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VAT Voice by Steve Allen

Steve Allen, Director of VAT Solutions (UK) Ltd, summarises a recent Court decision on the valuation of imports.

Background

The Appellant was a firm of opticians with branches throughout the UK, some of which were run by itself as principal, and others by franchisees.

From July 1999, it operated an offering named 'Contact Lenses by Post' ('CLBP') to private individual customers in the UK. Under CLBP, the customer receives regular deliveries of disposable contact lenses (with cleaning solutions and soaking cases) directly to his/her home from Jersey, and a number of services including an initial contact lens consultation, dispensing and fitting services, and professional aftercare services as required by the customer. The customer enters a contract with a sister company of the Appellant, and makes a single monthly payment by direct debit to it covering the total cost of the CLBP offering. In practice, the customer receives the related services by visiting his/her local branch in the UK, whether operated by the Appellant as principal or by a franchisee.

Point at issue

The dispute concerns the valuation at importation of the contact lenses, and whether there is eligibility for negligible value relief under Article 22 of Council Directive 83/181/EC of 28 March 1983. This relief is implemented in UK law as Item 8 of Group 8 to the Value Added Tax (Imported Goods) Relief Order 1984 (SI 1984 No 746) and, since 1 January 1996, the relief applies to any consignment of goods (other than alcoholic beverages, tobacco products, perfumes and toilet waters) not exceeding £18 in value.

The Appellant argued that the relevant valuation was only that of the goods, whilst HMRC argued that the relevant valuation was the total price paid by the customer. The Court made the preliminary point that, as we are looking here at an importation from Jersey, the taxable amount is defined by Article 11B(1) of the Sixth Directive as the value for customs purposes, determined in accordance with Article 29 of the Customs Code.

Decision

The Court first considered whether the ECJ tests in Card Protection Plan were relevant for the purposes of applying Article 29 of the Customs Code. It found that CPP relates to the scope of a transaction subject to VAT in a Member State, and did not have relevance in applying Article 29 of the Customs Code. The Court then addressed the case law precedents on Article 29 of the Customs Code - Van Houten (C-65/85), Brown Boveri (C-79/89), Overland Footwear (C-379/00) and Bay Wa (C-116/89). The Court concluded that the transaction value must be determined on the basis of the conditions of each individual sale and that, on the basis that the offering is a global one in respect of which a single payment is made, the supplies of services must be regarded as part of the 'payments made or to be made as a condition of sale of the imported goods by the buyer to the seller .... to satisfy an obligation of the seller' within the meaning of Article 29 of the Customs Code and, therefore, as an integral part of the Customs value. It makes no difference to this conclusion that the services were provided by a different legal entity or that the services took place in the UK whilst the goods were transported from Jersey.

Dollond & Aitchison Ltd(C-491/04), 23 February 2006

March 2006

Steve Allen
Director, VAT Solutions (UK) Ltd
Email: steveallen@vatsolutions-uk.com

VAT Solutions (UK) Ltd
1 Dundonald Avenue
Stockton Heath
Warrington
WA4 6JT

(T) 01925 212244
(F) 01925 212255
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(W) www.vatsolutions-uk.com

VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via their website: