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TMI Blog2002 (7) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 July. Lord Slynn of Hadley My Lords, Miss Brierley ordered some bulbs from Bakker Holland, the name under which Plantiflor Ltd trades in the United Kingdom. She received an invoice dated 5 September 1996. The invoice specified that the price of the goods she had ordered was 52.00. There were other charges of 2.50 ( Postage ( 1.63) plus packing ( 0.87) ) and 0.25 transport insurance. The total was thus 54.75. The invoice acknowledged that she had already paid this sum. The total VAT was stated to be 53.12 17.50% = 7.91 . The difference between 53.12 and 54.75 is 1.63, the postage charged. Thus no VAT was charged on the postage. The commissioners however say that VAT was chargeable to Plantiflor on the postage. Plantiflor says it was not. Accordingly, Miss Brierley's order was taken as a particular assessment to test the practice of the commissioners in respect of many thousands of mail orders. Mr P M F Horsfield QC, the chairman of the London VAT and Duties Tribunal [1997] V and DR 301, allowed Plantiflor's appeal and held that VAT was not payable by Plantiflor on the postage. Laws J [1999] STC 51 held that it was and reversed Mr Horsfield. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom VAT. By section 19 (2) of the 1994 Act: If the supply [of goods or services] is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration. The contract between Plantiflor and its customers is to be found in a page in Plantiflor's catalogue and the order form filled in by the customer together perhaps with the invoice. The catalogue under the heading Convenience of Delivery to Your Door states: Bakker deliver every order, whether large or small, direct to your home. Everything neatly packed with the utmost care. You will also receive the latest 'Garden Review'. Under the heading Collection and Delivery : Orders collected incur no handling charges. If you require delivery by carrier then a nominal charge is made to cover mail order packing and handling. We will happily arrange delivery on your behalf via Royal Mail Parcelforce if requested. In which case please include the postage and handling charge on your order. We will then advance all postage charges to Royal Mail on your behalf. The order form in the present case on the front side contains spaces to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the parcels dispatched would be delivered on or before the third working day after dispatch. On 21 September 1993 Plantiflor told Parcelforce that in Holland and Germany no VAT was charged on postage. This was on the basis that: providing we charge the customer the actual value of the postage paid to the PTT and that all contracts state clearly that we are receiving postage, and posting parcels on their behalf, we will no longer be the contract principal, merely the customers' agent. Plantiflor therefore proposed that Parcelforce should confirm that it delivered parcels (a) for us as principal and (b) as agent of our retail customers . Plantiflor on 7 March 1994 told the commissioners that they intended no longer to pay VAT on the postal charge and they asked for the commissioners' acceptance of this: If the customer requires us to present the goods either to a chosen carrier or to Royal Mail Parcelforce at a special price of 1.45 negotiated on our customers' behalf then we will do so subject to an additional packaging charge of 0.50. By letter of 8 August 1994 the Commissioners replied that it might be possible to treat the postage as a disb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as seems more likely, Plantiflor merely undertook to arrange insurance then the position would seem to be analogous to the present question though the matter has not been gone into in argument. If VAT was payable on the arrangement for insurance it may follow that it was also payable in respect of the arrangement for transport. Plantiflor's case relating to the transport in essence is that it made arrangements in September 1993 to act as agent for its customers and that it would receive the postage and pass it on to Parcelforce as such agent and that all services rendered by Parcelforce were rendered as principal to the customer. The consideration of 1.63 in fact moved from the customer to Parcelforce. The Court of Appeal considered that the commissioners had conceded that there were two supplies one of the sale of goods by Plantiflor and one of the service of arranging delivery of the goods via Parcelforce. There was also a supply of services by Parcelforce to the customer in the actual delivery of the goods. The judge thought this concession right. The Court of Appeal refused to allow the commissioners to go back on the concession and to argue that there was only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plantiflor did not deliver the goods and there was no consideration paid either in the postage charge or in the handling charge or in the price of the bulbs for arranging the delivery by Parcelforce. As to the agency argument Plantiflor of course relies on the provision of the catalogue We will . . . arrange delivery on your behalf. . . We will then advance all postage charges to Royal Mail on your behalf . They insist that for this reason no consideration moved from Plantiflor to Parcelforce. The tribunal [1977] V DR 301, 322 accepted that the role of Plantiflor in relation to delivery was that of agent or other intermediary . This conclusion however does not take into account the terms of the agreement between Plantiflor and Parcelforce. It is plain from the terms of that agreement to which I have referred that Parcelforce was to deliver parcels for Plantiflor . Parcelforce was to charge Plantiflor and Plantiflor was to pay invoices from Parcelforce by direct debit transfer. There is nothing in that agreement to express or even indicate that the two contracting parties were not acting as principals, in other words that Plantiflor was acting as agent for its customers. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arcels or even from a list, it would not be sufficient to constitute each part of the global direct debit or credit as being in the name or for the account of the individual customer. It is clear from Customs and Excise Comrs v. Redrow Group plc [1999] 1 WLR 408 that one set of acts can constitute two different supplies of services. There it was to be found in the work of the estate agent in connection with the marketing of the existing home of the potential purchaser of a new Redrow home as well as selling the Redrow home. The House held that what was done was a supply of services to Redrow as well as to the owner. Lord Millett said, a pp 418-419: In the present case the taxpayer did not merely derive a benefit from the services which the agents supplied to the householders and for which it paid. It chose the agents and instructed them. In return for the payment of their fees it obtained a contractual right to have the householders' homes valued and marketed, to monitor the agents' performance and maintain pressure for a quick sale, and to override any alteration in the agents' instructions which the householders might be minded to give. Everything which the age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of that product or service. In this case it was the latter. For the reasons already given I would hold that VAT is payable in the sum of 1.63 in respect of postage and I would allow the appeal. Lord Mackay of Clashfern My Lords, Plantiflor supplies goods and services to its customers. No question arises with regard to the supply of goods. So far as the supply of services is concerned what Plantiflor has agreed to do in respect of the consideration of 2.50 paid by the customer to Plantiflor is to arrange that the goods in question will be delivered by Parcelforce to the customer or to his order, the goods having been packed and delivered by Plantiflor to the relevant Parcelforce depot. It is agreed that the charge by Parcelforce for the delivery by them to the customer or to his order is 1.63 and the charge for packing and delivering the goods to the relevant Parcelforce depot and making the arrangements for their transmission by Parcelforce to the customer or to his order is 87p. The service of delivery is optional. By the time the question of delivery arises the goods are agreed to have become the property of the customer and therefore can only be moved or deliv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery of the goods by Parcelforce to the customer or to his order was not part of the supply which Plantiflor gave to the customer. That supply was completed when the packed goods were handed by Plantiflor to Parcelforce for delivery and the payment for it was made. The tribunal [1977] V DR 301, 323, finding 7.1(5) found as a fact that the consideration for that supply was included in the purchase price of the goods plus the 87p for the packaging cost. The 1.63 was not payment to any extent for the supply that Plantiflor gave to the customer. It was entirely devoted to the payment of the service supplied by Parcelforce to the customer. I accept that the arrangements were not arrangements for Plantiflor to be an agent of the customer to make payment to Parcelforce. The customer incurred no liability to Parcelforce in the event of default by Plantiflor to satisfy the payment arrangements which it had negotiated with Parcelforce. The invoice for the transaction made it plain that the intention of the parties was that the 1.63 should be the payment to Parcelforce for its service. In my opinion therefore in accordance with the view of Lord Slynn to which I have already re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(A)(3)(c) deals with the question that arises where in order to provide a supply the supplier incurs an expense to a third party, for example a subcontractor. Where that expense is incurred in the provision of the supply for which the consideration is in issue it can only be deducted in terms of article 11(A)(3)(c) when the full conditions are satisfied as, for example, when trust conditions are impressed on part of a payment to a contractor to protect the cash flow of a subcontractor in the event of the principal contractor becoming bankrupt. It does not appear to me to answer the question whether a particular sum is or is not part of the consideration for the supply. The agreement between Plantiflor and Parcelforce, rightly described during the hearing by my noble and learned friend Lord Hobhouse of Woodborough as a contract for carriage, involves a supply by Parcelforce to Plantiflor of the service of accepting customers' goods for delivery to the customer or to his order on terms set out in it but the consideration for this is not the charge that Parcelforce makes for delivery by it to the customer. The argument for the commissioners is based upon the submission th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consideration paid to the supplier by a third party. In this case Plantiflor paid to Parcelforce 1.63 for delivering the goods. It is therefore the consideration for this supply for VAT purposes. Although the consideration for the delivery by Parcelforce to the customer or to his order was paid by the customer as part of the total sum he paid to Plantiflor it was clearly the intention of the parties that it should be passed on to Parcelforce and this is what in fact happened and in my opinion it is entirely right that the total sum paid by the customer to Plantiflor should, for the purposes of value added tax, be allocated to the various supplies involved in the transaction: a supply of goods by Plantiflor to the customer, the packing and delivery of the goods to the Parcelforce depot which is a supply of services by Plantiflor to the customer and finally the supply of services by Parcelforce to the customer. I conclude by agreeing that there were three distinct suppliers in the present case. (i) The supply by Parcelforce to Plantiflor of the service of delivering its customer's goods. This was supplied pursuant to a contract for carriage made between Parcelforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into an agreement with the firm to pay their fees for the work, but only where a customer sold his existing home and bought a new house from the taxpayer. In order to recover their fees if a prospective customer found a buyer for his home but did not proceed to buy a house from the taxpayer, the firm entered into separate contracts with the customers. The firm were held to have made two different supplies. One, made to the customer, was a supply of the ordinary services of an estate agent in valuing and marketing his house. The other, made to the taxpayer, was the supply of the services of an estate agent in valuing and marketing its customer's house. Thus a single course of conduct by one party may constitute two or more supplies to different persons. In the present case the three parties entered into two separate but related bilateral contracts. One was the contract between Plantiflor and its customer by which Plantiflor sold plants, bulbs and other horticultural and related products to the customer and, if the customer requested it and paid a sum of 2.50 (which included postal charges of 1.63), arranged to have the goods delivered by Parcelforce (part of Roya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not undertaken to do that. It had undertaken only to make arrangements for the goods to be delivered by Parcelforce. Those arrangements, however, included not only packaging the goods and delivering them to Parcelforce for onwards transmission, but also paying the postal charges. It had expressly agreed with its customer to pay them. If Plantiflor had undertaken to deliver the goods itself, using Parcelforce as its subcontractor to make the actual delivery, the tax position would be straightforward. There would be two supplies: (i) a supply by Parcelforce to Plantiflor of the service (as its subcontractor) of delivering the customer's goods to the addressee and (ii) a supply by Plantiflor to the customer of the service of delivering his goods to the addressee (performed through its subcontractor). Consideration would pass from the customer to Plantiflor and from Plantiflor to Parcelforce. If Plantiflor were to use a private and taxable carrier instead of Parcelforce to make delivery, both supplies would be taxable supplies. But there would be no double payment of tax. The tax payable by Plantiflor to the carrier would be deductible in its hands as input tax. The problem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's future customers as undisclosed principals; and the contrary has not been suggested. Plantiflor is accordingly contractually liable to Parcelforce to pay the postal charges, and the customer is not. Parcelforce cannot look to the customer for payment. It does not even know his identity unless he happens to be the addressee. When it delivers the customer's goods pursuant to its contract with Plantiflor, therefore, Parcelforce gives credit to Plantiflor, not to Plantiflor's customer. Plantiflor advertises that it deliver[s] every order, whether large or small, direct to your home ; and its undertaking to arrange delivery by Parcelforce and to advance all postal charges to Parcelforce is an undertaking to make all necessary arrangements to have the goods delivered. The customer's acceptance of Plantiflor's terms does not authorise Plantiflor to bring him into a direct contractual relationship with Parcelforce so that, if Plantiflor defaults in payment of postal charges to Parcelforce, the customer, who has already paid postage to Plantiflor, could find himself liable to pay it over again to Parcelforce. None of the parties to these arrangements had any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly contracted, and that it was this supply which was made for the consideration which Parcelforce received. This led them into the further error of treating the sum paid by the customer to Plantiflor as consideration for the supply of the service of delivery by Parcelforce. It was not, for Parcelforce received its consideration from Plantiflor. The sum which the customer paid to Plantiflor was paid as consideration for the supply which Plantiflor made to the customer, viz of the service of arranging for delivery to be made by Parcelforce. To sum up: there were three distinct supplies in the present case, and it is necessary to identify the particular supply for which the payment made by the customer was the consideration. (i) The supply by parceforce to Plaintiflor of the service of delivering its customer's goods. This was supplied pursuant to a contract for delivery made between Parcelcorce and Plaintiflor and was for consideration payable by plaintiflor, It is (or would if parcelforce were a private carrier be) a taxable supply. (ii) The supply by parcelforce to the customer of the service of delivereing his goods to him or his order. This supply was also made pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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