1998 (12) TMI 605 - HC - VAT and Sales Tax

Issues Involved:
1. Nature of the supply by the maintenance trustees.
2. Consideration received by the maintenance trustees.
3. Impact of holding maintenance contributions on trust.
4. Application of Article 11A(3)(c) of the Sixth Council Directive.
5. Exemption under Group 1, item 1 of Schedule 6 to the Value Added Tax Act 1983.

Issue-Wise Detailed Analysis:

1. Nature of the Supply by the Maintenance Trustees:
The primary issue was whether the maintenance trustees merely arranged for staff to provide services or if they themselves supplied the services. The tribunal found that the maintenance trustees supplied the services of the staff, enhancing the enjoyment and amenity of the flats. This was upheld by Popplewell J., who emphasized the commercial reality of the agreement. The Court of Appeal, however, concluded that the trustees merely arranged for the provision of services. The House of Lords agreed with the tribunal, noting that the trustees employed the staff directly and were responsible for their employment contracts, thus supplying the services themselves.

2. Consideration Received by the Maintenance Trustees:
The second issue was whether the consideration for the services was the entire maintenance contribution attributable to staff salaries and wages, only the trustees' remuneration, or another amount. The tribunal and Popplewell J. concluded that the maintenance contributions constituted consideration for the services provided by the trustees. The House of Lords agreed, stating that the trustees received the maintenance contributions beneficially in consideration of the services provided.

3. Impact of Holding Maintenance Contributions on Trust:
The third issue was whether holding the maintenance contributions on trust affected the liability for VAT. The respondents argued that as trustees, they could not be said to receive consideration beneficially. The House of Lords disagreed, stating that when the trustees applied the maintenance fund to pay staff wages, they received the money beneficially in consideration of the services provided.

4. Application of Article 11A(3)(c) of the Sixth Council Directive:
The respondents contended that under Article 11A(3)(c), amounts received as repayment for expenses paid out in the name and for the account of the purchaser should be excluded from the taxable amount. The House of Lords rejected this argument, agreeing with Sir Christopher Slade that the trustees employed the staff and paid them from their funds, thus the payments were not repayments for expenses paid out in the name and for the account of the purchasers.

5. Exemption under Group 1, item 1 of Schedule 6 to the Value Added Tax Act 1983:
The respondents argued that the maintenance services were exempt from VAT as part of the grant of an interest in land. The House of Lords disagreed, noting that the supply of services was separate from the grant of the lease and was provided by a different taxpayer. The court also rejected the argument that Schedule 6A, paragraph 7 of the Act applied, as it was directed to situations where the legal title was in one person and the beneficial interest in another, which was not the case here.

Conclusion:
The House of Lords allowed the appeal, agreeing with the tribunal's findings and rejecting the respondents' arguments on all issues. The maintenance trustees were found to supply the services directly, the maintenance contributions constituted consideration for these services, and the holding of funds on trust did not affect the VAT liability. The exemptions and provisions cited by the respondents were found not to apply.

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