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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Customs & Excise v First Choice Holidays Plc [2004] EWCA Civ 1044 (29 July 2004) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/1044.html Cite as: [2004] 3 CMLR 45, [2004] STI 1761, [2004] EWCA Civ 1044, [2004] STC 1407, [2004] BTC 5676, [2004] BVC 735 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
The Hon Mr Justice Neuberger
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE RIX
and
LORD JUSTICE CARNWATH
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COMMISSIONERS OF CUSTOMS & EXCISE |
Appellants |
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- and - |
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FIRST CHOICE HOLIDAYS PLC |
Respondent |
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Mr Kevin PROSSER QC (instructed by Messrs McGrigors Solicitors) for the Respondent
Hearing dates : Tuesday 29 June 2004
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Crown Copyright ©
Lord Justice Rix :
The European texts
"11A(1). The taxable amount shall be
(a) in respect of supplies of goods and services other than those referred to in (b), (c) and (d) below, 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 including subsidies directly linked to the price of such supplies…""22(3)(a). Every taxable person shall issue an invoice or other document serving as an invoice, in respect of goods and services which he has supplied or rendered…
(b) The invoice shall state clearly the price exclusive of tax and the relevant tax at each rate…"
"26(2). All transactions performed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has supplied the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22(3)(b), in respect of this service shall be the travel agent's margin, that is to say, the difference between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and services provided by other taxable persons where those transactions are for the direct benefit of the traveller."
The domestic texts
"(1) The Treasury may by order modify the application of this Act in relation to supplies of goods or services by tour operators…
(2) Without prejudice to the generality of subsection (1) above, an order under this section may make provision –
(a) for two or more supplies of goods or services to be treated as a single supply of services;(b) for the value of that supply to be ascertained, in such manner as may be determined by or under the order, by reference to the difference between sums paid or payable to and sums paid or payable by the tour operator."
"3(1). Subject to paragraphs (2), (3) and (4) of this article, a "designated travel service" is a supply of goods or services –
(a) acquired for the purpose of his business; and(b) supplied for the benefit of a traveller without material alteration or further processing;
by a tour operator in a member State of the European Community in which he has established his business or has a fixed establishment."
"7. Subject to articles 8 and 9 of this Order, the value of a designated travel service shall be determined by the difference between sums paid and payable to and sums paid or payable by the tour operator in respect of that service, calculated in such manner as the Commissioners of Customs and Excise shall specify."
"The total selling price of your supplies under the scheme is your total charge to your customers…
Do not include any:
? group/child discounts that you allow
? amount collected from the customer for a supply of insurance direct to the customer from an authorised insurance company – even if you include it in the quoted tour price
? forfeited deposits and cancellation fees received from customers who cancel a booking
You may reduce your total receipts by compensation that you pay to the dissatisfied customer but only up to the amount that the customer had paid you.
Remember:
? if you sell through an agent you must not deduct any agent's commission charged to you. This applies even if the agent deducts his commission from the sum collected from the customer and remits the balance only…"
The facts
The domestic litigation
"it is intended to tax only the final consumer. Consequently the taxable amount serving as a basis for the VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer which is the basis for calculating the VAT ultimately borne by him" (Elida Gibbs Ltd v. Customs and Excise Commissioners (Case C-317/94) [1996] STC 1387 at 1402, para 19).
The reference to the European Court of Justice
"Where a tour operator within the meaning of Article 26 of Council Directive 77/388/EEC
a) supplies package holidays to customers through the disclosed agency of a travel agent;b) permits the agent to arrange the supply of package holidays at a discount from the price published in the tour operator's brochure (the customer being liable to pay only the discounted price for the holiday);c) requires the agent who arranges the supply of a package holiday at a discount not only to pass on to the tour operator the price actually charged to the customer but also to pay to the tour operator an additional sum equal to the discount given to the customer (who is unaware of the financial arrangements between the tour operator and the agent), so that the agent accounts to the tour operator for the full price of the holiday;d) agrees to pay the agent a commission based on the brochure price of the holiday, which in practice is paid by set-off against the sums due from the agent as mentioned in (c) above;e) does not know whether or not the agent has arranged the sale of a particular holiday at a discounted price, or the amount of the discount;f) as between itself and the agent, accounts for the sale of the holiday on the basis that it has been paid the full brochure price of the holiday;
(1) Having established the above facts, how should the additional sum (referred to in (c) above) paid by the travel agent to the tour operator be characterised for the purposes of Article 26(2)?
(2) Does "the total amount to be paid by the traveller" within Article 26(2) include the additional sum referred to in (c) above?"
"32. In circumstances such as those described by the national court, the additional amount paid by the travel agent to the tour operator constitutes a condition of the supply by the tour operator of his services, and the commission due to the travel agent is calculated on the full price of the holiday stated in the brochure.
"33. There is therefore a direct link between that additional amount paid by a third party and the supply of the services provided to the traveller. It follows that it is included in the consideration for that supply received by the tour operator and so in the "total amount to be paid by the traveller" within the meaning of Article 26(2) of the Sixth Directive. It cannot be regarded as the consideration for a service supplied by the tour operator to the travel agent, consisting in providing him with a facility of selling the holiday at a reduced price."
"34. The reply to the questions referred for a preliminary ruling must therefore be that Article 26(2) of the Sixth Directive must be interpreted as meaning that the "total amount to be paid by the traveller" within the meaning of that provision includes the additional amount that a travel agent, acting as an intermediary on behalf of a tour operator, must, in circumstances such as those described in the order for reference, pay to the tour operator on top of the price paid by the traveller and which corresponds in amount to the discount given by the travel agent to the traveller on the price of the holiday stated in the tour operator's brochure."
Submissions to this court at the adjourned hearing of this appeal
"In these circumstances it is the duty of the court to give to regulation 5 a construction which accords with the decisions of the European Court upon the corresponding provisions of the Directive to which the regulation was intended by Parliament to give effect. The precedent established by Pickstone v. Freemans Plc. [[1989] AC 66] indicates that this is to be done by implying the words necessary to achieve that result."
Lord Oliver also said (at 559E) –
"If the legislation can reasonably be construed so as to conform with those obligations – obligations which are to be ascertained not only from the wording of the relevant Directive but from the interpretation placed upon it by the European Court of Justice at Luxembourg – such a purposive construction will be applied even though, perhaps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use."
"Moreover, as the court has repeatedly held, community legislation must be certain and its application foreseeable by those subject to it. The requirement of legal certainty must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which they impose on them."
"it is for a United Kingdom court to construe domestic legislation in any field covered by a Community Directive so as to accord with the interpretation of the Directive as laid down by the European Court of Justice, if that can be done without distorting the meaning of the domestic legislation".
"If the words [of the domestic legislation] are so clear and unambiguous that they are capable of only one meaning and that meaning fails to give effect to the provisions of the Sixth Directive it is not open to the commissioners to rely on the provisions of the Directive, since to do so would allow the state to rely on its own failure to fulfil its obligations under the Directive."
Discussion and conclusion
The contract theme
The taxation theme
The language theme
The presumption theme
Conclusion
Lord Justice Carnwath:
Lord Justice Mummery: