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TMI Blog2001 (4) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... in Eastbourne. They pay a joining fee and they pay each year a proportion of the association's expenses. Through salaried employees services are provided for the members such as advertising and arranging jobs by telephone or radio contact. The association applied for registration and was registered with effect from 1 September 1991 for the purposes of value added tax. It was not disputed that the association was making supplies for the purpose of value added tax which exceeded the registration threshold. 2 In August 1994 the constitution of the association was revised. The association contended that thereafter it was not making supplies to its members and it applied for its registration to be cancelled under para 13(2) of Schedule 1 to the Value Added Tax Act 1994 on the basis that it was no longer registerable. The commissioners refused the application and their decision was upheld by the London VAT Tribunal, set aside by Turner J [1996] STC 1469 and restored by the Court of Appeal [1998] STC 669. The question on this appeal is whether the association does make taxable supplies to its members in view of the changes to its constitution. 3 The Act provides: 4(1) VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in mind and which the association submits are not only important but crucial. It is therefore necessary to consider these in some detail. 9 Thus paragraph 3 of the 1991 constitution provides that: The purposes for which the association is established are the following: (a) To provide for the members of the association premises from which there shall be conducted the businesses of the members as independently contracting private car hire drivers. (b) To provide by means of wireless telecommunications, telephone and such other means as may from time to time be deemed desirable, such communications network for the advancement of the members' business as may be appropriate. (c) To employ such manager, telephonist and other staff as may, from time to time, be desirable. (d) To conduct for and on behalf of the members from time to time, such negotiations and activities as may be deemed to be in the interests of the members in connection with their said businesses. (e) To do all other things as may from time to time, in the opinion of the association, or of the committee of the association be deemed desirable and opportune for the development of the business interests of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of electing and expelling and making, altering or revoking bye laws . . . . 34. The committee shall keep all proper and necessary records of all receipts and payments taken or made by them on behalf of the association or its members and shall present an audited account thereof at the annual general meeting and the same shall be at the expense of the members of the association. The total expenses of the association thus ascertained will be divided equally among the members. Any member who has been a member for only a part of the period covered by the account shall be allocated a rateable proportion of the total expenses computed on a time basis. At the same time every member will receive a statement of his account with the association covering the same period in which he will be charged his share of the total expenses and credited with the contributions he has made in accordance with clause 7 (g) above. The balance of each member's account at the end of the period may be dealt with by reduction or increase or such member's future contribution or in any other manner at the discretion of the committee including demand for immediate payment of any debit balance in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of supply for VAT purposes and the nature of the private law of 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 : Customs and Excise Comrs v. Reed Personnel Services Ltd [1995] STC 588, 595 per La1ws J. 15 It is also right to bear in mind the approach of Advocate General Jacobs in H J Glawe Spielund Unterhaltungsger te Aufstellungsgesellschaft mbH Co KG v. Finanzamt Hamburg-Barmbek-Uhlenhorst (Case C38/93) [1994] STC 543, 547, para 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and removal of members. The association is empowered to invest money. Only members of the association are entitled to benefit from the activity of the association. The members pay a joining subscription of 50 or such other fee as shall be fixed by the association in general meeting and they also pay a periodical sum fixed by the association's committee on account of the members' share of the expenses of the association (article 7(g)). In the drivers' rules attached to the constitution the word subscription is taken to refer to such contributions on account of expenses (article 42). The subscriptions are paid direct to the association and they do not go to other members who are said to provide the employees. A member's share of the expenses is not calculated on specific services rendered for him eg in arranging a particular journey but on the total expenses for the year divided amongst the members and any member who has been a member for only a part of the period covered by the account shall be allocated a rateable proportion of the total expenses computed on a time basis (article 34). The subscription for 1994 included in each case a higher amount than the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the association as an administrative intermediary as the association contends. Moreover there is not simply a sharing of expenses between two bodies as in Durham Aged Mineworkers' Homes Association v. Customs and Excise Comrs [1994] STC 553 upon which Mr Smouha strongly relied and the correctness of which decision on its own facts I do not doubt. Nor does this case raise the same issues as those decided by your Lordship's House in Nell Gwynn House Maintenance Fund Trustees v. Customs and Excise Comrs [1999] 1 WLR 174 which reversed the decision of the Court of Appeal [1996] STC 310 to which the courts below referred. 24 Such a conclusion is not contrary to what was said by Lord Russell of Kilowen in Inland Revenue Comrs v. Duke of Westminster [1936] AC 1, 24. On the contrary it is within the letter and spirit of the Act which implements the result intended in the Sixth VAT Directive (Council Directive 77/ 388/EEC of 17 May 1977). It also fully reflects the commercial reality whatever the drafting changes in the association's constitution as to the providing of service for the drivers. It follows that in my opinion in this case the Court of Appeal reached the righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he carrying on of a business when they might not otherwise be so regarded. It enables a taxable supply made by a taxable person, which otherwise might have been thought to fall outside section 4(1) because it was not in the course or furtherance of a business, to be brought within it. It therefore obviously assumes that the provision of facilities by a club etc to its members can amount to a taxable supply by a taxable person. This confirms the construction which the Interpretation Act 1978 gives to person in the term taxable person . 31 The next stage is to ask whether the association is not only a person but a taxable person . But this turns out to be linked with the second question about whether the association is making taxable supplies to its members, because a taxable person is defined as a person who is, or is required to be, registered for VAT (section 3(1)) and a person is required to be registered (subject to a minimum turnover requirement and other immaterial qualifications) if he is making taxable supplies: see Schedule 1. So the critical question is whether the association is making taxable supplies to its members. If so, it is a taxable person. In fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee or committees, the admission of members and the cessation of membership (giving the association a continuity beyond its original members) and provisions (or a rule-making power) for the terms and conditions upon which members may enjoy the benefits of membership. This list of the paradigm characteristics of an association is not intended to be exhaustive. Furthermore, it is perfectly possible for contractual arrangements to lack one or more of these features and still be regarded as constituting an association. But the further the arrangements depart from those of the standard case, the less likely they are to be treated as an association for the purposes of the Act. 35 The second condition is to exclude arrangements which are not with members as such but involve the association acting simply as an ordinary third party. For example, if two members of a club ask the wine steward to buy them a case of wine as part of the club's next order, undertaking to reimburse the cost, there is no supply to the members by the club. It is simply acting as their purchasing agent. On the other hand, if the club, acting in accordance with its rules, supplies wine out of its own stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or simply per capita or in any other way. What matters is that the consideration for the member's entitlement to services under the rules is a payment into the funds of the association in accordance with the rules. 39 Mr Smouha submitted that it was surely conceptually possible for persons in the position of the members of the association to set up an arrangement which merely amounted to a joint purchase of services, with a central paymaster. If so, the only question was whether they had succeeded in doing so. My Lords, I would not like to engage in the question of whether it is conceptually possible. That question involves asking whether it can be done without interposing between the employees and the members something which is treated in VAT law as an association and therefore a separate person making supplies to those who receive services by virtue of its rules. I do not wish to speculate upon whether complex arrangements for common provision of services can be created without involving an association of the recipients. It is sufficient that in my opinion the present arrangements clearly do so. For these reasons, as well as those given by my noble and learned friend, Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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