Expert Witness Institute v Customs & Excise, England and Wales Court of Appeal (Civil Division), Judgment, Law, casemine.com

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Attorney(S)

Mr Richard Drabble QC (instructed by KLegal, London for the Respondent)
Mr Michael Patchett-Joyce & Miss R. Haynes(instructed by Commissioners of Customs & Excise for the Appellants)

Judges

LORD JUSTICE CHADWICK
LORD JUSTICE LONGMORE
MR JUSTICE HARRISON

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Expert Witness Institute v. Customs & Excise

Smart Summary

Factual and Procedural Background

This opinion concerns an appeal against an order made on 15 February 2001 by Mr Justice Lloyd, arising from an appeal by Company A (The Expert Witness Institute) against a decision of the London VAT and Duties Tribunal dated 22 September 2000. The Tribunal had upheld a decision by the Commissioners of Customs and Excise, dated 12 July 1999, that supplies of goods and services by Company A were not exempt from value added tax (VAT). The High Court judge allowed Company A's appeal, concluding that Company A was a non-profit organisation with aims of a civic nature and thus fell within the exemption under paragraph (l) of Article 13A(1) of EC Council Directive 77/388/EEC. The Commissioners appealed with permission granted by the Court of Appeal on 29 March 2001.

Legal Issues Presented

Whether Company A qualifies as a non-profit making organisation with aims of a civic nature within the meaning of paragraph (l) of Article 13A(1) of the Sixth Council Directive 77/388/EEC and the corresponding domestic provisions in Schedule 9 to the Value Added Tax Act 1994.
Whether the supplies made by Company A to its members are exempt supplies for the purposes of VAT under the above provisions.

Arguments of the Parties

Appellant's Arguments (Company A)

Company A is a non-profit organisation incorporated to support the proper administration of justice and the early resolution of disputes through fair and unbiased expert evidence.
The aims of Company A are of a civic nature, encompassing objectives that relate to citizenship and the public interest, not confined to municipal or local government activities.
The exemption from VAT applies because Company A's services are supplied to members in return for subscriptions and are closely linked to its civic aims.
The phrase "aims of a civic nature" should be interpreted broadly to include aims pertaining to citizenship and the administration of justice, not narrowly restricted to municipal functions.
The presence of a membership subscription does not negate the civic nature of the aims, nor require altruism on the part of members.

Respondent's Arguments (Commissioners of Customs and Excise)

The phrase "aims of a civic nature" should be construed strictly and narrowly, primarily to mean aims related to municipal or local government activities.
Company A does not fall within the exemption because its stated aims do not have the necessary municipal or local connotations.
Previous case law supports a narrower interpretation excluding bodies like Company A.
Allowing a broad interpretation would extend the exemption beyond its intended scope, undermining the taxing regime.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Institute of Leisure and Amenity Management v Customs and Excise Commissioners [1988] STC 602	Interpretation of "aims of a civic nature" as excluding everyday municipal services.	The Court found this precedent unhelpful for the present case as it did not address the broader citizenship meaning of "civic".
Committee of Directors of Polytechnics v Customs and Excise Commissioners [1992] STC 873	Consideration of whether an organisation's aims fall within "aims of a civic nature".	The Court noted the aims were not of a civic nature, but did not exclude the possibility of a citizenship-related meaning.
Yoga for Health Foundation v Customs and Excise Commissioners [1984] STC 630	Principle that exemption provisions must be given a fair and proper meaning, not overly narrow.	Supported the approach that exemption language should be construed fairly in context.
Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën (Case 348/87) [1989] ECR 1737	Exemptions under VAT law are to be interpreted strictly as exceptions to the general rule.	The Court applied this principle but clarified that strict construction does not require an unduly narrow meaning.
Commission of the European Communities v Federal Republic of Germany (Case 107/84) [1985] ECR 2655	Strict interpretation of exemptions under VAT directives.	Referenced in support of strict but fair interpretation of exemption provisions.
Bulmer v Bollinger [1974] Ch 401	Purposive approach to statutory interpretation.	Referenced as guiding the purposive interpretation of exemption language.

Court's Reasoning and Analysis

The Court began by examining the relevant Community and domestic legislation, focusing on the Sixth Directive 77/388/EEC and the Value Added Tax Act 1994, particularly Schedule 9 which lists exempt supplies. The exemption at issue relates to non-profit organisations with aims of a civic nature supplying services to their members for a subscription.

Company A was incorporated as a non-profit organisation with the primary objective of supporting the proper administration of justice and early dispute resolution through fair and unbiased expert evidence. The Court found that this objective, along with ancillary aims such as training, representation, and maintaining professional standards, fell within the scope of aims of a civic nature.

The Court considered dictionary definitions and prior case law interpreting "civic" as relating either to municipal/local government or to citizenship and public spiritedness. It rejected the narrow municipal-only interpretation and accepted that "aims of a civic nature" may encompass aims pertaining to citizenship and the relationship between citizens and the state.

Evidence from expert linguistic analysis of the Directive's language in other Community languages supported this broader interpretation, showing that the equivalent terms relate to citizenship rather than municipal government.

The Court rejected the argument that the presence of membership subscriptions or charges for services negated the civic nature of the aims, emphasizing that the organisation is non-profit and that the nature of the objective is determinative, not the motive or individual member conduct.

Prior Tribunal decisions were reviewed and found to have erred in interpreting "civic" too narrowly. The High Court judge's decision was affirmed as correctly applying a fair and proper meaning to the exemption language consistent with the Directive and domestic law.

Holding and Implications

The Court DISMISSED the Commissioners' appeal and upheld the decision that Company A's supplies to its members are exempt from value added tax under paragraph (l) of Article 13A(1) of the Sixth Directive and item 1(e) of Group 9 in Schedule 9 to the Value Added Tax Act 1994.

The direct effect of this decision is that Company A is not liable for VAT on membership subscriptions for the services it provides. The Court did not establish a new precedent beyond clarifying the interpretation of "aims of a civic nature" in this context, emphasizing that exemptions must be construed strictly but fairly, allowing for a meaning that includes citizenship-related aims rather than restricting it solely to municipal objectives.