Tax Cases - Land occupation rights

Sinclair Collis Ltd provided, operated and maintained cigarette vending machines in public houses, hotels and clubs. Owners of such premises agreed to the presence of these vending machines in return for a percentage of the gross profits. The cigarettes and cash in the machines remained the property of Sinclair Collis, and the owners granted a two-year licence to the company to provide and operate the machines.

Customs claimed that the supply made by Sinclair Collis to the owners was an exempt supply under item 1 of Group 1 of Schedule 9 to the VAT Act 1994, as it involved a licence to occupy land. Sinclair Collis said that it was a taxable supply, as it wished to offset the input tax.

The tribunal agreed with the taxpayer, but the High Court and Court of Appeal found for the Revenue. The latest position on the case is that the House of Lords has referred it to the European Court of Justice. It is asking whether the grant by the owner of premises to an owner of a cigarette vending machine, of the right to instal, operate and maintain the machine in the premises for a period of two years, in a place nominated by the siteholder, in return for a percentage of the gross profits of the sales, amounted to the letting of immovable property within the meaning of Article 13B(b) of the Sixth Directive.

(Commissioners of Customs and Excise v Sinclair Collis Ltd, House of Lords, 7 June 2001.)

Healthy retirement

The taxpayer was a substantial shareholder in V Ltd, a property development company. He had been executive director and chairman for some time, and in March 1993 also took on the role of managing director. However, in June 1994, as a result of poor health he retired, carrying on only as an unpaid non-executive director. He was aged 53, and although the company retirement age was 60, under the company pension scheme rules the trustees had power to award immediate pension to a member of the scheme who retired in normal health at the age of 50. Thus the taxpayer received a lump sum of £580,591 paid in three instalments between July and August 1994. The Revenue assessed him to tax under Schedule E, and the taxpayer appealed.

The Revenue claimed that the payments were chargeable under section 600, Taxes Act 1988 because the taxpayer continued as a director, and therefore had not retired for the purposes of the company pension scheme. The Special Commissioner said that the taxpayer had retired, but that the assessment should be upheld as he had not retired 'in normal health'.

The taxpayer and the trustees appealed from the second determination, and the Revenue cross-appealed on the first determination.

Mr Justice Lawrence Collins said that the trust deed and rules had to be given a purposive construction. There was no clear legal distinction between an executive and a non-executive director, but it could not be said that a person who was a working paid director did not retire, when he ceased to have the associated responsibilities and was no longer paid. It was a matter of fact when a person retired, and the evidence showed that this was the case in respect of the taxpayer concerned.

However, the judge did not agree that the taxpayer had not retired in normal health. It was clear that until he retired, he had been working as a full-time director, and there was nothing to say that he was unfit to do so. His health problems were not abnormal in overweight middle-aged men.

The taxpayer's appeal therefore succeeded. This is a key case on its subject matter, as the application of section 600, Taxes Act 1988 to those with continuing service agreements has been in dispute.

(Venables and others v Hornby, Chancery Division, 14 June 2001.)

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