Customs and Excise v The Civil Service Motor Association

VAT exemptions for the negotiation of credit and arrangements for granting credit are not confined to an intermediary arranging individual loans or specific credit transactions. They may cover a structured joint arrangement that is antecedent to and directly leads to the general provision of credit, even though individual customers decide whether to take it up.

The exemptions must be interpreted strictly, but the court must not impose restrictions unsupported by the statutory or Directive wording. Domestic legislation implementing a Directive is construed consistently with it where possible. A reference to the Court of Justice is unnecessary where the interpretation is sufficiently clear under the CILFIT standard.

The Civil Service Motor Association supplied services to Frizzell Banking Services under an affinity credit-card partnership. It helped negotiate and develop card terms, benefits, marketing and operational arrangements, and received commission linked to members' credit transactions.

The Value Added Tax and Duties Tribunal allowed CSMA's appeal against a VAT assessment, holding that the services were exempt under Schedule 6 to the VAT Act 1983 and Article 13 B(d)1 of the Sixth EC Directive (77/388). Sedley J dismissed the Commissioners' appeal on a point of law. The central issue before the Court of Appeal was whether the exemption required an intermediary arranging particular credit grants and whether a reference to the Court of Justice was necessary.

Appeal dismissed. Mummery LJ gave the principal judgment, with Pill LJ agreeing and Hobhouse LJ agreeing in the result and to the principal reasons.

1. The court proceeded on the basis that domestic legislation implementing a Community Directive should, where possible without distortion, be construed consistently with the Directive. The exemptions were to be interpreted strictly, as recognised in Muys' en de Winter v Staatsecretaris van Financien [1993] ECR 1 -5405. That did not permit a restriction unsupported by the wording, as explained in Sparekassernes Datacenter v Skatteministeriet [1997] STC 933.
2. The expressions negotiation of credit and making arrangements for any transaction for granting credit were not implicitly confined to particular transactions or specific grants of credit. They covered activities antecedent to and directly leading to the general granting of credit. An intermediary might be involved, but intermediary involvement was not a condition of exemption. CSMA's joint work with FBS on fees, interest rates, benefits, marketing, customer handling and operational matters could properly be regarded as negotiation of credit and as making arrangements for the granting of credit.
3. No reference under Article 177 of the Treaty of Rome was required. Applying CILFIT v Italian Ministry of Health 1982 ECR 3415, the court considered the interpretation sufficiently clear to leave no reasonable doubt. The domestic provisions accurately reflected the Directive.
4. Hobhouse LJ stressed that a fact-finding tribunal must distinguish evidence from findings of fact and make clear findings on disputed issues, particularly where an appeal lies only on a point of law. Although the Tribunal's decision did not do so adequately, the relevant facts could be ascertained from the decision, documents and assistance of counsel, and the legal application was straightforward.

The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division) — On 25 November 1997, dismissed the Commissioners' appeal with costs and refused leave to appeal to the House of Lords: [1997] EWCA Civ 2809.
2. Queen's Bench Division — Sedley J dismissed the Commissioners' appeal from the Tribunal's decision on 24 January 1997.
3. Value Added Tax and Duties Tribunal — On 13 March 1996, allowed CSMA's appeal against the VAT assessment and held the services exempt under Schedule 6 to the VAT Act 1983.