.png)
.png)
Spot the consideration
The taxpayer was registered for VAT purposes as a representative member of a group of companies, one of which organised a weekly 'Spot The Ball' competition. Customs decided that the taxpayer was liable for VAT on the full amount of entry fees received. The taxpayer appealed to the VAT tribunal, which considered that the outcome depended on the interpretation of the Sixth Council Directive (EEC) 77/388. Accordingly the tribunal referred the following questions to the European Court of Justice:
Spot the consideration
The taxpayer was registered for VAT purposes as a representative member of a group of companies, one of which organised a weekly 'Spot The Ball' competition. Customs decided that the taxpayer was liable for VAT on the full amount of entry fees received. The taxpayer appealed to the VAT tribunal, which considered that the outcome depended on the interpretation of the Sixth Council Directive (EEC) 77/388. Accordingly the tribunal referred the following questions to the European Court of Justice:
* whether Article 2(1) of the Sixth Directive was to be interpreted as meaning that a supply of services which is effected for consideration but was not based on enforceable obligations constituted a transaction subject to VAT;
* whether Article 11A(1)(a) of the Sixth Directive was to be interpreted as meaning that, for the organisation of a competition such as that in the instant case, the taxable amount consisted of the full amount of the entry fees received by the organiser of that competition, or that amount less the value of the prizes distributed to the competitors.
The Court ruled with regard to the first question that it was settled law that for consideration to fall within the meaning of Article 2(1), there had to be a legal relationship between the provider and the recipient of the service to which there was reciprocal performance.
Secondly, it was settled law that the rule in Article 11A(1)(a)was to be interpreted as meaning that the taxable amount for a supply of services was represented by the consideration actually received for that supply. In the instant case, the consideration actually received by the organiser for the service he supplied was represented by the entry fees paid by competitors. It followed that it was the amount represented by those fees that constituted the taxable amount
(Town and County Factors Ltd v Commissioners of Customs and
Excise, European Court of Justice, 17 September 2002.)
Not really retired
The taxpayer had been executive director of a company. When he was 53, he retired as executive director, but continued as an unpaid non-executive director. Under the company pension scheme, the board had discretion to make an immediate pension to a member who retired in normal health after the age of 50, and accordingly, payments were made to the taxpayer.
The Revenue assessed the payments under section 600(2), Taxes Act 1988, and the taxpayer appealed to the Special Commissioners. They upheld the appeal, so the taxpayer appealed to the High Court. The judge ruled that the taxpayer had retired in good health, and quashed the assessment. The Revenue appealed to the Court of Appeal.
The judges in the Court of Appeal said that whether or not the taxpayer had retired depended upon the construction of the word 'retire'. This was defined in the relevant legislation for pension schemes, i.e., section 26(1), Finance Act 1970, as ceasing service as an employee of the employer in question. Further, an employee included any director of the company. Therefore, in the instant case the taxpayer had not retired, as he had continued as a director. The payment was therefore not authorised under the pension scheme.
It was not tenable to argue that since the taxpayer was a trustee of the scheme and could not have taken payment free from the trusts of the scheme, he had received nothing. The section 600 charge arose only where the payment was unauthorised and in breach of trust, so to hold that there had been no payment because the monies remained subject to the trusts of the scheme defeated the purpose of the provision.
The Revenue's appeal was allowed.
(Venables and others v Hornby, Court of Appeal, 18 September 2002.)
First Choice
The Advocate General has supported Customs' arguments in Commissioners of Customs and Excise v First Choice Holidays plc. He has recommended that the total amount to be paid by the traveller should include all amounts received by the tour operator. The case has been referred back to the United Kingdom Court of Appeal to establish whether the amount paid by the travel agent to the tour operator in addition to the price the traveller paid is consideration for the services supplied by the tour operator.
