Commissioners of Customs & Excise v Ping (Europe) Ltd

For VAT, non-monetary consideration must be valued by reference to the particular transaction. The relevant inquiry is the value attributed to the consideration by the parties, or, absent agreement, the value placed on it by the supplier as recipient for the purposes of that transaction. Objective market value, ordinary selling prices and an alleged opportunity cost are generally irrelevant unless they reflect the parties’ attribution of value. A surrendered item may constitute consideration even where its monetary value to the supplier is nil. A special price is not necessarily a discount or rebate. The absence of normal terms of trade may justify a nil valuation.

Ping supplied replacement golf clubs to owners of non-conforming clubs for £22 and required the old club to be surrendered. The old clubs had to be returned to the United States and had no value to Ping. The VAT and Duties Tribunal held that the non-monetary consideration had a value of nil. Hart J dismissed the Commissioners’ appeal, and the Commissioners brought a second appeal.

The central issue was the monetary equivalent of the surrendered club under section 19 of the Value Added Tax Act 1994 and Article 11A of the Sixth Directive.

1. Appeal dismissed. The return of the old club was consideration for the supply of the replacement club, but the tribunal was entitled to value that consideration at nil.
2. The governing approach is transaction-specific. The value of non-monetary consideration is its monetary equivalent for the purposes of the particular transaction. Where the parties have agreed a value, that agreement ordinarily determines the answer. Where they have not, the inquiry concerns the value attributed by the supplier, as recipient of the consideration, for the purposes of the transaction.
3. Objective value, ordinary wholesale or retail prices, and an asserted opportunity cost do not determine the answer unless they show what value the parties or the supplier actually attributed to the surrendered item. Ping’s ordinary wholesale price of £49.99 therefore did not establish that the old club was valued at £27.99.
4. The court rejected the opportunity-cost argument as a general theory. The offer was a special one-off transaction, with no relevant normal terms of trade comparable to the advertised sale and part-exchange terms in Bugeja. That case was distinguishable on its facts, and the approach treating the wholesale cost as a ceiling was erroneous.
5. A consideration item cannot simultaneously be part of the consideration and a discount. The surrender of the old club was not a discount or rebate under Article 11A(3)(b). Its value was nevertheless nil because Ping sought the clubs only to remove them from circulation and received no value for them.
6. Arden LJ agreed that the usual selling price and wholesale price were irrelevant and that the tribunal’s conclusion was a legal conclusion properly open to it. Thorpe LJ agreed with the reasoning and result. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): [2002] EWCA Civ 1115. Appeal dismissed with costs.
• High Court, Chancery Division: Hart J dismissed the Commissioners’ appeal from the VAT and Duties Tribunal on 27 June 2001.
• VAT and Duties Tribunal: held that the monetary value of the surrendered old clubs was nil.