Lex Services plc v Her Majesty’s Commissioners of Customs and Excise: HL 4 Dec 2003

References: [2003] UKHL 67, Gazette 22-Jan-2004, [2004] STC 73
Links: House of Lords, Bailii
Coram: Lord Nicholls of Birkenhead, Lord Steyn, Lord Hoffmann, Lord Millett, Lord Walker of Gestingthorpe
When taking a car in part exchange, the company would initially offer the correct market value. If the customer wanted, the company would agree a higher price. When cars were returned, the company at first reclaimed the VAT on the re-purchase price, but then submitted a rebate claim based upon the market value, the ‘non-monetary consideration’, which was a ‘subjective value’, in this case the value which the parties had expressly adoptd adopted to the goods on th first sale. The value of a part-exchange car was to be taken to be the full part-exchange price as agreed and not ‘true value’. That latter value served only to limit any possible refund. The part-exchange price could not properly be characterised as part of a discount on the price of the replacement car. Appeal dismissed
Statutes: Sixth Directive (77/388/EEC)
This case cites:

  • Appeal from – Lex Services plc -v- Commissioners of Customs and Excise; Customs & Excise Commissioners v Littlewoods Organisation Plc CA (Times 07-Nov-01, Gazette 29-Nov-01, [2001] STC 1568)
    The taxpayer took cars in part exchange on the sale of new cars. If the car was returned, the real value of the part exchange car was refunded. The taxpayer sought to be taxed on the real value of the car.
    Held: The tax was payable on the . .
  • Cited – Staatsecretaris Van Financien -v- Cooperatieve Aardappelenbewaarplaats ECJ ([1981] ECR 445, C-154/80, R-154/80, Bailii, [1981] EUECJ R-154/80)
    (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 . .
  • Cited – Argos Distributors -v- Commissioners of Customs & Excise ECJ (Times 18-Nov-96, Europa, C-288/94, [1996] STC 1359, [1996] ECR I-5311, Bailii, [1996] EUECJ C-288/94, [1997] QB 499)
    VAT was payable on the value of a discount voucher only, and not on the full price of the goods. ‘According to the court’s settled case law, the taxable amount for the supply of goods or services is represented by the consideration actually received . .
  • Cited – C R Smith Glaziers (Dunfermline) Limited -v- Commissioners of Customs and Excise HL (House of Lords, Times 21-Feb-03, Bailii, [2003] UKHL 7, [2003] STC 419)
    The taxpayer sold double glazing, supported by an insured guarantee, for which a charge was made. The additional charge was exempt, but it was contended that the contract should have stated the amount pursuant to Note 5.
    Held: The contract . .
  • Cited – Naturally Yours Cosmetics Ltd -v- Commissioners of Customs and Excise ECJ (Europa, C-230/87, [1988] ECR 6365)
    A cosmetics wholesaler offered to a beauty consultant, acting as retailer, a pot of rejuvenating cream at the special price of £1.50. The consultant was to give the cream to a chosen retail customer (referred to as a hostess) as a reward for . .
  • Cited – Rosgill Group Ltd -v- Commissioners of Customs and Excise CA (Times 30-Apr-97, Bailii, [1997] EWCA Civ 1502)
    A party hostess had been allowed to buy for £20.76 a blouse with a catalogue price of £27.99.
    Held: The monetary equivalent of the consideration for the hostess’s services in arranging the party was the difference £7.23: ‘The . .
  • Cited – Empire Stores -v- Commissioners of Customs and Excise ECJ (Times 08-Jul-94, Europa, C-33/93, [1994] ECR – I 2329, Bailii, [1994] EUECJ C-33/93)
    A retail mail-order supplier, had run two promotions, a ‘self-introduction’ scheme and a ‘introduce a friend’ scheme. Under either scheme the introducer (once she or her friend had been approved, placed an order and paid for it) became entitled to . .
  • Cited – Commissioners of Customs & Excise -v- Westmorland Motorway Services Ltd CA (Times 05-Feb-98, [1998] STC 431)
    Westmorland ran motorway service stations. Its practice, known to coach drivers, was to provide, without payment, a packet of cigarettes and a self-service meal (chosen from its usual menu) to any coach driver who brought a coach with at least . .
  • Cited – Rompelman -v- Minister van Financien (Judgment) ECJ (Europa, C-268/83, [1985] ECR I-655)
    A trader who decided to acquire property for letting could claim repayment of VAT on the cost of a right to acquire a building which had not yet been constructed, let alone tenanted. . .
  • Cited – Elida Gibbs Ltd -v- Commissioners of Customs and Excise ECJ (Times 12-Nov-96, Europa, Case C-317/94, [1996] STC 1387)
    VAT is chargeable only on the price of goods as discounted to agents.
    Europa Where (a) a manufacturer issues a money-off coupon, which is redeemable at the amount stated on the coupon by or at the expense . .
  • Cited – Jennifer Gregg and Mervyn Gregg -v- Commissioners of Customs and Excise ECJ (Times 19-Oct-99, Europa, C-216/97, [1999] STC 934, Bailii, [1999] EUECJ C-216/97)
    For the purposes of Value Added Tax, the terms ‘Establishments’ and ‘organisations’ did not only refer to legal entities as such, but included natural persons, and in this case, particularly, partnerships. Accordingly a partnership running a nursing . .
  • Cited – Staatssecretaris van Financien -v- Coffeeshop ‘Siberie’ vof ECJ (Times 08-Jul-99, Europa, C-158/98, [1999] STC 742, Bailii, [1999] EUECJ C-158/98)
    A cafe owner rented a table out to a drug dealer. He was charged VAT on the rent, but denied liability on the basis that it was an illegal activity and not taxable. However the renting itself was not unlawful either under national Netherlands law or . .
  • Cited – BLP Group -v- Commissioners of Customs & Excise ECJ (Times 17-Apr-95, Europa, C-4/94, [1995] ECR I-983, [1996] 1 WLR 174, [1995] STC 424, Bailii, [1995] EUECJ C-4/94)
    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 – Mirror Group plc -v- Commissioners of Customs and Excise, Cantor Fitzgerald International -v- Same ECJ (Europa, Europa, Times 07-Nov-01, C-409/98, C-108/99, [2002] QB 546, [2001] STC 1453, Bailii, [2001] EUECJ C-108/99, Bailii, [2001] EUECJ C-409/98)
    A potential lessee who did not have an interest in immovable property agreed to take a lease in return for money paid by the landlord. The transaction was not exempt from value-added tax under article 13(B)(b) as ‘the leasing or letting of immovable . .
  • Cited – Commissioners of Customs and Excise -v- Hartwell Plc QBD ([2002] STC 22)
    Motor traders gave customers a voucher to be set off against the cost of a replacement car and other services.
    Held: Patten J said: ‘The Purchase Plus allowance is negotiated and agreed as a reduction by Hartwell in the amount which the . .
  • Cited – Commissioners of Customs and Excise -v- Hartwell Plc CA (Bailii, [2003] EWCA Civ 130, Gazette 03-Apr-03, Times 17-Jun-03, [2003] STC 396)
    The taxpayers were motor traders. On agreeing a sale package with a customer, they issued to the customer a voucher worth more than the agreed trade-in value, to be used as credit against the purchase from the taxpayer. They also gave customers MOT . .
  • Cited – Kuwait Petroleum (GB) Ltd -v- Commissioners of Customs and Excise ECJ (Times 14-May-99, Europa, C-48/97, [1999] STC 488, Bailii, [1999] EUECJ C-48/97)
    ‘Items’ described as gifts’ which Kuwait Petroleum exchanged under a petrol promotion scheme for vouchers received by customers purchasing petrol were issued ‘free of charge’. The purchase of petrol and the exchange of vouchers for gifts were . .
  • Cited – Boots Company plc -v- Commissioners of Customs and Excise ECJ (Europa, C-126/88, [1990] STC 387)
    In the simple case of a voucher which the issuer himself redeems by allowing a discount on a purchase from himself, the voucher is not property but is simply evidence of an obligation to give a discount. . .
  • At first instance – Lex Services Plc -v- Commissioners of Customs and Excise ChD (Times 17-Oct-00, Gazette 07-Sep-00, [2000] STC 697)
    The taxpayer took in cars in part exchange at a cost higher than the re-sale value. The Commissioners sought to collect VAT on the higher price as shown in the agreements, and the tax payer on the actual value.
    Held: Where the parties . .
  • Cited – Investors Compensation Scheme Ltd -v- West Bromwich Building Society HL (Times 24-Jun-97, House of Lords, Bailii, [1997] UKHL 28, [1998] 1 All ER 98, [1998] 1 WLR 896, [1998] AC 896)
    The respondent gave advice on home income plans. The individual claimants had assigned their initial claims to the scheme, but later sought also to have their mortgages in favour of the respondent set aside.
    Held: Investors having once . .

(This list may be incomplete)
This case is cited by:

  • Cited – Revenue and Customs -v- Debenhams Retail Plc CA (Bailii, [2005] EWCA Civ 892, Times 26-Jul-05)
    The store introduced a system whereby when a customer paid by credit card, the charges made to them for card handling were expressed as a separate amount on the receipt. The store then said that VAT was payable only on the net amount allocated to . .

(This list may be incomplete)
Last Update: 03-Mar-16 Ref: 188433