Airtours Holidays Transport Ltd v Revenue and Customs: SC 11 May 2016

The court was asked whether the appellant, Airtours Holidays Transport Ltd (formerly MyTravel Group plc), was entitled to recover, by way of input tax VAT charged by PricewaterhouseCoopers LLP in respect of services provided by PwC and paid for by Airtours.
Held: The appeal was dismissed (Clarke and Carnwath LL dissenting) For the VAT to be reclaimable as input tax, it must be ‘VAT on the supply to [Airtours] of any goods or services’ . Whether there had been a supply of services by PwC to Airtours gave rise to two principal questions: whether PwC agreed, under the terms of the Contract, to supply services, and in particular to provide the Report. HMRC accepted that, if the answer to that question was yes, the appeal must be allowed. PwC’s commitment to provide the services described in the Contract was a contractual commitment to the ‘Engaging Institutions’, and not to Airtours, for the following reasons: (i) the Letter is addressed ‘To the Engaging Institutions’, and not to Airtours; (ii) paragraph 1 of the Letter provides that the Institutions had retained PwC; there is no suggestion that Airtours had done so; (iii) paragraph 4 of the Letter provides that any reports are ‘for the sole use of [those] institutions’ (iv) paragraph 8 of the Letter states that the Report is to be provided to the Institutions and Airtours is only to be provided with a copy, which can be redacted; (v) paragraphs 9 and 10 of the Letter recognise a duty of care on the part of PwC to the Institutions, but does not acknowledge one to Airtours; further, paragraph 11 excludes any duty of care or liability to ‘any other party’. While Airtours did countersign the Letter, it had to do so in order to be bound by certain provisions, such as those relating to the payment of PwC’s fees. The fact that Airtours, rather than the Institutions, was to pay PwC for the services, can be fairly said to raise a prima facie expectation that PwC would owe a duty to Airtours to provide those services. However, the Institutions wanted the services; there is no indication Airtours would have still paid for those services had that not been the
case. The same can be said of Airtours’ argument that its interest in having a report produced for the Institutions indicates there was a supply of services to it.
Where the person who pays the supplier is not entitled under the contractual document to receive any services from the supplier, then, unless the documentation does not reflect the economic reality, the payer has no right to reclaim by way of input tax the VAT in respect of the payment to the supplier.
Lord Neuberger held: ‘In the end, we are concerned with the interpretation of a document, and it is well established that that is a matter of law, not fact, in the courts of all parts of the United Kingdom. Of course, where there are relevant findings of primary fact (or even, at least in some cases, of secondary fact) relevant to interpretation, a Tribunal’s finding will deserve particular respect, but that does not arise in this case. . . ‘

Lord Neuberger, President, Lord Mance, Lord Clarke, Lord Carnwath, Lord Hodge
[2016] UKSC 21, [2016] 4 WLR 87, [2016] STI 1529, [2016] 4 All ER 1, [2016] BVC 17, [2016] STC 1509, UKSC 2014/0215
Bailii, Bailii Summary, SC, SC Summary
Value Added Tax Act 1994 24 25 26
England and Wales
At FTTTxAirtours Holiday Transport Ltd v Revenue and Customs FTTTx 2-Oct-2009
VAT – deduction of input tax – did the paying party receive a supply – yes – appeal allowed.
All that was required to establish its case was that it had ‘obtained anything at all that was used for the purpose of his business’ and ‘a supply of a . .
At UTTCHM Revenue and Customs v Airtours Holidays Transport Ltd UTTC 8-Nov-2010
UTTC INPUT TAX – tripartite agreement entered into by the Respondent, a number of financial institutions and PricewaterhouseCoopers whose fee was to be paid for by the Respondent-whether input tax of the . .
AT CAAirtours Holidays Transport Ltd v Revenue and Customs CA 24-Jul-2014
The Court was asked whether Airtours was entitled to recover (as input tax) value added tax charged by PricewaterhouseCoopers LLP in respect of certain services provided by PwC and for which the appellant paid. The issue turned upon whether, for VAT . .
CitedMarks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and Another SC 2-Dec-2015
The Court considered whether, on exercising a break clause in a lease, the tenant was entitled to recover rent paid in advance.
Held: The appeal failed. The Court of Appeal had imposed what was established law. The test for whether a clause . .
CitedCommissioners of Customs and Excise v Redrow Group Plc HL 11-Feb-1999
Where house builders had paid the estate agents’ fees for exchanged property on sales, the supply had been, at least in part, to the builder, and the builder could accordingly recover the agents’ VAT as input tax. A supplier could be treated as . .
CitedRevenue and Customs v Aimia Coalition Loyalty UK Ltd SC 13-Mar-2013
The company managed a card loyalty scheme for retailers. The Revenue appealed against a decision that the company could reclaim VAT input tax on the goods purchased on the customers redeeming their points. The ECJ had decided that the service . .
CitedWHA Ltd and Another v Revenue and Customs SC 1-May-2013
The Court was asked as to the effectiveness of a scheme, known as Project C, designed to minimise the overall liability to VAT of a group of companies involved in motor breakdown insurance.
Held: The court dismissed WHA’s appeal. There had . .
CitedRevenue and Customs v Secret Hotels2 Ltd SC 5-Mar-2014
The Court was asked as to: ‘the liability for Value Added Tax of a company which markets and arranges holiday accommodation through an on-line website. The outcome turns on the appropriate characterisation of the relationship between the company, . .
CitedTolsma v Inspecteur De Omzebelasting Leeuwarden ECJ 29-Mar-1994
An Organ Grinder receiving donations was not Vatable on those receipts. There was no legal relationship with donors.
A supply of services is effected ‘for consideration’ within the meaning of Article 2(1) of the Sixth Council Directive (77/388) . .
CitedPrimback Ltd v Commissioners of Customs and Excise ECJ 15-May-2001
A company made arrangements for finance for its customers to purchase products at an apparent zero rate of interest. In fact the finance company deducted an undisclosed commission before forwarding payment to the shop. The shop wanted to pay VAT . .
CitedLoyalty Management UK (Taxation) ECJ 7-Oct-2010
ECJ Sixth VAT Directive – Taxable amount – Sales promotion scheme – Loyalty rewards scheme allowing customers to earn points from traders and to redeem them for loyalty rewards – Payments made by the operator of . .
CitedPrimback Ltd v Commissioners of Customs and Excise ECJ 15-May-2001
A company made arrangements for finance for its customers to purchase products at an apparent zero rate of interest. In fact the finance company deducted an undisclosed commission before forwarding payment to the shop. The shop wanted to pay VAT . .
CitedStaatsecretaris Van Financien v Cooperatieve Aardappelenbewaarplaats ECJ 5-Feb-1981
(The Dutch Potato case) A farmers’ cooperative owned a refrigerated potato store. During 1975 and 1976 it came to be unnecessary, because it was planning to sell the store, to levy the usual storage charges on its members. Dutch tax officials . .
CitedStaatssecretaris Van Financien v Hong Kong Trade Development Council. ECJ 1-Apr-1982
Refund of value added tax. . .
CitedApple and Pear Development Council v Commissioners of Customs and Excise ECJ 8-Mar-1988
Consideration means ‘everything received in return for the supply of services or the provision of services’. . .
CitedFinanzamt Frankfurt am Main V-Hochst v Deutsche Bank AG ECJ 19-Jul-2012
Directive 2006/112/EC – Article 56(1)(e) – Article 135(1)(f) and (g) – Exemption for transactions relating to the management of securities-based assets (portfolio management)
Sharpston AG said: ‘ in connection with exemptions, fiscal neutrality . .
CitedRevenue And Customs v Newey ECJ 20-Jun-2013
ECJ Reference for a preliminary ruling – Sixth VAT Directive – Article 2(1) and Article 6(1) – Meaning of ‘supply of services’ – Supply of advertising and loan broking services – Exemptions – Economic and . .
CitedDixons Retail Plc v Commissioners For Her Majesty’s Revenue And Customs ECJ 21-Nov-2013
ECJ Directive 2006/112/EC – Value added tax – Supply of goods – Concept – Fraudulent use of a bank card . .

Cited by:
CitedX v Y Ltd (Practice and Procedure – Disclosure) EAT 9-Aug-2018
Iniquity surpasses legal advice privilege
PRACTICE AND PROCEDURE – Striking-out/dismissal
An Employment Judge struck out paragraphs of the Claimant’s claim as they depended on an email in respect of which legal advice privilege was claimed. . .

Lists of cited by and citing cases may be incomplete.


Updated: 14 January 2022; Ref: scu.563291