“Alabaster and Mr Newey agree … that they will indemnify the other against the consequences of breach by either of them of any Statute or subsidiary legislation or non-statutory Code of Practice applying to the loans or their advertising”
“… (a) supply” in this Act includes all forms of supply, but not anything done otherwise that for a consideration; (b) anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services.”
“I certainly accept that where any issue turns wholly upon the construction of a document having legal consequences, the exercise of construction is one of law for the judge. But for the proper resolution of a case of this kind, there are I think two qualifications. The first is that the concept of making a supply for the purposes of VAT is not identical with the performance of an obligation for the purposes of the law of contract, even where the obligation consists in the provision of goods or services. The second is that, in consequence, the true construction of a contractual document may not always answer the question—what was the nature of the VAT supply in the case?”
“… in consequence, it is perfectly possible that although the parties in any given situation may conclude their contractual arrangements in writing so as to define all their mutual rights and obligations arising in private law, their agreement may nevertheless leave open the question, what is the nature of the supplies made by A to B for the purposes of A's assessment of VAT. In many situations, of course, the contract will on the facts conclude any VAT issue, as where there is a simple agreement for the supply of goods or services with no third parties involved. In cases of that kind there is no space between the issue of supply for VAT purposes and the nature of the private law contractual obligation. But that is a circumstance, not a rule. There may be cases, generally (perhaps always) where three or more parties are concerned, in which the contract's definition (however exhaustive) of the parties' private law obligations nevertheless neither caters for nor concludes the statutory question, what supplies are made by whom to whom. Nor should this be a matter for surprise: in principle, the incidence of VAT is obviously not by definition regulated by private agreement. Whether and to what extent the tax falls to be exacted depends, as with every tax, on the application of the taxing statute to the particular facts. Within those facts, the terms of contracts entered into by the taxpayer may or may not determine the right tax result. They do not necessarily do so. They will not do so where the contract, though it tells all the parties everything that they must or must not do, does not categorise any individual party's obligations in a way which inevitably leads to the conclusion that he makes certain defined supplies to another. In principle, the nature of a VAT supply is to be ascertained from the whole facts of the case. It may be a consequence, but it is not a function, of the contracts entered into by the relevant parties.”
“[36] The essential features which are said to justify the conclusion that the garage makes a supply of services to WHA are as follows. First, the invoice is in respect of work carried out by the garage pursuant to an instruction by WHA. Secondly, the only contractual relationship, pursuant to which the work the subject of the invoice is carried out, exists under an agreement between WHA and the garage. Thirdly, the only person who is liable to pay the garage in respect of that work is WHA. Fourthly, WHA gets into the contractual relationship with the garage in the course of its business. Fifthly, by ensuring the garage carries out the work, WHA fulfils its obligation to Viscount under the claims handling agreement, and also becomes entitled to earn its£17 ·60 in respect of the claim resulting in the works. [37] In these circumstances, it appears to me that, unless there is some reason for reaching a contrary conclusion, there is indeed a 'supply of services' by the garage to WHA when the garage carries out repair work to a vehicle under a policy. Given the very wide definition of 'services' in s 5(2)(b), it is hard to resist the conclusion that, if something is supplied to WHA, it can be described as 'services': WHA receives a benefit from the carrying out of the repairs (namely satisfaction of an obligation to Viscount and the ability to earn the£17 ·60) and it is work which WHA will have authorised to be done. The fact that there is another beneficiary of the work, who may even fairly be said to be the primary beneficiary, namely the owner of the vehicle, should not, at least of itself, prevent the arrangement operating as a supply of 'services' to WHA. [38] It further appears to me that the services in question are 'supplied' to WHA. Again, the fact that they are also provided to the vehicle owner does not, to my mind, prevent them from being treated as 'supplied' to WHA. The fact that WHA authorises and pays for the work, and, indeed, is rendered the invoice for the work, serves to underline this conclusion. Of course, if any of these steps could be regarded as sham or bogus, different considerations might well apply. But, at least unless it is necessary to resort to the further arguments, which impinge on the scheme as a whole, no such contention has been raised in the present case.”
“Lord Hope of Craighead said that: '[t]he primary facts seem to me to support the conclusion which it reached on this issue' (see[1999] STC 161 at 165,[1999] 1 WLR 408 at 412). He continued ([1999] STC 161 at 166,[1999] 1 WLR 408 at 412): 'The estate agents received their instructions from Redrow and, so long as the prospective purchasers completed with Redrow, it was Redrow who paid for the services which were supplied. I do not see how the transactions between Redrow and the estate agents can be described other than as the supply of services for a consideration to Redrow. The agents were doing what Redrow instructed them to do, for which they charged a fee which was paid by Redrow.' [43] Lord Hope went on to make some general observations which, like Lloyd J ([2003] STC 648 at [29]), I consider are worth repeating (see[1999] STC 161 at 166,[1999] 1 WLR 408 at 412–413): 'The word “services” is given such a wide meaning for the purposes of VAT that it is capable of embracing everything which a taxable person does in the course or furtherance of a business carried on by him which is done for a consideration. The name or description which one might apply to the service is immaterial, because the concept does not call for that kind of analysis. The service is that which is done in return for the consideration … Questions such as who benefits from the service or who is the consumer of it are not helpful. The answers are likely to differ according to the interest which various people may have in the transaction. The matter has to be looked at from the standpoint of the person who is claiming the deduction by way of input tax. Was something being done for him for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration which has attracted VAT? The fact that someone else, in this case, the prospective purchaser, also received a service as part of the same transaction does not deprive the person who instructed the service and who has had to pay for it of the benefit of the deduction.' ”
“33. … in order to answer the question referred, it is necessary to determine to whom, whether the lessor or the lessee, the oil companies transferred, in the main proceedings, that right actually to dispose of the fuel as owner. 34. It is common ground that the lessee is empowered to dispose of the fuel as if he were the owner of that property. He obtains the fuel directly at filling stations and Auto Lease does not at any time have the right to decide in what way the fuel must be used or to what end. 35. The argument to the effect that the fuel is supplied to Auto Lease, since the lessee purchases the fuel in the name and at the expense of that company, which advances the cost of that property, cannot be accepted. As the Commission rightly contends, the supplies were effected at Auto Lease's expense only ostensibly. The monthly payments made to Auto Lease constitute only an advance. The actual consumption, established at the end of the year, is the financial responsibility of the lessee who, consequently, wholly bears the costs of the supply of fuel. 36. Accordingly, the fuel management agreement is not a contract for the supply of fuel, but rather a contract to finance its purchase. Auto Lease does not purchase the fuel in order subsequently to resell it to the lessee; the lessee purchases the fuel, having a free choice as to its quality and quantity, as well as the time of purchase. Auto Lease acts, in fact, as a supplier of credit vis-à-vis the lessee.”
“38. Whether there is a 'legal relationship' in the Tolsma sense cannot depend, moreover, on the presence of specific legal characteristics, in particular contractual or procedural ones, such as enforceability in legal proceedings. Since the conditions for the existence and content of legal relationships vary according to national legal systems, that would also be incompatible with the principle of fiscal neutrality and the objective of harmonisation of VAT. Otherwise the inclusion of a 'binding in honour only' clause could open the way to tax evasion. 39. All that need be examined is whether the components of reciprocal performance are exchanged in the framework of agreements—even ones that are binding in honour only—from which it is apparent that there is a direct link between them. 40. In the Tolsma case there were no agreements of any kind whatever which might have created a link between service and payment sufficient for it to be possible to speak of a transaction 'for consideration' within the meaning of art 2 of the Sixth Directive; the 'provider of the service' (in that case a street musician) admittedly received certain sums 'for his service', but the 'recipients of the service' paid them purely voluntarily and in principle received the service regardless of their 'consideration' (see[1994] STC 509 , [1994] ECJ I-743, para 17). 41. In contrast to the Tolsma case, in cases such as that in the main proceedings there is indeed a type of agreement under which the entry fee is paid for the service provided by the organiser of the competition. To be able to take part in the competition, the competitor must accept the rules imposed by the organiser and undertake to comply with all the terms of the agreement, including the rules of the competition. Only if the contestant—on the one hand—submits the entry form under those conditions and pays the corresponding fee can he—on the other hand—take part in the competition and be given a chance of winning a prize.”
“69. The application of Community legislation cannot be extended to cover abusive practices by economic operators, that is to say transactions carried out not in the context of normal commercial operations, but solely for the purpose of wrongfully obtaining advantages provided for by Community law (see, to that effect, Firma Peter Cremer v Bundesanstalt für Landwirtschaftliche Marktordnung (Case 125/76) [1977] ECR 1593 , para 21; General Milk Products GmbH v Hauptzollamt Hamburg-Jonas (Case C-8/92 )[1993] ECR I-779 , para 21; and Emsland-Stärke ( C-110/99 ), para 51). 70. That principle of prohibiting abusive practices also applies to the sphere of VAT.”
“73. Moreover, it is clear from the case law that a trader's choice between exempt transactions and taxable transactions may be based on a range of factors, including tax considerations relating to the VAT system (see, in particular, BLP Group[1995] STC 424 ,[1996] 1 WLR 174 , para 26, and Customs and Excise Comrs v Cantor Fitzgerald International (Case C-108/99 )[2001] STC 1453 ,[2002] QB 546 , para 33). Where the taxable person chooses one of two transactions, the Sixth Directive does not require him to choose the one which involves paying the highest amount of VAT. On the contrary, as the Advocate General observed in para 85 of his opinion, taxpayers may choose to structure their business so as to limit their tax liability.”
“74. In view of the foregoing considerations, it would appear that, in the sphere of VAT, an abusive practice can be found to exist only if, first, the transactions concerned, notwithstanding formal application of the conditions laid down by the relevant provisions of the Sixth Directive and the national legislation transposing it, result in the accrual of a tax advantage the grant of which would be contrary to the purpose of those provisions. 75. Second, it must also be apparent from a number of objective factors that the essential aim of the transactions concerned is to obtain a tax advantage. As the Advocate General observed in para 89 of his opinion, the prohibition of abuse is not relevant where the economic activity carried out may have some explanation other than the mere attainment of tax advantages. 76. It is for the national court to verify in accordance with the rules of evidence of national law, provided that the effectiveness of Community law is not undermined, whether action constituting such an abusive practice has taken place in the case before it (see Eichsfelder Schalchtbetrieb (Case C-515/03 )[2005] All ER (D) 306 (Jul) , para 40). … 80. To allow taxable persons to deduct all input VAT even though, in the context of their normal commercial operations, no transactions conforming with the deduction rules of the Sixth Directive or of the national legislation transposing it would have enabled them to deduct such VAT, or would have allowed them to deduct only a part, would be contrary to the principle of fiscal neutrality and, therefore, contrary to the purpose of those rules. 81. As regards the second element, whereby the transactions concerned must essentially seek to obtain a tax advantage, it must be borne in mind that it is the responsibility of the national court to determine the real substance and significance of the transactions concerned. In so doing, it may take account of the purely artificial nature of those transactions and the links of a legal, economic and/or personal nature between the operators involved in the scheme for reduction of the tax burden (see, to that effect, Emsland Stärke[2000] ECR I-11569 , para 58).”
“93. It must also be borne in mind that a finding of abusive practice must not lead to a penalty, for which a clear and unambiguous legal basis would be necessary, but rather to an obligation to repay, simply as a consequence of that finding, which rendered undue all or part of the deductions of input VAT (see, to that effect, Emsland Stärke[2000] ECR I-11569 , para 56). 94. It follows that transactions involved in an abusive practice must be redefined so as to re-establish the situation that would have prevailed in the absence of the transactions constituting that abusive practice. 95. In that regard, the tax authorities are entitled to demand, with retroactive effect, repayment of the amounts deducted in relation to each transaction whenever they find that the right to deduct has been exercised abusively ( Fini H[2005] STC 903 ,[2005] ECR I-1599 , para 33). 96. However, they must also subtract therefrom any tax charged on an output transaction for which the taxable person was artificially liable under a scheme for reduction of the tax burden and, if appropriate, they must reimburse any excess. 97. Similarly, it must allow a taxable person who, in the absence of transactions constituting an abusive practice, would have benefited from the first transaction not constituting such a practice, to deduct, under the deduction rules of the Sixth Directive, the VAT on that input transaction. 98. It follows that the answer to Question 1(b) must be that, where an abusive practice has been found to exist, the transactions involved must be redefined so as to re-establish the situation that would have prevailed in the absence of the transactions constituting that abusive practice.”
“ The abuse issue can usefully be considered by answering four questions, which appear to emerge from the passages I have quoted from the judgment in Halifax . First, does the Scheme, or an aspect of the Scheme, result in the accrual of a tax advantage which, as HMRC assert, is 'contrary to the purpose of' the provisions of the Sixth Directive? Secondly, if so, was it, as HMRC contend, the 'essential aim' of the Scheme, or of the relevant aspect, that a tax advantage be obtained? Thirdly, if so, are there any special features of the Scheme itself, or of the law relating to it, which should nonetheless prevent the abuse argument succeeding? Fourthly, if not, can (and must) the Scheme, or the relevant part, be 'redefined'?”
“[16] For HMRC, Mr Peacock QC contended that such fiscal neutrality requires the conclusion that an insurer, who provides, in the EU, insurance services which are exempt for VAT purposes, cannot recover input tax attributable to those services. Thus, in what one can fairly characterise as transactions in the context of 'normal commercial operations' of an insurer and a claims handler, such as that embodied in the arrangements which were replaced by the Scheme, there would be no question of the input tax attributable to the cost of repairs and parts being recoverable. Given that the effect of the Scheme, according to our 2004 decision, is that input tax, incurred in the provision of exempt insurance services, is recoverable, HMRC accordingly argue that the Scheme is, at least to the extent that it has such an effect, contrary to the purposes of the legislative purposes of the VAT legislation, as embodied in the Sixth Directive (and now in the 2006 Directive). [17] It seems to me that, subject to any arguments to the contrary by reference to the background and details of the Scheme or the legislation, this argument is correct. Although Gibraltar companies, namely Viscount and Crystal, are involved in the chain, the truth is that the provision of the services comprising the repairs and parts are provided in the EU to WHA, and what WHA provides, albeit through two Gibraltar companies in the same group, is the provision of claims handling, again in the EU, to a supplier of exempt services in the EU, namely NIG. On the face of it, at any rate, the VAT regime would plainly require that arrangement to result in an overall liability to VAT equal to the tax chargeable on the services, rather than, as results from the Scheme, no net liability whatever to VAT (as Viscount recovers the input tax paid by WHA).”
“The short answer to this argument is, in my judgment, that advanced by Mr Peacock. He submitted that Cadbury Schweppes was concerned with the right of a business to establish itself in another EU member state to take advantage of that state's beneficial tax regime, whereas the principle relied on here by HMRC, as in Halifax , is that, once it is established, in exercise of its right of establishment, in an EU member state, a business is not permitted to abuse the VAT system within the EU. The correctness of this submission in its application to the facts of this case is borne out by considering the essential nature of the allegedly abusive and artificial contrivance of the Scheme. It was not the establishing of Viscount in Gibraltar: after all, the previous arrangement was not abusive, and the reinsurer, Principal, was established in Gibraltar. It was the involvement of Viscount in the Scheme which was the artificial contrivance, because there was no need or purpose (other than the avoidance of tax) in dividing Principal's former functions between two companies, namely Crystal and Viscount, in creating another link in the claims handling chain, or in retroceding 85% of Crystal's reinsurance liabilities to Viscount.”
“When the Court takes the view that an abuse exists whenever the activity at issue cannot possibly have any other purpose or justification than to trigger the application of Community law provisions in a manner contrary to their purpose, that is tantamount, in my view, to adopting an objective criterion for the assessment of the abuse. It is true that those objective elements will reveal that the person or persons engaged in that activity had, most likely, the intention of abusing Community law. But it is not that intention that is decisive for the assessment of the abuse. It is instead the activity itself, objectively considered. In that regard, suffice it to imagine, by way of example, a case where A confines himself without further reflection to following the advice of B and to carrying out an activity for which there is no explanation other than securing a tax advantage for A. The fact that A did not have any subjective intention of abusing Community law will certainly not be material for the assessment of the abuse. What matters is not the actual state of mind of A, but the fact that the activity, objectively speaking, has no other explanation but to secure a tax advantage.”
“… it is clear to my mind from what the court said in the very paragraph to which I have just referred that an abusive scheme ' must be redefined'. In other words, once the two hurdles identified in para 86 of the European Court's judgment have been crossed, there is no third hurdle to be crossed before an abusive scheme is, as it were, neutralised.”