Tax Case - Expert Decision

The Court of Appeal allowed the taxpayer's appeal in Expert Witness Institute v Commissioners of Customs and Excise.

THE EXPERT WITNESS Institute claimed that as it was a non-profit making organisation with aims of a civic nature, the supplies it made to its members were VAT exempt. The Court of Appeal agreed that civic nature should be used in the context of citizenship, and allowed the appeal.

Background

The Expert Witness Institute, an incorporated company, was an organisation for experts of all professional disciplines, with the object of supporting the proper administration of justice by unbiased expert evidence. It provided training, liaised with the media, encouraged the use of expert witnesses, made representations to Government, and worked with other professional bodies to ensure that their members were equipped to act as expert witnesses. Members received benefits of membership by paying only a subscription.

In July 1999, Customs ruled that the institute was not VAT exempt in respect of supplies to members. The institute appealed claiming that its supplies were exempt by virtue of Article 13A(1)(l) of the Sixth Directive, which exempted services supplied by a non-profit making organisation with aims of a civic nature.

The VAT tribunal dismissed the appeal saying that the word 'civic' related to a locality or public affairs, and that the aims of the Institute could not be so described.

In the High Court, the judge allowed the Institute's appeal, saying that the word 'civic' also concerned the relationship between citizens and state. Customs therefore appealed again.

(Michael Patchett-Joyce and Rebecca Haynes for Customs; Richard Drabble QC for the taxpayer.)

Judgment in the Court of Appeal

Lord Justice Chadwick gave the first judgment. He said that the phrase 'aims of a civic nature' in Article 13(1)(l) had to be construed strictly, because it related to exceptions to the principle that VAT had to be levied by a Member State on all services supplied for a consideration by a taxable person. However, this did not mean that it had to be given the most restricted meaning. The court had to give exempting words a meaning which they could fairly and properly bear in the context in which they were used. He disagreed that the primary meaning of civic pertained to a city, borough or municipality, saying that civic took its meaning from its context.

After considering two cases in particular, Institute of Leisure and Amenity Management v Commissioners of Customs and Excise [1988] STC 602 and Committee of Directors of Polytechnics v Commissioners of Customs and Excise [1992] STC 873, the judge dismissed the idea that the phrase 'aims of a civic nature' could not include aims pertaining to citizenship nationwide. Article 13(1)(l) did not suggest this and neither did Item 1(e) of Group 9 of Schedule 9 to the VAT Act 1994.

The judge referred to the meaning given to the equivalent phrase in other, but not all, languages of the European Community. In German, for instance, the equivalent phrase was staatsbürgerliche Ziele, which had the meaning of belonging to or concerning a citizen of the state. There was no connotation with connection with a municipality.

With regard to the question of whether 'the proper administration of justice and the early resolution of disputes through fair and unbiased expert evidence' was an aim of a civic nature, Lord Justice Chadwick said that the proper administration of justice was a 'central element in the social contract between the state and its citizens'. It was important to the citizens in a 'civilised society' that disputes were decided fairly, and that expert evidence helped to promote this.

Finally, there was no reason why expert evidence should not be provided for a fee.

The appeal was allowed. Lord Justice Longmore and Mr Justice Harrison agreed.

Decision for the taxpayer

(Reported at [2002] STC 42.)

Commentary by Allison Plager

It is interesting the use made by the Court of Appeal of other languages in deciding this case, specifically the meaning of the phrase 'civic nature' in German and Dutch. The judge attached a health warning however, saying that it had not been possible to compare the phrase in all the languages of the various European Community members, and that Customs had not had the opportunity to respond to the evidence. While it is usual for judges to refer to English dictionaries to obtain common meanings of words, it is less usual for them to resort to other languages. As the impact of the European Community becomes ever greater on United Kingdom tax law, it will presumably become increasingly common for the courts to compare the meanings of words in other languages.

There was a nice touch of irony too, that evidence from an expert witness was instrumental in deciding the case for the Expert Witness Institute.

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