COMMISSIONERS OF CUSTOMS AND EXCISE V. SINCLAIR COLLIS LTD [2001] UKHL 30 (7 JUNE 2001)LORDS DECISIONSLORDS DECISIONS >>COMMISSIONERS OF CUSTOMS AND EXCISE V. SINCLAIR COLLIS LTD [2001] UKHL 30 (7 JUNE 2001)COMMISSIONERS OF CUSTOMS AND EXCISE V. SINCLAIR COLLIS LIMITED [2001] UKHL 30 (7TH JUNE, 2001)LORDSLORD SLYNN OF HADLEY LORD NICHOLLS OF BIRKENHEAD LORD STEYN LORD MILLETT LORD SCOTT OF FOSCOTELORDS OF APPEAL FOR JUDGMENTCOMMISSIONERS OF CUSTOMS AND EXCISELORD SLYNN OF HADLEYLORDS,COMMISSIONERS WHO SAY THAT THE SUPPLY IS EXEMPT AND THAT SC IT SEEMS ON BEHALF OF THE CLUB OWNERS, SAY THAT IT IS TAXABLE, IS EXPLAINED BY THE FACT THAT IF IT IS TAXABLE, INPUT TAX CAN BE SET OFF, IF IT IS EXEMPT IT CANNOT.COMMISSIONERS TOOK THE VIEW THAT THE RELEVANT SUPPLIES WERE EXEMPT FROM VAT SINCE THE AGREEMENTS WERE FOR LICENCES TO OCCUPY LAND. ON 16 MARCH 1995 AFTER REPRESENTATIONS WERE MADE ON BEHALF OF SC THE COMMISSIONERS ACCEPTED THAT SUPPLIES WERE STANDARD RATED AND NOT EXEMPT. IN SEPTEMBER 1995 THE COMMISSIONERS REVERSED THAT DECISION AND "ON BALANCE" RETURNED TO THEIR VIEW THAT THE SUPPLIES WERE EXEMPT AND THIS WAS CONFIRMED BY LETTER OF 3 JANUARY 1996, THE DECISION NOW UNDER REVIEW. MOREOVER THE TRIBUNAL DECIDED THAT THERE WAS NO LICENCE TO OCCUPY LANDS: LIGHTMAN J AND THE COURT OF APPEAL HELD THAT THERE WAS.COMMISSIONERS [1990] VATTR 131 WHERE IT WAS HELD THAT THE "REAL SUBJECT" OF AN AGREEMENT TO PLACE AMUSEMENT MACHINES IN PUBLIC HOUSES IN RETURN FOR PAYMENT WAS "THE MACHINE AND NOT THE USE OF OR ENJOYMENT OF THE LAND ON WHICH IT STOOD". SO HERE THE PRESENT TRIBUNAL HELD THATCOMMISSIONERS [1977] STC 36, 41 COULD BE UNHELPFUL, SINCE IT SUGGESTED THAT IT WAS POSSIBLE TO GO BEHIND THE WRITTEN CONTRACT EVEN WHEN THAT WAS NOT ALLEGED TO BE A SHAM OR WHERE THE AGREEMENT WAS SAID NOT TO REFLECT THE PARTIES' TRUE INTENTION. HERE, WHERE IT WAS ACCEPTED THAT THERE WAS ONLY ONE SUPPLY RATHER THAN SEVERAL DISSOCIABLE ELEMENTS, IT WAS NECESSARY TO CONSIDER FROM THE AGREEMENT WHAT WAS THE CHARACTER OF THE MAIN SUPPLY. EVEN THOUGH THE GRANT OF A RESTRICTIVE COVENANT BY WHICH A CLUB OWNER AGREES NOT TO GRANT A LICENCE TO ANY COMPETITOR, AS IN THIS CASE, IT WAS CLEAR THAT ON THE TRUE CONSTRUCTION OF THE AGREEMENT "IT IS A LICENCE TO KEEP A MACHINE ON THE SITE, AND IT IS IN RETURN FOR THAT LICENCE THAT THE RESPONDENT HAS AGREED TO PAY OVER A SHARE OF THE PROFIT". THE SUPPLY WAS ACCORDINGLY AN EXEMPT SUPPLY AS THE COMMISSIONERS CONTENDED.JUSTICE AND OF NATIONAL COURTS THE PROPER ANALYSIS, THEY CONCLUDED, WAS THAT THERE WAS HERE ONE MAIN SUPPLY AND THAT THE ELEMENTS OF THE TRANSACTION WERE INDISSOCIABLE. PROPERLY CONSTRUED THE AGREEMENT PROVIDED FOR ONE RELEVANT SUPPLY CONTAINED IN THE FIRST PROMISE OF THE CLUB OWNERS AND THAT CONSTITUTED A LICENCE TO OCCUPY LAND SO THAT THE SUPPLY WAS EXEMPT PURSUANT TO SECTION 31 OF THE 1994 ACT AND SCHEDULE 9 OF PART II GROUP 1.COMMISSIONERS (CASE C-63/92) [1993] ECR I-6665).JUSTICE HAS GIVEN SOME INDICATIONS, IN PARTICULAR FACTUAL SITUATIONS, AS TO WHETHER WHAT WAS DONE THERE HAD THE CHARACTERISTICS OF A "LETTING".JUSTICE, IN ORDER TO DETERMINE THE NATURE OF A TAXABLE TRANSACTION, REGARD MUST BE HAD TO ALL THE CIRCUMSTANCES IN WHICH THE TRANSACTION IN QUESTION TAKES PLACE IN ORDER TO IDENTIFY ITS CHARACTERISTIC FEATURES".COMMISSIONERS V MIRROR GROUP NEWSPAPERS PLC (CASE C-409/98, ECLI:EU:C:2001:524) IN AN OPINION GIVEN ON 23 JANUARY 2001, ADVOCATE GENERAL TIZZANO SAID:JUSTICE HAS NOT GIVEN A DECISION WHICH AS A MATTER OF INTERPRETATION CLEARLY PRESCRIBES OR INDICATES WHAT THE ANSWER MUST BE. I THEREFORE CONSIDER, THOUGH IT IS FOR YOUR LORDSHIP TO DECIDE WHETHER THERE IS ONE SUPPLY (CARD PROTECTION PLAN LTD V CUSTOMS AND EXCISE COMMISSIONERS (CASE C-349/96) [1999] 2 AC 601), THAT IT IS NECESSARY IN ORDER TO GIVE JUDGMENT IN THIS CASE, TO REFER PURSUANT TO THE THIRD PARAGRAPH OF ARTICLE 234 OF THE EC TREATY TO THE EUROPEAN COURT OF JUSTICE, THE FOLLOWING QUESTION: IS THE GRANT, BY THE OWNER OF PREMISES ("THE SITEHOLDER") TO AN OWNER OF A CIGARETTE VENDING MACHINE, OF THE RIGHT TO INSTALL, OPERATE AND MAINTAIN THE MACHINE IN THE PREMISES FOR A PERIOD OF TWO YEARS, IN A PLACE NOMINATED BY THE SITEHOLDER, IN RETURN FOR A PERCENTAGE OF THE GROSS PROFITS OF THE SALES OF CIGARETTES AND OTHER TOBACCO GOODS IN THE PREMISES, BUT WITH NO OTHER SIGNIFICANT RIGHTS OF POSSESSION OR CONTROL THAN THOSE SET OUT IN THE WRITTEN AGREEMENT BETWEEN THE PARTIES, CAPABLE OF AMOUNTING TO THE LETTING OF IMMOVABLE PROPERTY WITHIN THE MEANING OF ARTICLE 13B(B) OF COUNCIL DIRECTIVE NO 77/388/EEC OF 17TH MAY 1977 ON THE HARMONISATION OF THE LAWS OF THE MEMBER STATES RELATING TO TURNOVER TAXES; AND WHAT ARE THE PRINCIPLES APPLICABLE IN DECIDING WHETHER AN AGREEMENT AMOUNTS TO THE LETTING OF IMMOVABLE PROPERTY WITHIN SUCH MEANING?JUSTICE HAS BEEN RECEIVED.LORD NICHOLLS OF BIRKENHEADLORDS,LORDSHIPS CONSIDER THERE IS A POINT OF PRINCIPLE ON WHICH THE OPINION OF THE EUROPEAN COURT OF JUSTICE SHOULD BE SOUGHT, I AGREE THAT A QUESTION SHOULD BE REFERRED ACCORDINGLY.LORD STEYNLORDS,LORD SLYNN OF HADLEY. FOR THE REASONS HE GIVES I WOULD MAKE THE ORDER WHICH HE PROPOSES.LORD MILLETTLORDS,COMMISSIONERS CONTEND THAT IT IS. THIS APPARENT PARADOX IS DUE TO THE UNUSUAL CIRCUMSTANCE THAT THE COMPANY IS NOT CONCERNED IN THE PROCEEDINGS AS THE TAXPAYER BUT IS ACTING ON BEHALF OF THE SITE OWNERS. THEY ARE THE RELEVANT TAXPAYERS; AND WHAT IS IN ISSUE IS NOT THE COMPANY'S LIABILITY TO PAY OUTPUT TAX ON THE SUPPLY OF TOBACCO PRODUCTS, WHICH IS BEYOND DISPUTE, BUT THE DEDUCTION OF INPUT TAX BY THE SITE OWNERS.JUSTICE HAS CONSISTENTLY HELD THAT THE EXEMPTIONS CONTAINED IN ARTICLE 13 OF THE DIRECTIVE ARE TO BE NARROWLY INTERPRETED SINCE THEY CONSTITUTE EXCEPTIONS TO THE GENERAL PRINCIPLE THAT VAT IS TO BE CHARGED ON ALL SERVICES SUPPLIED BY A TAXABLE PERSON FOR A CONSIDERATION. IT IS COMMON GROUND THAT THE STANDARD FORM OF AGREEMENT BETWEEN THE SITE OWNER AND THE COMPANY DOES NOT CONSTITUTE THE GRANT OF A LEASE. THE QUESTION, THEREFORE, IS WHETHER IT CONSTITUTES "A LETTING OF IMMOVABLE PROPERTY."JUSTICE, HOWEVER, PROVIDES SOME GUIDANCE TO ITS MEANING. THE FOLLOWING PROPOSITIONS MAY BE DERIVED FROM RECENT DECISIONS OF THE COURT:COMMISSIONERS OF CUSTOMS AND EXCISE V MIRROR GROUP NEWSPAPERS PLC (CASE 409/98) (UNREPORTED) AT PARA 25 IN THE OPINION OF THE ADVOCATE GENERAL).JUSTICE, NOT BECAUSE I CONSIDER THE OUTCOME TO BE ACTE CLAIRE, BUT BECAUSE I CONSIDER THAT THE DIFFICULTY DOES NOT ARISE FROM THE MEANING OF THE DIRECTIVE, BUT LIES IN THE APPLICATION OF THE DIRECTIVE TO THE FACTS, WHICH IS A QUESTION FOR NATIONAL COURTS. BUT YOUR LORDSHIPS TAKE A DIFFERENT VIEW, AND I AGREE THAT IN THOSE CIRCUMSTANCES THERE SHOULD BE A REFERENCE.LORD SCOTT OF FOSCOTELORDS,COMMISSIONERS WHO ARE ARGUING THAT THE SUPPLY IS EXEMPT, AND THE APPELLANT WHO IS ARGUING, FOR THE BENEFIT AS I UNDERSTAND IT, OF THE SITEHOLDER, THE PROPRIETOR OF THE PREMISES, THAT THE SUPPLY ATTRACTS VAT. I NEED NOT EXPLAIN WHY IT IS THAT THESE STANCES HAVE BEEN ADOPTED. IT SUFFICES TO SAY THAT THERE ARE, APPARENTLY, SUBSTANTIAL COMMERCIAL REASONS FOR THEM.COMMISSIONERS AND HELD THAT THE AGREEMENT DID GRANT A LICENCE TO OCCUPY LAND. LIGHTMAN J, WHO REVERSED THE MANCHESTER VAT AND DUTIES TRIBUNAL, POSED WHAT HE DESCRIBED AS "THE CRITICAL QUESTION, NAMELY WHAT UPON THE TRUE CONSTRUCTION OF THE AGREEMENT IS THE SITEHOLDER AGREEING TO SUPPLY?" [1998] STC 841, 848. HE SAID: "THE ANSWER IS CLEAR; IT IS A LICENCE TO KEEP A MACHINE ON THE SITE AND IT IS IN RETURN FOR THAT LICENCE THAT [SINCLAIR COLLIS LTD] HAS AGREED TO PAY OVER A SHARE OF THE PROFITS". HE REFORMULATED HIS ANSWER LATER IN HIS JUDGMENT, AT P 849: "THE ANSWER … IS CLEAR, NAMELY A LICENCE TO OCCUPY LAND TOGETHER WITH CERTAIN ANCILLARY OR INCIDENTAL RIGHTS". SO HE HELD THE SUPPLY TO BE EXEMPT.COMMISSIONERS [1977] STC 36). BUT IS THE LICENCE A "LICENCE TO OCCUPY LAND" WITHIN THE MEANING OF THOSE WORDS IN THE 1994 ACT?COMMISSIONERS ACCEPT, RIGHTLY IN MY VIEW, THAT THE GRANT OF A RIGHT TO PLACE ADVERTISEMENTS OR POSTERS ON A WALL IS NOT THE GRANT OF A LICENCE TO OCCUPY LAND FOR VAT PURPOSES. IN STAATSSECRETARIS VAN FINANCIEN V COFFEESHOP 'SIBERIE' (CASE C-158/98) [1999] STC 742 THE EUROPEAN COURT HELD THAT THE HIRING OUT OF A TABLE IN A COFFEESHOP FROM WHICH THE CUSTOMER COULD MAKE SALES OF NARCOTICS TO MEMBERS OF THE PUBLIC WAS A SUPPLY OF SERVICES THAT ATTRACTED VAT. THERE WAS NO SUGGESTION THAT THE HIRING OF THE TABLE MIGHT FALL WITHIN THE ARTICLE 13B(B) EXEMPTION AS A "LEASING OR LETTING OF IMMOVABLE PROPERTY". FOR OUR DOMESTIC LAW PURPOSES THE HIRING OF THE TABLE WOULD CONSTITUTE A GRANT OF A LICENCE BUT, IN MY OPINION, PLAINLY NOT A "LICENCE TO OCCUPY LAND".LADY WOULD, I SUGGEST, BE VERY UNLIKELY TO BE HELD TO DO SO. A CONTRACT FOR PARKING SPACE MIGHT ENTITLE THE GRANTEE TO THE EXCLUSIVE USE OF A SPECIFIED PARKING SPACE. OR IT MIGHT DO NO MORE THAN ENTITLE HIM, TOGETHER WITH OTHERS TO WHOM A SIMILAR RIGHT HAD BEEN GRANTED, TO ENTER UPON A PIECE OF LAND AND PARK WHEREVER HE COULD FIND SPACE TO DO SO. THE FORMER MIGHT CONSTITUTE A "LETTING". THE LATTER ARRANGEMENT COULD NOT POSSIBLY BE HELD TO DO SO. IN MY OPINION, THE CATEGORIES OF EXCLUSION IN ARTICLE 13B(B) AND, FOR THE SAME REASONS, THE CATEGORIES OF EXCLUSION IN PARAGRAPH 1 OF PART II OF SCHEDULE 9 TO THE 1994 ACT, DO NO MORE THAN INDICATE TYPES OF TRANSACTION CAPABLE OF CONSTITUTING A "LETTING" FOR THE PURPOSES OF THE DIRECTIVE OR OF A "LICENCE TO OCCUPY" FOR THE PURPOSES OF THE 1994 ACT. WHETHER, IN ANY PARTICULAR CASE, THE TRANSACTION WOULD, HAD IT NOT FALLEN WITHIN ONE OF THE EXCLUDED CATEGORIES, HAVE FALLEN WITHIN THE EXEMPTION WOULD HAVE DEPENDED ON THE FACTS OF THE PARTICULAR CASE. EC COMMISSION V UNITED KINGDOM [2000] STC 777 IS NOT, IN MY OPINION, ANY WARRANT FOR TREATING AS A "LETTING" OR AS A "LICENCE TO OCCUPY" A TRANSACTION WHICH WOULD NOT ORDINARILY JUSTIFY BEING SO DESCRIBED.LORD DENNING SAID:COMMISSIONERS' PRACTICE IN REGARD TO ADVERTISEMENTS IS, IN MY OPINION, CORRECT. IT IS NOT CONCESSIONARY. IT IS A RECOGNITION THAT THE RIGHT GRANTED IS NOT A "LETTING" OF LAND AND THAT THE EXERCISE OF IT DOES NOT INVOLVE THE OCCUPATION OF LAND. FOR THE SAME REASONS THE GRANT OF A RIGHT FOR A SALESPERSON WITH A TRAY SUSPENDED FROM HIS OR HER NECK TO WANDER AROUND A PUBLIC HOUSE OR THE FOYER OF A THEATRE OFFERING FOR SALE THE CONTENTS OF THE TRAY WOULD NOT CONSTITUTE THE GRANT OF A LICENCE TO OCCUPY. THERE WOULD BE NO PART OF THE PREMISES OF WHICH THE SALESPERSON COULD BE SAID TO BE IN POSSESSION OR CONTROL OR, THEREFORE, IN OCCUPATION. NOR, IN MY OPINION, WOULD THE RESULT BE ANY DIFFERENT IF THE SALESPERSON WERE OBLIGED UNDER THE AGREEMENT TO BE STATIONED IN A SPECIFIC CORNER OF THE PREMISES. THERE WOULD STILL BE NOTHING THAT COULD REASONABLY BE THOUGHT TO CONSTITUTE "OCCUPATION" OR A "LETTING" OF LAND.