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 making, in the same transaction, both a supply of services to one person and a supply of different services to another person; and in addressing a claim for input tax by one of those persons, the relevant questions were (1) whether that person had made a payment to the supplier, (2) whether the payment was consideration for the services supplied to him, and (3) whether the services were used or to be used in the course of a business carried on by that person.
Lord Millett said: ‘In the present case the taxpayer did not merely derive a benefit from the services which the agents supplied to the householders and for which it paid. It chose the agents and instructed them. In return for the payment of their fees it obtained a contractual right to have the householders’ homes valued and marketed, to monitor the agents’ performance and maintain pressure for a quick sale, and to override any alteration in the agents’ instructions which the householders might be minded to give. Everything which the agents did was done at the taxpayer’s request and in accordance with its instructions and, in the events which happened, at its expense. The doing of those acts constituted a supply of services to Redrow.
The value added tax tribunal had the second of the two factors to which I have referred in mind when it said that it was necessary to await events and see to whom the agent makes the supply; it is only if the taxpayer becomes liable to pay the agent’s fees that his services are supplied to it. The commissioners criticised this reasoning, submitting that the destination of a supply must be ascertainable when it is made; it cannot be held in suspense to await subsequent events. But this assumes that the services rendered to the householder and those rendered to the taxpayer are the same. They are not. The services rendered to the householder are the ordinary services of an estate agent in the valuation and marketing of his house. If the householder sells his home but fails to complete the purchase of a Redrow home, he may become liable for the agent’s fees. He is not, however, entitled to deduct input tax in respect of the fees because, although the services in question were supplied to him, they were not used or to be used for the purpose of any business carried on or to be carried on by him.
The services obtained by the taxpayer are different. They consist of the right to have the householder’s home valued and marketed in accordance with the taxpayer’s instructions’.
‘ The word ‘services’ is given such a wide meaning for the purposes of value added tax that it is capable of embracing everything which a taxable person does in the course or furtherance of a business carried on by him which is done for a consideration. The name or description which one might apply to the service is immaterial, because the concept does not call for that kind of analysis. The service is that which is done in return for the consideration. As one moves down the chain of supply, each taxable person receives a service when another taxable person does something for him in the course or furtherance of a business carried on by that other person for which he takes a consideration in return. Questions such as who benefits from the service or who is the consumer of it are not helpful. The answers are likely to differ according to the interest which various people may have in the transaction. The matter has to be looked at from the standpoint of the person who is claiming the deduction by way of input tax. Was something being done for him for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration which has attracted Value Added Tax? The fact that someone else–in this case, the prospective purchaser–also received a service as part of the same transaction does not deprive the person who instructed the service and who has had to pay for it of the benefit of the deduction.’
Lord Steyn, Lord Goff of Chieveley, Lord Hope of Craighead, Lord Hutton, Lord Millett
Times 18-Feb-1999, Gazette 03-Mar-1999, [1999] UKHL 4, [1999] STC 161, [1999] 2 All ER 13, [1999] 1 WLR 408, [1999] 2 Cr App R (S) 176, [1999] Crim LR 240, [1999] 2 Cr App R 36, [1999] 2 WLR 1100, [2000] QB 198
House of Lords, House of Lords, Bailii
Value Added Tax Act 1983 3(2)(b)
England and Wales
Citing:
Appeal from – Commissioners of Customs and Excise v Redrow Group Plc CA 3-Jul-1997
Where a house builder pays the estate agent’s bills on the sale of the buyer’s own house, the VAT paid on the estate agents’ invoices was not recoverable. . .
Cited – BLP Group v Commissioners of Customs and Excise ECJ 6-Apr-1995
The use of taxable goods for an exempt transaction disallowed a claim against VAT input tax. The use in that provision of the words ‘for transactions’ shows that to give the right to deduct under paragraph 2, the goods or services in question must . .
Cited by:
Cited – Ashfield District Council v Commissioners of Customs and Excise ChD 30-Nov-2001
The council were liable to pay grants for building works. They wished to set the VAT element as an input tax. The Commissioners refused. Did the builders supply their services to the house owners, or to the council who paid the bill. The Act allowed . .
Cited – Commissioners of Customs and Excise v Plantiflor Limited HL 25-Jul-2002
The company charged no VAT on its postage and packaging charged to mail order customers. The company had described it as an advance of the sums to be charged by Parcelforce.
Held: There was no separate contract between the end customer and . .
Cited – Revenue 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 . .
Cited – Loyalty Management UK Ltd v HM Revenue and Customs CA 5-Oct-2007
The company (LMUK) managed a loyalty scheme for retailers. Their customers were awarded point sunder the schem on purchasing items, and then redeeemed those points against other purchases. LMUK sought to recover input tax on the invoices it paid to . .
Cited – Revenue and Customs v Aimia Coalition Loyalty UK Ltd SC 20-Jun-2013
Decisions about the application of the VAT system are highly dependent upon the factual situations involved. The case-law of the Court of Justice indicates that, when determining the relevant supply in which a taxable person engages, regard must be . .
Cited – WHA 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 . .
Cited – 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 . .
Lists of cited by and citing cases may be incomplete.
VAT
Leading Case
Updated: 31 October 2021; Ref: scu.158987