Customs & Excise v First Choice Holidays Plc

Where the correct application of European Union law is not acte clair, and the issue is critical to the court’s decision, a reference to the European Court of Justice is ordinarily appropriate unless the national court can resolve the issue with complete confidence. The Court of Appeal should exercise its discretion to refer where domestic factual findings are established, the legal question cannot safely be resolved without guidance, and the issue has wider significance for the relevant industry.

First Choice Holidays operated package holidays sold through travel agents. Customers could receive discounts from the brochure price, with the agent paying the discounted amount to First Choice. The dispute concerned whether the additional payment made by the agent formed part of the traveller’s total payment for the purposes of Article 26(2) of the Sixth Directive.

The VAT & Duties Tribunal found for First Choice. Neuberger J upheld that decision. The Commissioners sought permission to appeal and requested a preliminary reference concerning the proper characterisation of the additional payment.

1. Permission and reference. Permission to appeal was granted. The Court of Appeal ordered a reference to the European Court of Justice, with costs of the reference reserved.
2. Acte clair. Article 26(2) of the Sixth Directive raised issues which were not acte clair. The correct application of European Union law was not so obvious as to leave no reasonable doubt.
3. Applicable approach. Although the decision whether to refer was discretionary, where the facts had been found and the Community-law issue was critical to the final decision, the appropriate course was ordinarily to refer unless the national court could resolve it with complete confidence. The guidance in Regina v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd [1993] QB 534 was applied.
4. Need for guidance. Without guidance from the European Court of Justice, the Court of Appeal could not rule on whether the agent’s additional payment should be treated as part of the total amount paid by the traveller or as consideration under the arrangements between tour operator and agent. The issue was important to the travel industry generally.

• High Court, Chancery Division, Revenue List: Neuberger J upheld the decision of the VAT & Duties Tribunal in favour of First Choice Holidays.
• VAT & Duties Tribunal: The Tribunal decided that the additional payment made by the travel agent should not be included in the traveller’s total payment for the special VAT scheme.
• Court of Appeal (Civil Division): Permission to appeal was granted and the European-law questions were referred to the European Court of Justice.