VAT:  repayment claim for output tax on unused vouchers – vouchers non-refundable – whether failure to take up the right purchased meant that there was no supply and ceased to be a supply of services – appeal dismissed.

EDINBURGH TRIBUNAL CENTRE

	TAYSIDE AVIATION LTD	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman)   T Gordon Coutts, QC

Sitting in Edinburgh on Monday 21 July 2003

for the Appellants		S Taylor, FTII., ATT

for the Respondents	Richard Shaw

© CROWN COPYRIGHT 2003.

DECISION

Introductory
This is an appeal against an assessment to tax which, it was contended by the Commissioners the Appellants had wrongfully deducted from their return.  The tax was output tax which the Appellants had charged in the circumstances undernoted but which they contended fell to be reclaimed from the Commissioners on the basis that no service had been supplied.  The Tribunal heard evidence from Mr David John King the Appellant’s accountant.  He outlined the operation of the voucher scheme.  His evidence was not challenged and there was no counter evidence.

The Facts
The Appellants provide private pilot training.   They do not provide pleasure flights.  They have about 20 aircraft which are available for the provision of flying lessons and for hire.  A customer pays for the lesson or a hire at the time it is taken.  However in the exercise of sound business initiative in the 1970’s the Appellants introduced a gift voucher scheme.  At the time with which this appeal is concerned the voucher could be purchased by a member of the public for presentation to another person.  The name of the purchaser and the recipient were entered on the voucher and the voucher itself was printed as if for a flight of unspecified duration.  The duration was inserted corresponding to the amount paid. The voucher was given an expiry date of 12 months in the usual transaction, but the expiry date was not preprinted.  It was expressly non-refundable although it was transferable and could be redeemed for a meal in a specified restaurant, run by the Appellants, instead of a flight.  No value was expressed on the voucher although its value would be readily ascertained by reference to the charge for the flight of specified duration. 

At the time with which this appeal is concerned the Appellants charged and accounted for VAT on the sale of the voucher.

The voucher was usually redeemed for a flight but very occasionally for a restaurant meal.  From time to time a voucher was not redeemed at all.  Although no refund was given the Appellants then sought to deduct or reclaim the VAT which had been paid by the purchaser for the voucher itself on the undernoted line of reasoning.

Appellant’s Contentions
The Appellant contended that where the gift voucher was not redeemed the sale of the gift voucher constituted neither a supply of goods or services.  The voucher it was said did not constitute a supply of a particular flight or item such as was provided in Celtic PLC (VAT decision 14762) or C&E Commissioners v Bass PLC [1993] STC 42.

The Tribunal was also referred to Acorne Sports Limited (VAT decision 18009), New World Payphones Ltd (VAT decision 15964), British Rail Board v Customs & Excise Commissioners [1977] 1 BVC 116 and Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C-16/93) of the European Court.

Contentions for the Commissioners
The Commissioners founded strongly on the case of Acorne, Bass and Celtic in each of which there had been provided, by means of pre-payment, the supply of a right to receive some benefit.  In Bass it was a guaranteed booking, in Celtic a right to attend some football match.  Payment is accordingly advance payment, a supply is made at the time of payment and it matters not whether or not the voucher is redeemed.

Decision
The Tribunal had no hesitation in holding that the supply of the gift voucher itself correctly attracted VAT, which was the regime adopted.  The contention that if, subsequently, the obligation of Tayside was not called up and the sum paid was forfeit there was suddenly not a supply appeared to the Tribunal to be unstatable.

The Tribunal noted that there was no question of a refund of the sum given for the voucher and accordingly the purchaser of the voucher, who had paid VAT on it was not entitled to reclaim any of the monies he had paid.  That looks absurd and in the view of the Tribunal is absurd.  The proper view of the situation is that the Appellants had undertaken to provide a service, they had received payment for it and whether or not the recipient or purchaser chose to exercise his right cannot be determinative of whether or not there was a supply.  It would be a total distortion to allow the Appellants to reclaim output tax they had accounted for depending on the whim of the recipient who had paid the full price for the service to which he was entitled, knowing that the full price was not refundable.

The appeal accordingly fails and is dismissed.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  25 JULY 2003

EDN/02/152