2002 (7) TMI 782 - HC - VAT and Sales Tax

Issues Involved:
1. Whether VAT was chargeable on the postage costs incurred by Plantiflor Ltd.
2. Whether Plantiflor acted as an agent for its customers in relation to the postage costs.
3. Whether the postage costs were part of the consideration for the supply of goods by Plantiflor to its customers.
4. The interpretation of the Sixth Council Directive (77/338/EEC) and its application to the UK VAT Act 1994.

Issue-wise Detailed Analysis:

1. VAT Chargeability on Postage Costs:
The central issue was whether VAT was chargeable on the postage costs incurred by Plantiflor Ltd. The commissioners argued that VAT was chargeable on the postage, while Plantiflor contended it was not. The House of Lords concluded that VAT was indeed payable on the postage costs. The judgment emphasized that the postage costs were part of the overall consideration paid by the customer to Plantiflor for the supply of delivered goods.

2. Agency Relationship Between Plantiflor and Customers:
Plantiflor argued that it acted as an agent for its customers in relation to the postage costs, meaning that the postage was a disbursement and not part of the consideration for the supply. However, the House of Lords found that Plantiflor did not act as an agent for its customers. The contractual terms between Plantiflor and Parcelforce indicated that Plantiflor was acting as a principal and not as an agent. Parcelforce charged Plantiflor for the delivery services, and Plantiflor was liable to pay these charges, not the customers.

3. Consideration for the Supply of Goods:
The judgment analyzed whether the postage costs were part of the consideration for the supply of goods by Plantiflor to its customers. It was determined that the postage costs were indeed part of the consideration. The customer paid a total sum to Plantiflor, which included the cost of postage. This total sum was for the supply of delivered goods, making the postage costs part of the taxable amount.

4. Interpretation of the Sixth Council Directive and UK VAT Act 1994:
The judgment referenced the Sixth Council Directive (77/338/EEC) and the UK VAT Act 1994 to determine the taxable amount. Article 11(A)(1)(a) of the Directive states that the taxable amount includes "everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser." Additionally, Article 11(A)(2) includes "incidental expenses such as commission, packing, transport and insurance costs charged by the supplier to the purchaser." The House of Lords concluded that the postage costs fell within these provisions and were therefore subject to VAT.

Separate Judgments:

Lord Slynn of Hadley:
Lord Slynn emphasized that Plantiflor's contract with its customers included the delivery of goods, making the postage costs part of the consideration for the supply. He concluded that VAT was payable on the postage costs.

Lord Mackay of Clashfern:
Lord Mackay agreed with the conclusion that the postage costs were part of the consideration for the supply of goods. He highlighted that the arrangements between Plantiflor and Parcelforce did not constitute an agency relationship, and the customer paid Plantiflor for the delivery services.

Lord Hobhouse of Woodborough:
Lord Hobhouse concurred with the reasoning and conclusion of Lord Slynn and Lord Millett, stating that VAT was chargeable on the postage costs.

Lord Millett:
Lord Millett provided a detailed analysis of the contractual relationships and the application of the Sixth Directive. He concluded that the postage costs were part of the consideration for the supply of goods and were subject to VAT.

Lord Scott of Foscote:
Lord Scott agreed with the opinions of Lord Slynn and Lord Millett, supporting the conclusion that VAT was chargeable on the postage costs.

Conclusion:
The House of Lords allowed the appeal, concluding that VAT was payable on the postage costs incurred by Plantiflor Ltd. The judgment clarified that the postage costs were part of the consideration for the supply of delivered goods and did not constitute a disbursement or an agency relationship. The decision was based on the interpretation of the Sixth Council Directive and the UK VAT Act 1994. The appeal was allowed with costs.

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