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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Commissioners of Customs and Excise v Hartwell Plc [2003] EWCA Civ 130 (12 February 2003) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2003/130.html Cite as: [2003] EWCA Civ 130 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE PATTEN)
Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE CHADWICK
and
LADY JUSTICE ARDEN
____________________
THE COMMISSIONERS OF CUSTOMS AND EXCISE | Appellant | |
- and - | ||
HARTWELL PLC | Respondent |
____________________
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr R Cordara QC & Mr P Key (instructed by KLegal, London for the Respondent)
____________________
VERSION
OF JUDGMENT
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Chadwick :
". . . in accordance with the terms and conditions shown on the order form I have agreed a price for the purchase of the abovevehicle,
but wish to accept Hartwell's offer to use my Purchase Plus entitlement shown above (due to me in respect of this
vehicle
purchase) as part of my deposit requirement. The purchase plus entitlement is specific to the purchase of the above
vehicle.
If the purchase does not proceed in the manner agreed, or is subsequently cancelled for whatever reason, then the purchase plus entitlement is cancelled."
The voucher
is signed by the customer. The issue between the parties, as argued before the tribunal and the judge, was whether the
voucher
operates as a discount in the purchase price of the replacement car – so as to reduce the amount of the consideration received by Hartwell on the supply of that
vehicle
– or as an accretion to the price allowed in respect of the part exchange car. If the latter were the correct analysis, then the effect would be as if the part exchange price were inflated; with the
VAT
consequences identified in the Lex appeal.
The underlying facts
"Purchase Plus
4. In a transaction not involving a finance house, the customer sells his existing car to the Appellant [Hartwell] at a price which the Appellant's sales manager estimates at its marketvalue
using Glass's Guide or CAP. This figure is inserted by the sales manager in the appraisal form, a pre-contractual document on which the salesman notes the condition of the existing car. The same price is shown on the order form, which is signed by the customer, as the part exchange price. The order form also contains particulars of the replacement car which the customer also signs as an offer to purchase. Sometimes the cash sale price of the replacement car is reduced by the Appellant in order to obtain the sale. On occasions this will not be possible, particularly with a new car because of the small margin on particular makes of car or the effect on the manufacturer's bonus scheme for dealers, although we were given one example (tab 6, in paragraph 7 below) of purchase plus being given on a used car purchased for cash where there was apparently no reason why a discount on the price of the replacement car could not have been given instead. In a case where purchase plus is used, the Appellant gives the customer a purchase plus discount note . . . [describing it]. The purchase plus allowance is deducted on the order form from the amount payable under the transaction after deducting the part exchange
value
of the existing car. Because the Appellant's computer
system
cannot cope with purchase plus, a separate credit note is raised by the Appellant in the name of the customer for the purchase plus allowance, but this is an internal document which is not given to the customer. Purchase plus is often given where there is also a discount in the purchase price of the replacement car. This is found in all but one of the examples we were shown and which are summarised in paragraph 7 below. Mr Boden [group finance and insurance manager of the Appellant] said that some type of discount is given in 99.9 per cent of cases
5. Where the customer finances the purchase of the replacement car using a finance house the mechanism of sale is that the customer sells his existing car to the Appellant with the transactionvalue
being fixed in the same way as described above. By a linked contract, the Appellant sells the replacement car to the finance house for an amount which if purchase plus has been agreed is fixed in the same way as above. By a further linked contract, the finance house sells the replacement car to the customer on credit terms. Purchase plus is sometimes used in cases where a finance house is involved in order to satisfy the finance house's requirements for a minimum deposit. For example, in the specimen case at tab 7 (see paragraph 7 below) the finance house's statement starts with the total cash price of goods as £16,500. The next line is "Less deposit/allowance £1,650" which is made up as to £1,500 part exchange and £150 purchase plus. If the price of the replacement car had been discounted by the same amount as the purchase plus it would have been £16,350 with the result that the part exchange price of £1,500 would not have met the requirements of the finance house for a 10 per cent deposit. The arrangements for the issue of a purchase plus discount note and a credit note are identical to the case where no finance house is involved. Although a finance house is involved as purchaser the purchase plus discount note is still issued in the name of the customer.
6. So far as the customer is concerned he is interested in how much he has to pay. The way in which this is achieved does not make any difference to him.
7. We have already referred to some specimen cases. Details of these (except that we have not included the one at tab 10 where there was no purchase plus allowance, and we have excluded references to cash-back which is not material to this case) are summarised as follows.
Example in Tab: 6 7 8 9 15
Replacement car used used new new used
Finance company no yes no yes yes
Basic price 12,495 18,995 14,310 17,000 7,500
Less discount (260) (2,495) (1,305) (239) 0
Factory fitted options 0 0 416 508 0
Car tax 0 0 0 0 85
Insurance 199
Dealer fitted options 222 0 180 415
Subtotal exVAT
12,456 16,500 13,601 17,684 7,784
TotalVAT
@ 17.5% 38 0 2,348 3,067 0
Total sales price 12,495 16,500 15,950 20,752 7,784
Less part exchange 4,750 1,500 100 5,500 0
Total payment due 7,745 15,000 15,850 15,252 7,784
Purchase PlusVoucher
500 150 600 1,500 1,000
Balance due 7,245 14,850 15,250 13,752 6,784"
"6. A number of points arise from this factual analysis. The first is that Purchase Plus is an allowance which is offered to customers regardless of whether finance is involved in the transaction. In the table of transactions set out at paragraph 7 of the decision are two in which no finance was necessary. In the first example which involved the sale of a used car the Purchase Plus discount note was issued in standard form in the sum of £500. On the computer generated order form which constitutes the contract between Hartwell and its customer for the sale of the car the basic price of £12,495 is shown after adding in and then discounting the cost of a warranty plusVAT
in the sum of £260.85. This sales price is then shown as reduced further by two credit items. The first is the agreed
value
of the car accepted in part exchange (in this case £4750). The second is the Purchase Plus
voucher
in the sum of £500. The customer is required to pay the balance. The reference to the Purchase Plus
voucher
is entered in manuscript as "PPV" replacing the typed words "Less Deposit Paid" which are generated by the computer software. This method of documenting the sale also applied in the second example of a cash purchase where the replacement car was new. The only difference in the sales invoice is that
VAT
on the price of the new car is included.
VAT
is not normally payable by customers on the purchase of used cars: see SI 1992/3122 art. 8. The trader can elect (as in this case), subject to certain conditions, to be taxed on the profit margin on the supply instead of by reference to its
value.
But the calculation of the profit margin still requires a determination of what
value
is received on the sale.
7. When finance is used to meet part of the cost of the replacement car then the sales invoice issued to the customer is the same. It sets out a calculation of the total sales price and then details thevalue
of the part exchanged car and the Purchase Plus allowance. In the example involving the sale of a used car the total sales price (after a discount of £2495) was £16,500. The part exchange
value
of the car traded in was £1,500 and the deposit of £150 was accounted for by the Purchase Plus
voucher.
This left the sum of £14,850 to be paid. The customer was able to obtain finance based on a purchase price of £16,500 in the sum of £14,850. The difference of £1,650 which was paid partly in the form of the part exchange and partly by means of the Purchase Plus
voucher
represents the 10% deposit required by the finance company. On the invoice to Land Rover Financial Services which was before the Tribunal this is clearly shown as made up of these two elements.
8. The documentation relating to the sale of a new car involving finance is similar save for the addition ofVAT
on the sale price in the sales invoice and the deletion in manuscript of the typed word "Less Deposit Paid" coupled with the insertion again in manuscript of "PPV". It was accepted by Mr Anderson on behalf of the Commissioners both before me and the Tribunal that nothing turns on these changes nor indeed on the form and layout of the sales invoice as such. The correct tax treatment falls to be determined by analysing the substance of the transaction and not simply on the basis of the software used. However, for the reasons which I shall explain later in this judgement, that does not mean that the form of the invoice can or need be ignored.
9. The second point to come out of the evidence is that Purchase Plus is also available in cases where no part exchange is involved. The example given in the table was a sale through a finance company. The total sales price was £7,784.25 of which £6,699 was financed. The balance of £1,085.25 was paid as to £1000 through the use of the Purchase Plus allowance and by payment of £85.25 from the customer.
10. The third point which needs to be explained at this stage is that the Purchase Plus Discount Note was obviously settled on the basis that the Purchase Plus allowance would be used in all cases involving finance in order to assist the customer in meeting the deposit requirements laid down by the finance companies. The Tribunal heard evidence from Hartwell (which is referred to in paragraph 24 of its decision) that in about 1999 the company decided to change the way in which it structured its order form and invoices in cases involving hire purchase or finance. In a letter to G. E. Capital dated 18th February 1999 Mr Boden, the Group Finance Manager of Hartwell, explained the proposed changes in these terms:
"Following a series of internal discussions Hartwell plc, are intending to change the way we structure our order form/invoices. As this will affect the way we present the figures to you when proposing deals I would like to invite your comments on the change. Specifically I need to know that the change is acceptable to you before we implement it in April.
The change relates to the way we show thevalue
of the part exchange on the order/invoice. Currently it is an industry standard to show an allowance price that, in truth, bears no relation to the true
value
of the part exchange. Hence the plethora of "minimum part exchange" offers currently in the market place.
In future Hartwell will not show any over-allowance on any part exchange. Instead we will show the truevalue.
Over allowance will be shown separately as "Purchase Plus". This will be raised as a credit note to the customer, with the proviso that the "Purchase Plus" can only be used as a deposit on the
vehicle
they are buying.
The benefits of thesystem
are manifold:
We as a company will benefit from streamlining ourVAT
flow.
Deals that are unwound at a later date due to problems will no longer face the problem of a customer having a legal right to the allowed price of the part exchange rather than the truevalue.
The finance companies will be able more accurately to see the true deposit on any deal helping them to make a more accurate decision."
11. The introduction of this change is apparent from the documentation I have described. In the specimen transaction involving the purchase of a used car for £16,500 the invoice to the finance company (as I have already indicated) shows quite clearly that the 10% deposit is made up of the part exchangevalue
of £1,500 and the Purchase Plus allowance of £150. This is then reflected in the regulated agreement between the finance company and the customer which in this case describes the £1,650 as a "Deposit/Allowance". It is accepted by the Commissioners that the practice detailed in Hartwell's letter of 18th February 1999 was transparent and that the finance companies it dealt with were fully aware of and agreeable to the Purchase Plus
vouchers
being used in this way."
The tribunal decision
"18. Historically in the motor trade, an overvaluation was made of the existing car, which is disadvantageous for the trader'sVAT
but worked well for the customer in relation to the finance house. The Appellant wished to stop the overvaluation, but in about 5 percent of cases something equivalent to it was needed. In Lex Services the dealer paid the overvaluation for the existing car but separated out the overvaluation element arguing that for
VAT
the real purchase price was the market
value.
This argument did not succeed because the dealer and the customer both agreed that the higher price was the sale price. . . .
19. The Appellant appears to overcome the main difficulty in Lex Services by specifying the lower, true price for the sale of the existing car and introducing what in Lex Services was the overvaluation, or additional allowance, as purchase plus. What we have to determine is the true nature of purchase plus."
"Our conclusion is that, in the Appellant's relations with the finance house, purchase plus is, and necessarily has to be, treated by both parties in the same way as an increase in thevalue
of the existing car. There is nothing in the relationship that is consistent with its being a discount in the price of the replacement car. This treatment is commercially necessary if the finance house is to treat purchase plus as part of the customer's deposit. Accordingly, we do not think that the Appellant can treat it differently in its relations with the Commissioners. . . . The stated part-exchange price for the existing car is the manager's
valuation
rather than an agreed price. The customer agrees the transaction as a whole but the allocation of
value
makes no difference to him and so the stated price is only agreed in this sense. Accordingly we think it is necessary to go behind the price for the existing car which is stated to be agreed in the documents. The only treatment of purchase plus that is consistent with the Appellant's relationship with the finance house is that purchase plus must be an increase in the
value
of the existing car. In other words, the differences between this case and Lex Services are cosmetic rather than real. In saying this, we are not rewriting the subjective
value
agreed between the parties, which Lex Services decided one cannot do, but finding what is the real subjective
value
looking at the transaction as a whole, which for
VAT
purposes necessarily involves altering the stated price of either the existing car or the replacement car."
"ForVAT
purposes we have to change either the part-exchange
value
or the sale price of the replacement car by the amount of purchase plus. In our
view,
it is more consistent with the documents to increase the part-exchange
value
of the existing car for the same reasons as in the case where a finance house is involved. If the Appellant wanted purchase plus to be a discount on the
value
of the replacement car it could have shown this as a discount on the invoice rather than as part payment of the full price."
"We agree with this. There is no alternative way of analysing it, although we would point out that purchase plus is still presented to the finance house as a deposit paid by the customer."
The decision in the High Court
"In the present case thevalue
attributed by the parties to the part exchanged cars was agreed at the market
value
of those
vehicles
as at the date of the transaction. The practice of inflating the
value
in order to satisfy the deposit requirements of the finance companies has been expressly discontinued. Instead the balance of the deposit (in cases where finance was involved) was provided by means of the Purchase Plus allowance. In that sense the use of these
vouchers
to provide part of the payment for the replacement
vehicle
(and its attribution to the deposit) makes the
voucher
part of the consideration received by Hartwell in respect of the car it supplies."
"But the Discount Note is provided by the company at no cost to the customer and in economic terms represents a reduction in the amount they receive in payment for the newvehicle.
The amount specified in the Discount Note should, it is said, therefore be treated as a price reduction or discount within the provisions of Article 11A(3) of the Sixth Directive and for the purposes of s.19(3) should be given a nil
value."
"The monetary equivalent to the supplier of avoucher
which the supplier has undertaken to accept as payment for goods is the money which the supplier has received (or will receive) in respect of that undertaking. In a case where the
voucher
is issued by the supplier against payment, the monetary equivalent of the
voucher
will be the amount of that payment. In a case where the
voucher
is, itself, issued for no payment or consideration, the monetary equivalent of the
voucher
will be nil (see the decision of the Court in the Boots case). In neither case is the face
value
of the
voucher
determinative of its monetary equivalent to the supplier."
"This is recognised in the fifth of the five specific cases where novehicle
was taken in part exchange [the example taken under tab 15 in paragraph 7 of the tribunal's decision]. The Purchase Plus allowance of £1000 was treated by the Commissioners as a discount in the purchase price."
Why, then, had the tribunal accepted the commissioners' contention that, in a case where the customer's existing car was accepted by the dealer in part exchange for the replacement car, the Purchase Plus allowance had to be treated as part of the value
attributed by the parties to the part exchange car?
"The Tribunal was undoubtedly correct in finding that Purchase Plus was intended in all finance cases to assist the customer to satisfy the deposit requirements of the finance company. It is also correct (as is evident from the documentation) that the Purchase Plus allowance was treated by Hartwell both in its dealings with the customer and those with the finance company as part payment of the deposit together with the part-exchanged car. The evidence was that the transaction was deliberately structured in this way with the knowledge and approval of the finance company involved. The critical point, however, in the Tribunal's reasoning is its acceptance of the Commissioners' argument that the use of the allowance as part of the deposit cannot co-exist with its treatment as a discount against price. It seems to me that this is where the Tribunal fell into error."
"The Purchase Plus allowance is negotiated and agreed as a reduction by Hartwell in the amount which the customer will have to pay for the replacement car. No consideration is given for it. It is simply a concession made by the salesman as an inducement to the customer to purchase. It is given and can be used whether or not any finance is involved. In the latter case the customer simply pays less. In cases where the balance of the purchase price over the agreedvalue
of the part exchanged car is provided by a finance company the Purchase Plus is treated by Hartwell and the finance company as a contribution by the customer to the necessary deposit. . . . But this is not in my judgment decisive of the real issue. The use of the Purchase Plus Discount Note effectively as part payment of the balance of the purchase price is no different from the use of the coupons or
vouchers
which were considered in the Boots and the Elida Gibbs cases. . . . The significance and effect of Purchase Plus being used or treated as part of the deposit makes it part of the consideration received but it does not determine the
value
to be placed upon it as part of that consideration."
He went on, at paragraphs 27 and 28:
"27. In paragraph 25 of its Decision the Tribunal stated that "the finance house treats Purchase Plus in the same way as an over-valuation
of the existing car". What that seems to mean is that the finance house, as is evident from the documentation, was content to treat the allowance as a contribution to the deposit just as the car taken in part exchange. In economic terms the same result would [be] (and formerly was) achieved through the over-
valuation
of the existing car. This is not however a finding by the Tribunal that in the example used the Purchase Plus allowance was actually an over-
valuation
of and therefore part of the
value
attributed by the parties to the existing car. If it was intended to be such a finding then it was unsupported by any evidence. As the Tribunal itself accepted earlier in its decision the practice of over-
valuing
part exchanged
vehicles
was deliberately discontinued with the agreement of the finance companies. It seems to me that it would be wholly inconsistent with this to treat Purchase Plus as part of the agreed
value
of the existing car when both parties had deliberately agreed to do the contrary.
28. Notwithstanding that the transaction was deliberately structured so as to treat Purchase Plus as a separate item in the transaction from the part exchange of the existing car the Tribunal nonetheless concluded that it should have the same effect forVAT
purposes as if the amount of the Purchase Plus allowance had been added to the agreed
value
of the car."
And, after setting out the tribunal's reasoning in paragraph 27 of its decision (supra), he said this:
"In my judgment this confuses the treatment of the Purchase Plus allowance as part of the consideration with the question of the monetaryvalue
to be attributed to it and in effect elides two separate questions. It seems to me that despite its protestations to the contrary the Tribunal has re-written the transaction and has determined the "subjective
value"
of the non-monetary parts of the consideration otherwise than in accordance with the principles laid down by the Court of Justice in the Boots and the Elida Gibbs decisions. Absent any suggestion of a sham this approach to the transaction which dictated its tax treatment was impermissible and wrong."
This appeal
" . . . everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies . . "
The first question, therefore, is: what does the supplier obtain for the replacement car which it supplies? The answer, as it seems to me, is not in doubt. In each of the five specimen cases considered by the tribunal, the dealer obtains (a) a monetary payment (shown in the table at paragraph 7 of the decision as "balance due") and (b) a Purchase Plus Voucher.
In four of those specimen cases (tabs 6, 7, 8 and 9 in the table) the dealer also obtains (c) the customer's existing car.
"The monetary equivalent to the supplier of avoucher
which the supplier has undertaken to accept as payment for goods is the money which the supplier has received (or will receive) in respect of that undertaking. . . . In a case where the
voucher
is, itself, issued for no payment or consideration, the monetary equivalent of the
voucher
will be nil . . . "
It is no answer to say, as the commissioners do in the skeleton argument prepared for this appeal, that "in the context of the transactions of which they formed part, the purchase plus discount notes had had attributed to them a real value
by the parties". As this Court pointed out in its judgment in Lex Services (paragraph [32], ibid, 1585c-d) 'the transaction
value'
expressly or impliedly attributed by the parties to the supply of goods will not, necessarily, be determinative of the monetary equivalent of non-monetary consideration in cases where the non-monetary consideration takes the form of
vouchers
or redeemable coupons. That is because the supply of the goods is not the relevant transaction in that context. The relevant transaction – in the context of ascertaining the monetary equivalent to be ascribed to the
voucher
- is the issue of the
voucher
to the customer. The parties to that transaction are the dealer and the customer. In the context of that transaction the relevant question is not "what
value
did those parties attribute to the
voucher";
but "what consideration (if any) did the supplier of the
voucher
(in these cases, the dealer) obtain for the supply of the
voucher".
The answer, in a case where the
voucher
is issued to secure a sale, is "the agreement of the other party to the sale". But no attempt has been made by the commissioners to show that the agreement of the customer to an arm's length sale is itself to be given any
value;
and, in my
view,
the judge was correct to treat the
value
of the consideration obtained by the supplier for the supply of the
voucher
as nil.
The facts found by the tribunal
"Eachvoucher
entitles the customer (in respect of any
vehicle),
or the
vehicle
(in respect of any owner), to a free MOT test by the Appellant [Hartwell] at any participating location. The order form contains the following words under the heading factory fitted options: "three MOT
vouchers
total
value
£96.33" with no cost being shown against this item. The invoice also contains the words "included in the car price are three MOT inspection
vouchers
with a total
value
of £96.33." If the customer keeps the replacement car for more than three years further
vouchers
for free MOT tests are given to the customer year by year. The reason the Appellant issues these
vouchers
is to increase its repair business; we were told that it was successful in doing so."
Paragraph 5 of schedule 6 to the 1994 Act
"Where a right to receive goods or services for an amount stated on any token, stamp orvoucher
is granted for a consideration, the consideration shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds that amount."
Hartwell contends that the MOT vouchers
are supplied for a consideration; they are not provided free. The consideration for the three
vouchers
is part of the consideration given by the purchaser on the supply of the replacement car. Whatever the amount of such part of the overall consideration, paragraph 5 of schedule 6 requires that that amount must be disregarded "except to the extent (if any) that it exceeds [the face
value
of the
voucher]".
So the taxable amount of the overall consideration for the supply of the replacement car and
vouchers
must be reduced by the amount of the face
value
of the
vouchers.
The tribunal decision
"28. . . . where the transaction in question comprises a bundle of features and acts, regard must be had to all the circumstances in which that transaction takes place.
29. In this respect, taking into account, first, that it follows from art 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, second, that a supply which comprises a single service from the economic point ofview
should not be artificially split, so as not to distort the functioning of the
VAT
![]()
system,
the essential features of the transaction must be ascertained, in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service.
30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for the customers an aim in itself, but a means of better enjoying the principal service supplied (see Customs and Excise Comrsv
Madgett and Baldwin (trading as Howden Court Hotel) (Joined cases C-308/96 and C-94/97) [1998] STC 1189 at 1206, para 24)."
Although the Court was directing its observations in that passage to a supply of services – which was the context in which the reference question arose – it is not in dispute that the guidance has equal force in relation to the provision of goods.
The decision in the High Court
"That provision is entirely general and appears to apply regardless of whether the supply of thevoucher
is an ancillary or single supply in the circumstances of the particular case. Consistently with the provisions of s. 19 there is no reason to give it a limited application. It simply dictates (for the reasons I have already indicated) that any consideration received on the supply of the
voucher
is to be disregarded in computing the turnover of the supplier for
VAT
purposes. Whether that supply and therefore that part of the turnover is to be standard rated or treated as an exempt supply is quite a separate matter. On the Commissioners' argument the supply of a
voucher
for consideration would be disregarded under paragraph 5 if made as part of a single supply yet treated as part of the supplier's taxable turnover if made as part of a multiple supply. The consequence of deciding that the supply of the
vouchers
was merely ancillary to the supply of the car would therefore be not merely to dictate the rate of tax applicable to the supply of the
voucher
but also to remove from the supplier the benefit of the double taxation provisions regardless of whether the single supply fell to be treated as standard rated or exempt. I cannot accept that this is what Parliament intended or that this result can be justified by the application of any established principles of community law. On the contrary it seems to me entirely capricious. It is important to note that paragraph 5 of Schedule 6 does not refer or turn on whether the issue of the
voucher
is a separate supply or merely part of a larger supply to which it is ancillary. What falls to be disregarded is the amount of the consideration given for the
voucher,
not the basis on which it was supplied."
Accordingly he allowed the appeal from the tribunal's decision on the issue raised by the MOT vouchers
also.
This appeal
Lady Justice Arden :
Purchase plus vouchers
MoT vouchers
"27. It must be borne in mind that the question of the extent of a transaction is of particular importance, forVAT
purposes, both for identifying the place where the services are provided and for applying the rate of tax or, as in the present case, the exemption provisions in the Sixth Directive. In addition, having regard to the diversity of commercial operations, it is not possible to give exhaustive guidance on how to approach the problem correctly in all cases.
28. However, as the court held in Faaborg-Gelting Linien A/Av
Finanzamt Flensburg (Case C-231/94) [1996] STC 774 at 783, [1996] ECR –2395 at 2411 – 2412, paras 12 to 14, concerning the classification of restaurant transactions, where the transaction in question comprises a bundle of features and acts, regard must first be had to all the circumstances in which that transaction takes place.
29. In this respect, taking into account, first, that it follows from art 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, second, that a supply which comprises a single service from an economic point ofview
should not be artificially split, so as not to distort the functioning of the
VAT
![]()
system,
the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service.
30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal services, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied (see Customs and Excise Comrsv
Madgett and Baldwin (trading as Howden Court Hotel) (Joined cases C-308/96 and C-94/94) [1998] STC 1189 at 1206, para 24).
31. In those circumstances, the fact that a single price is charged is not decisive. Admittedly, if the service provided to customers consists of several elements for a single price, the single price may suggest that there is a single service. However, notwithstanding the single price, if circumstances such as those described in paras 7 to 10 above indicated that the customers intended to purchase two distinct services, namely an insurance supply and a card registration service, then it would be necessary to identify the part of the single price which related to the insurance supply, which would remain exempt in any event. The simplest possible method of calculation or assessment should be used for this (see, to this effect, Madgett and Baldwin (at 1208, paras 45 and 46)).
32. The answer to the first two questions must therefore be that it is for the national court to determine, in the light of the above criteria, whether transactions such as those performed by CPP are to be regarded forVAT
purposes as comprising two independent supplies, namely an exempt insurance supply and a taxable card registration service, or whether one of those two supplies is the principal supply to which the other is ancillary, so that it receives the same tax treatment as the principal supply."
Lord Justice Ward :
The Purchase Plus vouchers.
The MOT vouchers.
"… whether transactions such as those performed by CPP are to be regarded forVAT
purposes as comprising two independent supplies, namely an exempt insurance supply and a taxable card insurance service, or whether one of those two supplies is the principal supply to which the other is ancillary so that it receives the same tax treatment as the principal supply." (Emphasis added by me.)
"It is for the national court to enquire whether, at the time of purchasing the fuel, the customers and Kuwait Petroleum had agreed – through the dealers, as the case may be – that part of the price paid for the fuel, whether identifiable or not, would constitute thevalue
given in return for the Q8
vouchers
or the redemption goods."