Summary
In a tripartite transaction, each supply and the consideration attributable to it must be identified by analysing the parties’ contractual rights and liabilities. A single course of conduct may constitute supplies to more than one person.
A sum paid to a trader for arranging performance by a third party remains consideration for the trader’s taxable supply where the trader, rather than the customer, is liable to pay the third party. The sum is not an excluded disbursement merely because it is separately identified and passed on. Under article 11(A)(3)(c) of the Sixth Council Directive 77/338/EEC, exclusion requires payment in the customer’s name and for the customer’s account. The payment must discharge the customer’s pre-existing indebtedness.
Factual background
Plantiflor sold horticultural products by mail order. Customers requesting delivery paid a post-and-packing charge which included £1.63 for postage. Parcelforce delivered the parcels under a five-year bulk-carriage contract with Plantiflor. Plantiflor maintained that the postage was passed to Parcelforce for the customer and did not form part of the consideration for Plantiflor’s taxable supply.
The VAT and Duties Tribunal allowed Plantiflor’s appeal. Laws J reversed that decision, but the Court of Appeal restored the tribunal’s decision. The Commissioners appealed to the House of Lords.
The central issue was whether the £1.63 was consideration for a taxable supply by Plantiflor or consideration attributable to an exempt postal service supplied by Parcelforce to the customer.
Held
Appeal allowed by a majority of four to one. Lord Slynn and Lord Millett delivered the principal majority speeches. Lord Hobhouse agreed with both, and Lord Scott agreed with their reasons. Lord Mackay dissented.
Per Lord Millett, tripartite arrangements involving related bilateral contracts require close analysis of the supplies made and the consideration for each supply. One course of conduct may constitute different supplies to different persons. Parcelforce supplied the customer with actual delivery and also supplied Plantiflor with the service of delivering its customer’s goods.
Per Lord Millett, the customer had no contract with Parcelforce and incurred no liability to it. Plantiflor and Parcelforce contracted as principals. Plantiflor was liable for the postal charges, and Parcelforce gave credit to Plantiflor. The customer’s £1.63 was therefore consideration for Plantiflor’s service of making the arrangements necessary for delivery, including paying Parcelforce. That supply was taxable.
Per Lord Slynn, the contractual arrangements could also be viewed as a single supply of bulbs delivered to the customer’s home because arranging delivery was ancillary to supplying the bulbs. Alternatively, even if Plantiflor made a distinct arrangement service, the postal payment formed part of Plantiflor’s receipts. It was neither the property of Parcelforce nor consideration passing from the customer to Parcelforce.
Per Lord Slynn and Lord Millett, article 11(A)(3)(c) of the Sixth Council Directive 77/338/EEC did not exclude the payment from the taxable amount. It was insufficient that Plantiflor separately recorded the sum and was obliged to remit an equivalent amount. Payment in the customer’s name and for the customer’s account required the discharge of a pre-existing liability owed by the customer. No such liability existed.
Lord Mackay dissented. He considered that the £1.63 was third-party consideration for Parcelforce’s supply to the customer, while Plantiflor received only 87p for packing and arranging delivery. He would have dismissed the appeal.
The court’s approach to earlier authorities
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Appellate history
- House of Lords: By a majority of four to one, allowed the Commissioners’ appeal and restored the conclusion that VAT was payable on the £1.63 postage charge.
- Court of Appeal: Allowed Plantiflor’s appeal from Laws J and held that VAT was not payable by Plantiflor on the postage.
- High Court: Laws J allowed the Commissioners’ appeal and held that VAT was payable.
- London VAT and Duties Tribunal: Allowed Plantiflor’s appeal and held that VAT was not payable on the postage.
Key cases cited
8 authorities cited.
- Customs and Excise Comrs v British Telecommunications Plc [1999] 1 WLR 1376
- Customs and Excise Comrs v Redrow Group Plc [1999] 1 WLR 408
- Trustees of the Nell Gwynn House Maintenance Fund v Customs and Excise Comrs [1999] 1 WLR 174
- First National Bank of Chicago v Customs and Excise Comrs Case C-172/96
- R v Goodwin (Fischer v Finanzamt Donaueschingen) Case C-283/95
- Customs and Excise Comrs v Reed Personnel Services Ltd [1995] STC 588
- Finanzamt Uelzen v Armbrecht [1995] STC 997
- Glawe (HJ) [1994] ECR I-1679
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Cases citing this case
9 later cases · 2 positive · 3 neutral · 4 caution
Most senior citing decisions:
- Her Majesty’s Revenue and Customs v Aimia Coalition Loyalty UK Limited (formerly known as Loyalty Management UK Limited) [2013] UKSC 15 approved
- Airtours Holidays Transport Ltd v Revenue And Customs [2014] EWCA Civ 1033 considered
- Loyalty Management UK Ltd v HM Revenue & Customs [2007] EWCA Civ 965 applied
- Telewest Communications Plc & Anor v Customs and Excise [2005] EWCA Civ 102
- A1 Lofts Ltd v Revenue and Customs [2009] EWHC 2694 (Ch)
- Revenue and Customs v Loyalty Management UK Ltd [2006] EWHC 1498 (Ch)
- Debenhams Retail Plc v Customs & Excise [2004] EWHC 1540 (Ch)
- Peugeot Motor Company Plc & Anor v Customs & Excise [2003] EWHC 2304 (Ch)
- WHA Ltd & Anor v Customs and Excise [2003] EWHC 305 (Ch)
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