it was providing the services of an insurance intermediary, under Article 13B(a) of Council Directive 77/388/EEC and item 4 of Group 2 of Schedule 9 to the VAT Act 1994. Later the High Court found for Century, so Customs appealed.
The Appeal Court said that the services provided by Century were within the exemption provided by Article 13B(a), as there was no requirement that a broker or agent had to be acting as an insurance broker or agent in order to come within the exemption. The wording in the article defined the nature of the services to be supplied as relating to insurance transactions; no further qualification was given.
The nature of the services supplied by Century was essentially one of compliance, rather than commercial, and ensuring that a policy complied with regulations was intimately related to the services provided by an insurance agent.
There was no substance in Customs' arguments, and the appeal was dismissed.
(Commissioners of Customs and Excise v Century Life plc, Court of Appeal, 19 December 2000.)
Taxable free goods
Kuwait Petroleum ran a customer loyalty scheme in which the purchaser of petrol received stamps and a collector card. Once enough stamps had been collected, they could be exchanged for goods published in a catalogue. Customs said that these redemption goods were supplied free of charge, and required Kuwait Petroleum to account for the VAT on their value as supplied to the customers.
Kuwait Petroleum objected saying that it accounted for the full value of the fuel supplied to the customer, and the costs of the redemption goods were absorbed in the cost of the fuel paid for by the customer. If VAT were due on the redemption goods, then the company would be paying VAT twice on the same goods, which would be contrary to the principle of neutrality which was fundamental to VAT law. Kuwait Petroleum argued that the vouchers were supplied to the customer for a consideration, and were not free of charge, under Article 5(6) of EC Council Directive 77/388. Secondly, the supply of the redemption goods should be treated as a reduction in the price of the premium goods, and therefore under Article 11C(1), the value of the former should be excluded from the output tax due on the latter.
Mr Justice Laddie in the High Court said that the provisions of Article 11 had to be read together and consistently. Article 11A(1)(b) provided that the taxable amount should be increased by the amount deemed to be the value of goods disposed of free of charge under Article 5(6). It was therefore impossible to view the same goods as being disposed of to achieve a price reduction under Article 11C(1). This would mean that in most cases where traders disposed of goods free of charge, the effect of Article 11A(1)(b) would be cancelled by the opposite effect of Article 11C(1). This could not be a proper construction of the articles. Kuwait's argument on neutrality did not find favour with the court either.
The appeal was dismissed.
(Kuwait Petroleum (GB) Ltd v Commissioners of Customs and Excise, Chancery Division, 20 December 2000.)
No room for horses
The taxpayer owned a property which comprised a farmhouse, stabling and an outhouse with surrounding land extending to about seven-and-a-half hectares. The stabling was used for keeping horses and the taxpayer also erected a further building for use as a riding school. On a disposal of the property, he contended that all the land was required for the reasonable enjoyment of the dwelling house as a residence because of the equestrian interests of himself and his family whilst living at the property. He was unsuccessful on appeal to the Special Commissioners and the case then proceeded to the High Court. The central point was that, because of the stabling at the property, more land was required in order for the occupier to enjoy the property as it stood, since it would not otherwise be possible to keep horses if the surrounding land were inadequate for the purpose.
In the High Court it was held that it was not possible to extend the capital gains tax exemption at the property on account of the use of the land for keeping horses. The house itself could be enjoyed as a residence without the equestrian activities. If the taxpayer's contention was correct, the exempt area of land with any house could vary in accordance with the hobbies of the person occupying it at the date of its disposal. Accordingly the appeal was dismissed.
(Longson v Baker, High Court, Chancery Division, 16 November 2000.)
Exempt insurance services
Century Life agreed to act as Lincoln Assurance's agent and intermediary between Lincoln and its policyholders to review all pension policies issued by Lincoln to determine if there had been any misselling between 29 April 1988 and 30 June 1994.
Customs assessed Century Life to VAT in respect of the services provided to Lincoln. The tribunal dismissed Century's appeal that the services were exempt as it was providing the services of an insurance intermediary, under Article 13B(a) of Council Directive 77/388/EEC and item 4 of Group 2 of Schedule 9 to the VAT Act 1994. Later the High Court found for Century, so Customs appealed.
The Appeal Court said that the services provided by Century were within the exemption provided by Article 13B(a), as there was no requirement that a broker or agent had to be acting as an insurance broker or agent in order to come within the exemption. The wording in the article defined the nature of the services to be supplied as relating to insurance transactions; no further qualification was given.
The nature of the services supplied by Century was essentially one of compliance, rather than commercial, and ensuring that a policy complied with regulations was intimately related to the services provided by an insurance agent.
There was no substance in Customs' arguments, and the appeal was dismissed.
(Commissioners of Customs and Excise v Century Life plc, Court of Appeal, 19 December 2000.)
Taxable free goods
Kuwait Petroleum ran a customer loyalty scheme in which the purchaser of petrol received stamps and a collector card. Once enough stamps had been collected, they could be exchanged for goods published in a catalogue. Customs said that these redemption goods were supplied free of charge, and required Kuwait Petroleum to account for the VAT on their value as supplied to the customers.
Kuwait Petroleum objected saying that it accounted for the full value of the fuel supplied to the customer, and the costs of the redemption goods were absorbed in the cost of the fuel paid for by the customer. If VAT were due on the redemption goods, then the company would be paying VAT twice on the same goods, which would be contrary to the principle of neutrality which was fundamental to VAT law. Kuwait Petroleum argued that the vouchers were supplied to the customer for a consideration, and were not free of charge, under Article 5(6) of EC Council Directive 77/388. Secondly, the supply of the redemption goods should be treated as a reduction in the price of the premium goods, and therefore under Article 11C(1), the value of the former should be excluded from the output tax due on the latter.
Mr Justice Laddie in the High Court said that the provisions of Article 11 had to be read together and consistently. Article 11A(1)(b) provided that the taxable amount should be increased by the amount deemed to be the value of goods disposed of free of charge under Article 5(6). It was therefore impossible to view the same goods as being disposed of to achieve a price reduction under Article 11C(1). This would mean that in most cases where traders disposed of goods free of charge, the effect of Article 11A(1)(b) would be cancelled by the opposite effect of Article 11C(1). This could not be a proper construction of the articles. Kuwait's argument on neutrality did not find favour with the court either.
The appeal was dismissed.
(Kuwait Petroleum (GB) Ltd v Commissioners of Customs and Excise, Chancery Division, 20 December 2000.)