Martin-Jenkins v Revenue & Customs [2009] UKFTT 99 (TC)

FTT-Tax
Martin-Jenkins v Revenue & Customs
[2009] UKFTT 99 (TC) · 2009-05-13
[1][2009] UKFTT 99 (TC) TC00067 Appeal number LON/2008/1867 Value added tax – whether goods fell to be zero-rated as goods intended for export to a place outside the member States supplied otherwise than to a taxable person to a person not resident in the United Kingdom – whether the Appellant was a person not resident in the United Kingdom at the time(s) of supply of the goods – held he was not – regulation 129 of the VAT Regulations 1995 – appeal dismissed FIRST-TIER TRIBUNAL TAX CHAMBER TIMOTHY DENNIS MARTIN-JENKINS Appellant - and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS (Value Added Tax) Respondents TRIBUNAL: JOHN WALTERS QC MRS R A WATTS DAVIES MHCIMA FCIPD Sitting in public in London on 29 April 2009 The Appellant appeared in person David Manknell, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents © CROWN COPYRIGHT 2009 DECISION Mr. Timothy Martin-Jenkins ("the Appellant") appeals against a decision taken by Ian Tustin, Higher Officer, of the Reconsiderations Team of the Respondent Commissioners ("HMRC") in a letter to him dated 31 January 2008 that goods supplied to him by Rogers & Co (a UK supplier) in the summer of 2007 were the subject of a standard-rated, and not a zero-rated, supply for VAT purposes. The Tribunal's jurisdiction to hear and decide this appeal is provided by section 83(b) VAT Act 1994 ("VATA") as the matter in dispute is "the VAT chargeable on the supply of any goods or services".[2]The Appellant's case is that the supply of the goods to him by Rogers & Co fell to be zero-rated because the goods were exported to a place outside the member States, namely Mauritius – see: section 30(8) VATA.[3]We set out the relevant legislation.[4]Section 30(8) VATA relevantly provides as follows:
"(8) Regulations may provide for the zero-rating of supplies of goods, or of such goods as may be specified in the regulations, in cases where– (a) The Commissioners are satisfied that the goods have been or are to be exported to a place outside the member States ... and (b) Such other conditions, of any, as may be specified in the regulations or the Commissioners may impose are fulfilled."
[5]The relevant regulation is regulation 129 of the VAT Regulations 1995, which relevantly provides as follows:
"129 – (1) Where the Commissioners are satisfied that– (a) Goods intended for export to a place outside the member States have been supplied, otherwise than to a taxable person, to– (i) A person not resident in the United Kingdom ... and (b) The goods were exported to a place outside the member States, the supply, subject to such conditions as they may impose, shall be zero-rated."
[6]The Commissioners have imposed conditions for the purposes of regulation 129, in Public Notice 703 ("Export of goods from the United Kingdom"). However, Mr. Manknell, for HMRC, takes no additional point on non-compliance with the relevant parts of Public Notice 703 – paragraphs 2.4 ("What is meant by 'an overseas person'?") and 3.4 ("Conditions for zero-rating indirect exports").[7]Mr. Manknell accepts that at the time of the supply of the goods they were "to be exported to a place outside the member States" (within the meaning of section 30(8)(a) VATA) and that they were "intended for export to a place outside the member States", they were supplied "otherwise than to a taxable person" and they were in fact exported to a place outside the member States" (regulation 129 of the VAT regulations 1995 refers).[8]The only point in issue is whether the goods were supplied to "a person not resident in the United Kingdom". The goods were supplied to the Appellant and he says that he was such a person. HMRC say that the Appellant was not at the relevant time "a person not resident in the United Kingdom" – in other words that at the relevant time he was a person resident in the United Kingdom.[9]The relevant time was the tax point or tax points of the supplies. The evidence before the Tribunal (some documents and the oral evidence of the Appellant) did not enable us to determine with accuracy the date(s) of the relevant tax point(s). However we find the goods were delivered to the Sussex address of the Appellant, which was the place from which he shipped them in a sealed container to Mauritius, on dates between 10 and 14 August 2007. We also find that he made two payments to Rogers & Co of respectively £10,000 and £20,000. The first payment (of £10,000) was made in July 2007.[10]What is important for the purposes of this Decision is that the tax point(s) of the supply or supplies was (or were) in July and/or August 2007 but before 31 August 2007. On that date the Appellant flew with his wife and two children from the UK to live full time in Mauritius.[11]We now set out our remaining findings of fact and then go on to consider whether the Appellant, as recipient of the supply or supplies, was, in July and August 2007, but before 31 August 2007, "not resident in the United Kingdom" for the purposes of regulation 129 of the VAT Regulations 1995.[12]The Appellant is an international businessman. Settled residence in one jurisdiction has not been his way of life. He has not been in full time employment in the United Kingdom since the 1970s. He has, however, been resident in the United Kingdom for income tax purposes since 1997. He has also had the status of Permanent Resident in Hong Kong since November 1982, and a residence permit under the Integrated Resort Scheme of Mauritius since 7 August 2006. This authorised the Appellant, his wife and his children to reside in Mauritius. The Appellant pays income tax in the United Kingdom, Hong Kong and Mauritius.[13]The Appellant purchased his house in Mauritius in April 2006, some months before his Mauritius residence permit came through. This house was not furnished when it was bought by the Appellant.[14]In March 2007 the Appellant made a decision to move to Mauritius. He negotiated a consultancy agreement which, in the event, was concluded with a Hong Kong company on 1 August 2007. The agreement required the Appellant to commence his duties on 1 September 2007. The extract from the consultancy agreement which the Tribunal was shown gave a Mauritius address for the Appellant.[15]He made two visits to Mauritius, one in January 2007 and one in June 2007. Each visit lasted about 2 weeks. For the duration of both visits he stayed at a hotel.[16]The Appellant appointed an agent to let his house in the United Kingdom. In the event he let it for a term of 11 months and 9 days commencing on 1 September 2007. When the goods were exported to Mauritius the letting arrangement had already been entered into by the Appellant. The house in the United Kingdom was let fully furnished.[17]The Appellant is married, with two young children. During the spring and summer school terms in 2007, his children attended school in England.[18]The Appellant and his wife decided that, starting in the autumn term of 2007, their children should attend school in Mauritius. This was not very simple to arrange and, to facilitate it, the Appellant became a patron of the school in Mauritius and, to achieve this status, made a payment of £5,000 to the school in May 2007.[19]The Appellant ordered a range of goods from Rogers & Co over the telephone, from Mauritius, in June 2007. The goods consisted of a wide range of household furniture, lighting appliances, bed and bathroom linen and household accessories.[20]He obtained a quotation from Rogers & Co for the items ordered, addressed to "Mr. & Mrs. Martin-Jenkins, Mauritius" in the total sum of £39,470 "prices all VAT free".[21]Not all the items ordered were in fact supplied. About three-quarters of them (in value) were. Rogers & Co invoiced the Appellant on 30 August 2007 – to "Mr. & Mrs. T. Martin-Jenkins" – in the sum of £25,123.64 plus VAT £4,396.64, and added a charge of £400 plus VAT (£70) for "Exclusive Showroom time as discussed". The invoice showed the two payments made by the Appellant of £10,000 and £20,000 and the resulting total showed the Appellant entitled to a credit of £9.72 from Rogers & Co.[22]The payments of £10,000 and £20,000 were remitted by the Appellant to Rogers & Co from overseas.[23]The Appellant never advanced funds to Rogers & Co for the payment of VAT. The amount claimed as VAT (£4,396.64) was taken by Rogers & Co, without the Appellant's agreement, from the money advanced by him to Rogers & Co. The Appellant had advanced more funds than were necessary to meet the quoted prices of the goods actually supplied for the purpose of paying the quoted prices of goods which, in the event, Rogers & Co were unable to source. The charge of £400 plus VAT for "Exclusive Showroom time as discussed" was, according to the Appellant, not agreed by him and was claimed by Rogers & Co for the first time after the goods had been delivered.[24]Rogers & Co delivered the goods actually supplied to his house in the United Kingdom on 10, 13 and 14 August 2007. The goods were (with other items from his house in the United Kingdom which the Appellant wished to transport to Mauritius) packed into shipping containers at his house in the United Kingdom between 13 and 16 August 2007. The containers were sealed and they and their contents were shipped from the United Kingdom to Mauritius (via Oman), leaving the United Kingdom on 20 August 2007. None of the goods purchased from Rogers & Co were used in the United Kingdom before being packed in the containers for export to Mauritius.[25]As already stated, the Appellant and his family left the United Kingdom on 31 August 2007 to travel to Mauritius preparatory to the Appellant commencing his duties as a consultant there on 1 September 2007. From that time the family lived in Mauritius.[26]The goods were always intended by the Appellant to furnish his family home in Mauritius.[27]When the Appellant took up with Rogers & Co the fact that he had been charged VAT, Rogers & Co informed him that their accountant had told them that VAT was chargeable. Thereafter the Appellant raised the point with HMRC. Considerable correspondence was carried on between the Appellant and HMRC, which resulted in HMRC's appealable decision that the goods had been supplied under a standard-rated supply.[28]On these facts, the Appellant argues that he purchased the goods in his capacity as a resident of Mauritius, and therefore the goods were supplied to "a person not resident in the United Kingdom". He states that if he had understood that his actions would lead to a VAT charge on the supply, he would not have purchased the goods. In other words, he would not, he says, have purchased the goods in his capacity as a UK resident, and this, he submits, is consistent with his case that he did in fact purchase them in his capacity as a resident of Mauritius.[29]The Appellant argues that, with regard to the purchase of the goods, his status as resident of Mauritius was of importance and his status as resident of the United Kingdom was wholly without importance. He lays emphasis on the following facts: He ordered the goods as a resident of Mauritius. He was quoted a VAT free price as a resident of Mauritius. He used funds from an overseas source to purchase the goods and did not intentionally pay any VAT. The goods were exported to Mauritius without having been used in the United Kingdom. At all relevant times he had agreed to rent out his house in the United Kingdom.[30]Mr. Manknell, for HMRC, submits that the central question in this case, whether the goods were supplied to a person "not resident in the United Kingdom", must be determined according to the territory in which the Appellant (as the person receiving the supply) had his usual place of residence at the time(s) of supply (the tax points), that is, in July and August 2007, before 31 August 2007.[31]He submits that certainly during this period during which the tax point(s) occurred, the Appellant had his usual place of residence in the United Kingdom. During this period the Appellant and his family were living at the house in the United Kingdom, albeit that arrangements had been made to move to Mauritius and let the house.[32]Despite a statement in his Skeleton Argument that shortly after the supply was made, the Appellant "transferred his residence to Mauritius", Mr. Manknell did not in argument accept that from and after 31 August 2007 the Appellant had his usual place of residence in Mauritius. He took this stance because of the temporary nature of the residence in Mauritius taken up then by the Appellant. But Mr. Manknell did recognise that the fact that the Appellant and his family were physically in Mauritius after 31 August 2007, living in their house there, was a factor of importance which could support a conclusion that the Appellant was a person not resident in the United Kingdom from and after 31 August 2007.[33]Mr. Manknell submitted that neither the Appellant's intention to move to Mauritius nor his purpose in purchasing the goods to furnish his house in Mauritius was a factor which could support a determination that he was resident in Mauritius in July and August 2007, before 31 August 2007.[34]Both parties cited two decisions of the VAT Tribunal. The first was the decision of the Tribunal (Chairman: D.C. Potter QC) in USAA Limited v Commissioners of Customs and Excise (LON/1992/1950A). The second was the decision of the Tribunal (Chairman: Theodore Wallace) in S. A. Razzak and M. A. Mishari v Commissioners of Customs and Excise (LON/1997/0754 – Decision Number 15240). They also cited Shah v Barnet London Borough Council [1983] 1 All ER 226 .[35]In USAA , the Tribunal was considering the case of a typical (male) officer in the US forces who is on a three year tour of duty in the United Kingdom. The typical officer has no home in the USA or, if he has such a home, it is let out to a tenant. If the officer is married, his wife and children live with him in the United Kingdom. In such a case, the Tribunal concluded that the officer's "usual place of residence" for the purposes of section 8(3) VAT Act 1983 was the United Kingdom. That provision fixed the country where an individual who received services otherwise than for the purposes of any business carried on by him "belonged". The concept of the country where a recipient of services "belonged" was used to determine the application of VAT in cases where there was a reverse charge on supplies of relevant services (including insurance services, with which USAA was concerned) received from abroad – see: section 7 VAT Act 1983.[36]The Tribunal in USAA was considering in what country a typical officer "belonged", or had "his usual place of residence" at the point of time which was the tax point of the supply of insurance services (the moment when the insurance contract was made). It concluded that an officer in the USA about to move to the United Kingdom has "a usual place of residence" in the USA.[37]The Appellant's argument on USAA was that at the time of the tax point(s) of the supply or supplies of furniture, he was in a transit situation. He was in the United Kingdom but was packing up and generally preparing for his imminent move to Mauritius. His "mind was in Mauritius" (his words). He was not in the same position as the officer on a tour of duty in the United Kingdom, with which USAA was concerned.[38]Mr. Manknell, on the other hand, while accepting that USAA was decided on different legislation, submits that the decision points to a conclusion that the Appellant in this case had his usual place of residence in the United Kingdom, and not in Mauritius, at the relevant time(s). As in USAA , he submits that the question of determining the country in which a recipient of a supply is resident, which he equates to the question of the country in which such a person has his usual residence, is the country in which he is actually present at the relevant time, provided he is present there with a settled purpose of residence there.[39]He points out that the goods acquired from Rogers & Co were needed by the Appellant to furnish and equip the home which he was about to set up in Mauritius, pointing out that he had said in email correspondence with HMRC that "we could not have purchased the goods after we had left the UK, or the goods would have been even later in arriving in Mauritius, where we needed them to furnish our house". He submits that the natural inference from the evidence is that in July and August 2007, before 31 August 2007, the Appellant's house in Mauritius was not his "home" or "residence" – and indeed he had no "home" or "residence" in Mauritius at that time.[40]Mr. Manknell's submission is that at the relevant time the Appellant's residence was in the United Kingdom and that he was resident for VAT purposes in the United Kingdom and nowhere else.[41]The concept of a settled purpose of residence as an ingredient of the state of facts which will constitute a person resident in one country or another is derived from Lord Scarman's speech in Shah . That was a case on the meaning of the statutory phrase "ordinary residence" and Lord Scarman's conclusion is summed up in these words:
"... if there be proved a regular, habitual mode of life in a particular place, the continuity of which has persisted despite temporary absences, ordinary residence is established provided only it is adopted voluntarily and for a settled purpose."
[42]The requirement that residence must be voluntarily adopted was relevant in the other case cited to the Tribunal, Razzak and Mishari .[43]That appeal turned on the construction of the same words as those considered in USAA . But this time the words in issue – "he shall be treated as belonging in whatever country he has his usual place of residence" – were taken from section 9(3) VATA 1994. The Tribunal described the case as one "with most unusual facts". On those facts it concluded in relation to the relevant person, Mrs. Haseena, that "throughout the relevant period India was the country where she had her usual place of residence although she was temporarily and effectively involuntarily present in the UK". The Tribunal Chairman referred to the USAA case saying that the facts of that case "were entirely different in that the officers were typically here voluntarily on three year tours of duty which might be extended".[44]The Appellant submits that Razzak and Mishari is in his favour – Mrs. Haseena was found not to be resident here even though she was physically here.[45]The issue in this case concerns the interpretation of the domestic provisions implementing the Community law principle of VAT providing for exemption from VAT on exportation. That principle is formulated in article 146(1)(b) of the Directive 2006/112/EC as follows: "Member States shall exempt ... (b) the supply of goods dispatched or transported to a destination outside the Community by or on behalf of a customer not established within their respective territory ...".[46]The requirement that a person must be "not resident in the United Kingdom" in order that a supply may be zero-rated under regulation 129 of the VAT Regulations 1995 must therefore be interpreted in the sense that the person is not established in the United Kingdom.[47]In July and August 2007, before 31 August 2007, the relevant time, the Appellant was living with his family at his home in the United Kingdom. His presence in the United Kingdom was, of course, entirely voluntary, and so he can gain no assistance from the Razzak and Mishari decision.[48]We accept that at the relevant time his mind was focussed on preparing for his future residence in Mauritius. His mind may well have been in Mauritius, as he said.[49]But propositions forming the basis for the application of VAT in any particular way must be established by objective evidence, not subjective intention. This has been made clear by the European Court of Justice in many contexts. A recent example is Axel Kittel v Etat belge (C–439/04) where the Court stated that "where it is ascertained, having regard to objective factors, that the supply is to a taxable person who knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT, it is for the national court to refuse that taxable person entitlement to the right to deduct."[50]Of course this case is not even remotely concerned with any fraudulent evasion of VAT, but this dictum is relevant in illustrating the principle that conditions requisite for any particular VAT treatment must be satisfied "having regard to objective factors".[51]The thrust of the Appellant's case was that he was resident both in the United Kingdom and in Mauritius and the supply was made to him entirely in connection with his Mauritius residence and not at all in connection with his United Kingdom residence.[52]We accept that. But that submission does not deal with the test which the relevant VAT law applies. Instead the law looks at the objectively ascertainable place of residence (in the sense of place of establishment) of the customer at the time the supply is made, to determine whether the supply is, for VAT purposes, an export.[53]We accept Mr. Manknell's submission that for these purposes (which are different from income tax purposes, for instance) a person can only be resident in one territory at a time. If it were otherwise it would be impossible to use the residence of the recipient of the supply (as the legislature has done) to determine whether the supply is for VAT purposes to be treated as an export.[54]In choosing which of the territories in which the Appellant claims he was resident at the relevant time is the relevant territory for the purposes of applying the test in regulation 129 of the VAT Regulations 1995, we must be guided by the evidence of objective factors pointing to where he was established at the relevant time. There can only be one answer – the United Kingdom.[55]We conclude that the Appellant was established in the United Kingdom, and was for the relevant VAT purposes resident in the United Kingdom at the relevant time, namely in July and August 2007 before 31 August 2007.[56]For these reasons we dismiss the appeal. HMRC did not apply for costs and we make no costs direction. JOHN WALTERS QC JUDGE OF THE FIRST-TIER TRIBUNAL RELEASE DATE: 13 May 2009

Cited in 1 later judgment