[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> HM Revenue & Customs v Weight Watchers (UK) Ltd [2008] EWCA Civ 715 (25 June 2008) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/715.html Cite as: [2009] BVC 91, [2008] STI 1644, [2008] EWCA Civ 715, [2008] STC 2313, [2009] BTC 5091

[New search] [Printable RTF version] [Help]

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
MR JUSTICE MORGAN
CH2007APP0259

		Royal Courts of Justice Strand, London, WC2A 2LL
		25 June 2008

The Chancellor:

Introduction
1. Membership of Weight Watchers (UK) Ltd ("WW") is open to those whose weight exceeds a level identified by reference to certain charts and who wish to reduce it. In January 2005 WW introduced for its members a weight loss and weight management programme entitled "Switch", the benefits of which are made available to members at meetings organised by WW. A person who seeks to become a member attends such a meeting and is enrolled, provided with, amongst other documents, the Switch Handbook and instructed how to use it. At that meeting the newly enrolled member, together with all the existing members attending that meeting are 'weighed in', receive a leaflet and other printed matter and have the benefit of the address of the leader of that meeting. The newly enrolled member pays £9 for enrolment and £4.95 for the meeting; the existing member pays £4.95 for the meeting.
2. On 11th March 2005 the appellants ("HMRC") ruled that for the purposes of VAT

"the components of the Weight Watchers classes, the classes and the printed matter together, [form] one supply of a (standard-rated) weight loss programme."

This ruling was disputed by WW. It appealed to the VAT and Duties Tribunal (Theodore Wallace Esq and Mrs Lynneth Salisbury JP). It contended that the events of the meetings gave rise to two separate supplies, namely a zero-rated supply of the printed materials and a standard-rated supply of the other goods and services. It accepted that, on this analysis, the price paid by the member, be it £13.95 or £4.95 should be apportioned. For the reasons explained in their decision released on 8th March 2007 the Tribunal accepted the submissions of WW and allowed its appeal.

3. HMRC appealed and their appeal came before Morgan J. He drew a distinction between the supplies made in relation to any given member at his or her first meeting and all other supplies to members attending meetings. He saw no sufficient reason for interfering with the decision of the Tribunal that the consideration paid by the new member at his or her first meeting, namely £13.95, was for separate supplies of services and printed materials. Accordingly he dismissed the appeal of HMRC "in relation to the transaction involved in the first meeting attended by a customer". But in the case of the transactions involved in subsequent meetings he considered that the consideration of £4.95 was paid for a single standard-rated supply of weight loss services.
4. WW now appeals, with the permission of Sir John Chadwick, from the decision of Morgan J in relation to the subsequent meetings. HMRC appeals, with the permission we granted at the commencement of the hearing, from the decision of Morgan J in relation to the first meeting. The issue in relation to both appeals is, as originally formulated by the Tribunal,

"whether customers of [WW], who attend weekly meetings at which they are weighed and can then remain to attend a talk and discussion period but in any event also receive a handbook and other printed material at the meetings, receive single standard-rated supplies of a weight-loss programme or separate supplies of zero-rated printed material and standard-rated support services."

The Facts
5. It is common ground that these appeals, both to the judge and to this court, lie on a point of law only. It is also common ground that the determination of the issue so formulated is one of law, Dr Beynon v HMCE [2005] STC 55, 62 paras 26 and 27 ("Dr Beynon") and College of Estate Management v HMCE [2005] STC 1597 paras 35 and 36 ("College of Estate Management"). It follows that the essential starting point is the facts as found by the Tribunal. They are set out verbatim by the judge in paragraph 3 of his judgment. I will treat them as read. It is unnecessary in this court to go into the same detail as the Tribunal, but it is appropriate, without trenching on their exclusive preserve, to extract and summarise the material facts.
6. Switch consists of two alternative food plans, Full Choice and No Count. The former is based on an elaborate points system, the latter uses points in relation to food not on a permitted list. Switch includes what are described as 10 Winning Habits which members are encouraged to adopt. [Tribunal paras 5 to 8] There are about 6,000 to 6,500 meetings each week held in halls of various descriptions up and down the country and controlled by a 'Leader'. Attendance varies according to the time of year but may amount to about 80. Those who attend are either new members seeking to enrol, existing members or former members for whom it is cheaper to re-enrol rather than pay for missed weeks. [Tribunal paras 9 to 12]
7. All those attending the meeting are provided with that week's leaflet, a points tracker form for the week and, once a month, the magazine 'irresistible'. Those enrolling for the first time get a copy of the handbook, together with a points calculator and bonus booster. Those re-enrolling may not need another copy of the handbook or the points calculator and bonus booster. [Tribunal paras 12 to 15] The various publications are described by the Tribunal in paragraphs 20 to 24 of their decision. I should refer to the Handbook. This publication is 7 inches square and comprises 170 pages divided into seven sections. The section entitled 'Get Support' emphasises, in effect, the importance of group therapy and of the encouragement and support provided by the Leader and the other members present at the meeting.
8. Meetings last for about an hour. Members are 'weighed in' by the Leader, that is to say that they are weighed by the Leader and their weight that week is recorded. There is ample opportunity for conversation with other members while the weighing in progresses. Later they get the benefit of a talk by the Leader on some relevant topic and a group discussion. Those enrolling for the first time also get, at the end, an 'orientation' talk on how Switch works and how to navigate the Handbook. [Tribunal paras 17 to 19] The responsibility for the arrangements for the meetings and their venues rests with the Leaders and Area Managers appointed by WW. [Tribunal paras 25 and 26]
9. In addition WW provides weight loss programmes for At Home and On Line customers. They receive the printed material by post and on line respectively. The supply of the former is zero-rated and of the latter standard-rated. The terms and cost of membership are different. [Tribunal paras 11 and 27].
10. In relation to the transactions effected at the meetings the Tribunal concluded in paragraphs 56 and 57:

"56. In the present case although separate fees are charged at the initial meeting for registration and for attendance at that meeting, a customer cannot attend as a Member without paying the registration fee, except when there is a special promotion, and cannot register without paying the meeting fee for that week. We conclude that as a matter of contract and VAT law there is a single transaction at the first Meeting for a consideration comprising both fees. For this consideration the Member is supplied with the Handbook with Points Finder and Bonus Booster insert and is given an orientation talk in addition to the supplies made at weekly meetings thereafter; the Member is also given the right to attend further meetings without paying further registration fees.

57. Each time the Member attends a meeting thereafter there is a further transaction for a separate consideration. There is no contractual obligation to attend further meetings. No part of the further consideration is attributable to the Handbook and insert which has already been supplied or to the other printed materials already supplied. That Member already has the Handbook and thus only attends to obtain the services provided at the further meeting and the further printed materials."

There is no challenge to these conclusions.

The Law
11. As is well known, art 2(1) Sixth Directive requires member states to subject to VAT

"the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such."

Neither the Sixth Directive nor the VAT Act 1994 give any guidance as to how to identify a single supply consisting of a number of elements or the recognition of several distinct supplies in a single transaction. That guidance has been provided by the European Court of Justice. It is common ground that the test relevant to the issues in this case is that enunciated by the European Court of Justice in paragraph 22 of its judgment in the case of Levob Verzekeringen BV and another v Staatssecretaris van Financien (C-41/04) [2006] STC 766 ("Levob") in the following terms:

"The same (sc.there is a single supply) is true where two or more elements or acts supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split."

In its ruling the Court stated:

"Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment must be interpreted as meaning that where two or more elements or acts supplied by a taxable person to a customer, being a typical consumer, are so closely linked that they form objectively, from an economic point of view, a whole transaction, which it would be artificial to split, all those elements or acts constitute a single supply for purposes of the application of VAT;"

The principle originated in the judgment of the Court in Card Protection Plan Ltd v Commissioners for Customs and Excise [1999] STC 270 ("Card Protection Plan").

12. In that case, for a single fee, Card Protection Plan ("CPP") provided a credit card protection plan which was intended to protect the card holder from financial loss caused by the loss or theft of their credit cards. The plan consisted of a number of elements including the benefit of insurance cover under a block policy taken out by CPP. Customs and Excise claimed VAT on the basis that there was a single supply of the package of services available under the plan. CPP contended that there was a separate supply of insurance services which was exempt from VAT. The House of Lords referred a number of questions to the European Court of Justice for a preliminary ruling. They asked:

"what is the proper test to be applied in deciding whether a transaction consists for VAT purposes of a single composite supply or of two or more independent supplies".

13. This question was answered by the Court in paragraphs 26 to 32 of its judgment. It pointed out in paragraph 27 that owing to the diversity of commercial operations it was not possible to give exhaustive guidance on how to approach the question in all cases. It emphasised the need to have regard to all the circumstances in which the transaction had taken place and continued:

"29. In this respect, taking into account, first, that it follows from article 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, secondly, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service.

30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied:  Customs and Excise Commissioners v. Madgett and Baldwin (trading as Howden Court Hotel) (Joined Cases C-308/96 and 94/97)  [1998] STC 1189, 1206, para. 24.

31. In those circumstances, the fact that a single price is charged is not decisive. Admittedly, if the service provided to customers consists of several elements for a single price, the single price may suggest that there is a single service. However, notwithstanding the single price, if circumstances such as those described in paragraphs 7 to 10 above indicated that the customers intended to purchase two distinct services, namely an insurance supply and a card registration service, then it would be necessary to identify the part of the single price which related to the insurance supply, which would remain exempt in any event. The simplest possible method of calculation or assessment should be used for this: see, to that effect,  Madgett and Baldwin,  at p. 1208, paras. 45 and 46.

32. The answer to the first two questions must therefore be that it is for the national court to determine, in the light of the above criteria, whether transactions such as those performed by C.P.P. are to be regarded for VAT purposes as comprising two independent supplies, namely an exempt insurance supply and a taxable card registration service, or whether one of those two supplies is the principal supply to which the other is ancillary, so that it receives the same tax treatment as the principal supply."

14. It is common ground that the principles enunciated in paragraph 30 of the Court's judgment in CPP do not apply to this case. But it is, I think, clear that the general principle set out in paragraph 29 and elsewhere in the passages I have quoted is what the Court reaffirmed in Levob. But, in the meantime, Lord Rodger of Earlsferry had suggested in College of Estate Management at 1601 para 8 et seq that the version of the Court's judgment in English lacked clarity.
15. In that case the College provided distance learning courses for the training of property and construction professionals consisting of printed materials, face to face teaching sessions and the material on its website. The College claimed that it provided separate, zero-rated, supplies of written materials and exempt supplies of the rest of its educational services so that it might reclaim VAT paid in relation to the zero-rated supplies. That contention was upheld by the Court of Appeal. In the House of Lords Lord Rodger of Earlsferry referred to the judgment of the European Court of Justice in Card Protection Plan and the problems with the English version. In paragraph 12 he said:

"But the mere fact that the supply of the printed materials cannot be described as ancillary does not mean that it is to be regarded as a separate supply for tax purposes. One has still to decide whether, as a matter of statutory interpretation, the College should properly be regarded as making a separate supply of the printed materials or, rather, a single supply of education, of which the provision of the printed materials is merely one element. Only in the latter event is there a single exempt supply, to which section 31(1) of the Act applies and section 30(1) does not apply. The answer to that question is not to be found simply by looking at what the taxable person actually did since ex hypothesi, in any case where this kind of question arises, on the physical plane the taxable person will have made a number of supplies. The question is whether, for tax purposes, these are to be treated as separate supplies or merely as elements in some over-arching single supply. According to the Court of Justice in Card Protection, at para 29, for the purposes of the directive the criterion to be applied is whether there is a single supply "from an economic point of view". If so, that supply should not be artificially split, so as not to distort (altérer) the functioning of the value added tax system. The answer will accordingly be found by ascertaining the essential features of the transaction under which the taxable person is operating when supplying the consumer, regarded as a typical consumer. Since the 1994 Act has not adopted any different mechanism to give effect to this aspect of the directive, the same approach must be applied in interpreting the provisions of the Act. The key lies in analysing the transaction."

16. The decision of the House of Lords in College of Estate Management was given five days before the judgment of the European Court of Justice in Levob. In Levob the question was whether two or more separate transactions, the supply of consumer software and its customisation, should be regarded as a single supply. The Court of Justice formulated the principle which I have already quoted. In doing so they did not adopt the formulation put forward by the Advocate-General in paragraphs 69 to 73 of her opinion of an inseparable link or connection between the several elements or services constituting the single supply.
17. In summary, therefore, the court must have regard to all the circumstances. It must apply the relevant test on an objective basis. There are various formulations of what the relevant test is in Card Protection Plan para 29, Levob para 22 and Levob ruling 1. Common to all of them are the requirements that the court must look at the transactions from the view point of the typical consumer rather than the supplier. The extent of the linkage between the relevant transactions must be considered from an economic point of view, rather than, say, a physical, temporal or other standpoint. So regarded the question then is whether it would be artificial to split them into separate supplies. The fact that the supplier has charged a single price for the aggregate of the transactions is a relevant circumstance but is not conclusive because that price may be apportioned.
The decision of the Tribunal
18. As I have already indicated the Tribunal set out the facts as found by them in paragraphs 5 to 28 of their decision. In paragraphs 29 to 44 they summarised the submissions of counsel for the parties. They noted that the starting point for consideration of the question was the decision of the European Court of Justice in Levob developing its own decision in Card Protection Plan. They considered both those cases and the decision of the House of Lords in College of Estate Management.
19. In paragraph 49 the Tribunal considered the economic element of the relevant test and said:

"Levob shows at [24] that the economic purpose of the transaction is potentially relevant as is the question of whether the separate elements are of any economic use by themselves. The reference to economic is in our view included because the supply in that case was for the purpose of an economic activity of the recipient. That does not apply here; however the purpose of the recipient must be relevant notwithstanding that the customer is not using the supply for an economic purpose."

Later [paragraph 58] the Tribunal added:

"If the word "economic" in [22] of Levob is relevant to a case such as this, it seems to us that it can only be in the sense of being indivisible in a practical business sense. We can see no reason why it would be impractical to charge separately for the weekly and monthly leaflets magazine just as a charge is made for Weight Watchers magazine."

Counsel for HMRC contended before the Judge and submits to us that in the former passage the Tribunal can be seen to have fallen into error and that such an error was not redeemed by the consideration referred to in the latter passage. I will return to that point in due course.

20. The Tribunal then considered the requirement to have regard to the typical consumer. In paragraph 52 they said:

"In our judgment the reference to a typical consumer is really directed at the need to decide objectively whether there is an indivisible supply which it would be artificial to split. If there is a one-off transaction involving separate elements, there cannot be a typical consumer. "Typical" is defined in the Shorter Oxford English Dictionary as "serving as a representative specimen of a class or kind." It is not possible to have a representative specimen of a class of one. Equally it is of little meaning to seek to identify a typical consumer when it is clear that consumers have widely differing attributes and motives which are potentially relevant. We doubt that we would have been any nearer to identifying a typical customer if we had heard 100 witnesses. In the present case we find it impossible to ascribe attributes to a representative consumer unless they are so general as to be devoid of real meaning for the purpose of deciding whether there is a single indivisible supply."

Later [paragraph 54] the Tribunal added:

"...although we cannot meaningfully identify a typical consumer, we can consider objectively what is supplied to Members in the light of what are their minimum attributes."

Counsel for HMRC submitted to us as he had done to the judge that in the former passage the Tribunal can be seen to have fallen into an error of law too. Counsel for WW submitted that any such error was neutralised by the addition of the latter passage. However the Tribunal did not go on to analyse what those minimum attributes were. I will return to these submissions also after I have described the various conclusions of the judge.

21. Having considered the contractual nature of the transactions at the various meetings in the paragraphs I have already quoted in paragraph 10 above the Tribunal reached their conclusions in paragraphs 58 and 59. Surprisingly they considered the situation at the subsequent meetings first and concluded:

"The issue therefore is whether they [the leaflet and the magazine] are so closely linked to the services provided at the Meetings that they form objectively a single indivisible supply which it would be artificial to split, see Levob at [22]. The weekly leaflet is clearly not indivisible from weighing-in and from any encouragement given by the Leader on weighing-in. Nor is it indivisible from interaction with other Members. At some meetings the Leader's talk and discussion focus on the week's leaflet, but that depends on the Leader and the talk may have nothing to do with the leaflet. If the talk brings in the weekly leaflet it can only touch on parts of it. We do not consider that the printed material is indivisible from the services provided at the meetings. If the word "economic" in [22] of Levob is relevant to a case such as this, it seems to us that it can only be in the sense of being indivisible in a practical business sense. We can see no reason why it would be impractical to charge separately for the weekly and monthly leaflets magazine just as a charge is made for Weight Watchers magazine. Nor can we see anything artificial in the separation."

22. Having reached that conclusion the Tribunal then considered the position at the first meeting. They concluded [paragraph 59]:

"In our judgment it is also impossible to say that there are single indivisible supplies at the first meeting. We do not accept Mr Milne's submission that the fact that Weight Watchers At Home obtained the same materials separately is conclusive, although it is a relevant factor. It cannot be said that the Handbook and printed materials would be of no use without the services provided at the meeting. At Home customers have no meeting. Nor do we consider that it can be said that the services provided at the first meeting as a whole would be of no use without the Handbook. Until 2003 there was no Handbook although there was a series of booklets. We qualify the last sentence but one by the words "as a whole" because the orientation talk which is directed to the programme set out in the Handbook would be of no use without the Handbook. In addition to concluding that there are not single indivisible supplies at the first meeting, we consider that there is nothing artificial about splitting them."

23. Finally they recognised in paragraph 60 that in the light of their conclusions the considerations of £13.95 and £4.95 would have to be apportioned. They considered that the ratio of the apportionment would not be the same for both since the zero-rated content of the first meeting would be greater. For all the reasons to which I have referred the Tribunal allowed the appeal of WW. They did not consider their various individual conclusions in the light of the others. Thus there was little consideration of the connection between meetings of one type and others to the various classes of member attending each. This omission constitutes the third of the alleged errors of law on which HMRC relied before the judge and before this court.
The judgment of Morgan J
24. After setting out the facts found by the Tribunal [paragraph 3] and the relevant VAT rules [paragraphs 4 to 7], Morgan J considered the legal tests to be applied. He pointed out [paragraph 11] that no one suggested that the principal/ancillary test was relevant to the facts of this case but that it was common ground that the appropriate test is what he described as "the artificial to split test" [paragraph 12]. He then considered the judgments of the European Court of Justice in Card Protection Plan and Levob, the decision of the House of Lords in College of Estate Management the decisions in Faaborg-Gelting Linien A/S v Staatssecretaris van Financien [1996] STC 774, Dr Beynon and College of Estate Management [paragraphs 13 to 26].
25. In paragraphs 27 to 38 Morgan J discussed the proper approach of an appellate court to an appeal on an issue such as is involved in this case. He pointed out that the characterisation of the transaction as a single or multiple supply is a question of law [paragraph 29] so that, prima facie, the test laid down in Edwards v Bairstow [1956] AC 14 in relation to appeals on questions of fact is inapplicable. He asked himself in paragraph 31:

"Given that the ultimate question in this case is one of law, should the court simply reach its own conclusion on the ultimate question and if the court's answer differs from the Tribunal's answer, should the court allow the appeal?

26. In that context he referred to the speech of Lord Hoffmann in Dr Beynon that:

"...the question is one of fact and degree, taking account of all the circumstances. In such cases it is customary for an appellate court to show some circumspection before interfering with the decision of the tribunal merely because it would have put the case on the other side of the line."

After referring to certain other authorities he concluded in paragraph 37 that:

"In my judgment, I can read these recent statements of the right approach as emphasising the need for circumspection in a case like the present before reversing this specialist tribunal even though the ultimate question is a question of law. However, I conclude that the degree of circumspection needed is not yet (until a higher court says so in terms) so great as to amount to a requirement to apply the Edwards v Bairstow test."

27. In paragraph 38 Morgan J indicated that the foregoing was the basis on which he would approach the issues in the appeal before him. I will, in due course, describe how he applied it in this case. I note that it is part of the appeal of HMRC to this court that the judge applied the wrong test given their submission that the Tribunal had made errors of law on the face of its decision.
28. In paragraphs 39 to 43 Morgan J described the reasoning of the Tribunal and in paragraphs 44 to 50 the submissions of counsel before him. In the course of those submissions counsel for HMRC had made certain specific criticisms of the decision of the Tribunal. Morgan J considered each of them in turn and dismissed them. I will consider his conclusions in respect of those criticisms when I come to deal with the submissions made to us by Counsel for HMRC. Morgan J concluded that the Tribunal in the present case applied the correct legal test to the primary facts found by them.
29. He then proceeded to consider for himself the correct legal characterisation of the transactions in this case in accordance with the principles to which I have referred in paragraph 26 above. In relation to the transactions at what he described as the first meeting he concluded:

"59. As regards the first meeting, both sides to this dispute and the Tribunal proceeded on the basis that there was a single transaction at the first meeting and the consideration for the transaction was the registration fee and the meeting fee for that week. The Tribunal held that this transaction comprised separate supplies of services and printed materials. The question is, applying the legal tests identified in the authorities and, in particular, in Levob, whether, from an economic stand point, and from the perspective of a typical consumer, it is artificial to split the transaction in this way.

60. I regard the arguments on this point as fairly evenly balanced. The Tribunal were impressed by the ready dissociability of the services from the printed material. They were impressed by the separate availability of the printed material for At Home customers. They were impressed by the fact that the printed material was of considerable use separate from the meetings. The rival point of view is to give greater weight to the links between the meetings and the printed material. The Weight Watchers package has been designed to operate to best advantage when it draws upon the services and the printed materials operating together. [Counsel for HMRC] took me through the printed material to emphasise the closeness of the links between that material and the services.

61. It is also right to comment that the legal test which is to be applied is not cut and dried. There is no precise measure or yard stick. The courts have deliberately avoided a schematic analysis. That leaves considerable scope for the decision maker to reach an evaluative judgment reflecting the impact of the matters of fact and degree in the individual case. If I had been the initial decision maker, I might have been more impressed by the link between the services and the printed materials than were the Tribunal.

62. My overall conclusion, hearing an appeal from the Tribunal on this question, is that even if I was minded to put the case on the other side of the line from the Tribunal, it would be wrong to go so far as to reverse the Tribunal's decision in relation to the first meeting. That would be to ignore the very clear requirement imposed upon me that I show proper circumspection before doing so. Accordingly, I dismiss the appeal insofar as it relates to the transaction involved in the first meeting."

On their cross-appeal HMRC contend that the judge was wrong both in his treatment of the specific criticisms of the decision of the Tribunal and in his conclusion that, in any event, he was not entitled to reach a different view in relation to the first meeting.

30. In relation to the subsequent meetings the judge reached the opposite conclusion. In paragraphs 63 and 64 he said:

"63. I next consider the transaction involved in a subsequent meeting. At the subsequent meeting, a member is provided with the services described in the Tribunal's decision. So far as printed materials go, the member is given a Points Tracker form and a weekly leaflet. There is also a monthly magazine which is available although if a member goes to a weekly meeting four times in a month, the member will only, presumably, want to have the monthly magazine on one of those four occasions.

64. My initial reaction when being shown the printed material in question was to regard this as subordinate to the services provided at the meetings and I would have been open to the argument that the printed material was an ancillary matter at a subsequent meeting. However, it was not argued before the Tribunal nor before me that this was the right approach. Accordingly, I will proceed on the basis that there is some feature of the printed material at a subsequent meeting which takes it outside the definition of "ancillary" provided by Lord Walker in College of Estate Management at [30] as "subservient, subordinate and ministering to something else". Nonetheless, when I come to apply the artificial to split test to a subsequent meeting, I form the clear view that it would be artificial to differentiate between the printed material and the services provided at the meeting. The links between the services and the printed material are very strong, the purpose of the printed material is to contribute to the usefulness of the services provided at the meeting, and to strengthen the commitment and staying power of the member to the Weight Watchers programme. In my judgment it is more accurate to regard that which is provided at a subsequent meeting as a single supply of weight loss services. Of course, I must act with circumspection before reversing the Tribunal on the subject of a subsequent meeting. I should not reverse the Tribunal just because I would put the case over the line from where it was placed by the Tribunal. However, my clear view is that the position at a subsequent meeting is not a borderline case and if one applies the correct legal test to the primary facts found by the Tribunal, the clear answer is that it would be artificial to differentiate between the services and the printed material at a subsequent meeting."

In their appeal WW submit that the judge was wrong to have interfered with the conclusions of the Tribunal.

31. The judge then considered [paragraph 65] whether to arrive at different conclusions in relation to the two categories of meeting would involve practical difficulties to such an extent as to require the court to strive to obtain the same conclusion for each category. He decided that it would not because:

"...there are real distinctions between the first meeting and the subsequent meetings. Furthermore, the decision of the tribunal in this case itself distinguished between the first meeting and subsequent meeting because, as the Tribunal pointed out in paragraph 60 of their decision, the question of apportionment was different for the two meetings."

The submissions for the parties and my conclusions
32. We heard argument, at our request, from counsel for HMRC on their cross-appeal before the argument of counsel for WW on the appeal. This was to facilitate consideration of the issues in the correct chronological order. I do not understand why the Tribunal dealt with the transactions at the subsequent meeting before reaching a prima facie conclusion in relation to the transactions effected at the first. Given their obvious interrelation I would have thought that it was necessary to consider them in the order in which they occurred and to test the prima facie conclusions in relation to one category against the prima facie conclusions in relation to the other. Accordingly I start with the specific criticisms made by counsel for HMRC of the decision of the Tribunal and of the judge's treatment of them.
33. The first specific criticism relates to the Tribunal's application of the Levob test in relation to the "economic" element. I have referred to this and its various formulations in paragraph 17 above. In paragraph 19 I have shown how the Tribunal dealt with this element. In effect they concluded that it did not apply on the facts of this case, being a retail sale, but that if it did it could only mean "being indivisible in a practical business sense". The judge dealt with this point in paragraphs 53 and 54 of his judgment. He said:

"53...At paragraph 49 of the decision, the Tribunal stated that the reference to economic purpose in the authorities did not apply in the present case because the customers were not engaged in an economic activity. I think that comment by the Tribunal was not correct. The legal test applies whether the consumer of the service or services is carrying on a business or using the services for a non business purpose. However, as before, I do not regard the criticism of the Tribunal as really affecting the later reasoning or the conclusions of the Tribunal. In paragraph 49 itself, the Tribunal correctly directed themselves that the focus was upon the purpose of the recipient of the services (i.e. rather than the provider of the services). The fact that the Tribunal stumbled over the word "economic" does not appear to me to have mattered.

54. [Counsel for HMRC] also criticised the Tribunal in their handling of the question whether it was artificial to split the services and, as he submitted, for concentrating on physical severability rather than non-physical severability. One of the difficulties in appraising that submission is that it is a feature of this case that the services and the printed material were plainly physically severable. It was only accurate for the Tribunal to state that this was the case. Further, in assessing the closeness of the link between the services and the printed material, it was right to refer to their physical severability. It is also clear on the authorities that it is sometimes useful to ask whether one element will be useful if deprived of the other element. In the present case, the handbook was plainly of considerable use even without attendance at the meetings. For the Tribunal to make these points and to weigh them in an overall assessment does not mean that the Tribunal have wrongly directed themselves or that they have looked only at physical severability rather than asking the wider question whether it is artificial to split the transaction into separate elements."

34. Counsel for HMRC repeated his criticisms of the decision of the Tribunal on the economic aspect before us. In addition he contended that the judge was wrong to have rejected the obvious error made by the Tribunal on the basis that it did not contribute to their conclusion. He traced the decision of the Tribunal from what he described as an obvious error of law in paragraph 49 through to further errors of law in paragraph 58. In the latter connection he submitted that the Tribunal was wrongly approaching the question of indivisibility from a physical point of view. In addition, as he pointed out, the fact that it would not be impractical for the supplier to charge separately for the printed material was irrelevant because it was not looking at the transaction from the perspective of the typical consumer as required by Levob.
35. Counsel for WW relied on the opinion of the Advocate-General in Levob for the proposition that the economic linkage required was that from a commercial point of view one element of the supply can have no use without the other. He contended that on that basis the Tribunal did not err in law. There were, he contended, obviously separate supplies from an economic point of view of the printed material and the benefits to be derived from attendance at the meetings.
36. I prefer the submissions of counsel for HMRC. First, I would reject the submission of counsel for WW that the test formulated by the Court in Levob should be applied in accordance with the sense of the opinion of the Advocate-General in paragraphs 69 to 73, namely that one element can have no practical use without the other. The Court might have adopted her phraseology but did not. Instead they repeated, in substance, what the Court had held in Card Protection Plan. Second, the economic element is part of the test formulated in Card Protection Plan, Levob para 22 and Levob ruling 1. That test is of general application to all transactions which constitute supplies for the purposes of Article 2(1) of the Sixth Directive. There is no warrant for confining that part of the test to one type of supply by excluding retail sales. In my view, the Tribunal was plainly wrong where, in paragraph 49 of their decision, they concluded otherwise.
37. Nor, third, do I consider that that error of law was retrieved in paragraph 58 of the decision of the Tribunal. Indeed I consider that that paragraph discloses further errors of law. First, the word "indivisible" is used in the second to fourth sentences of paragraph 58 in some sense other than economic. Further, even if the Tribunal were right in their paraphrase of "economic" as "practical in a business sense" it is clear that they then applied that test from the wrong point of view, namely that of the supplier not that of the typical consumer.
38. These errors go to the conclusions of the Tribunal in respect of both category of meeting. In my view they entitled, indeed obliged, the judge to re-examine the Tribunal's conclusions in respect of both categories of meeting in the light of the correct legal test without showing any particular degree of circumspection over and above that which should be shown by any appellate court. Before I seek to do so I should also deal with the other specific criticisms advanced by counsel for HMRC.
39. The second specific criticism related to that part of the test which involves the typical consumer. In paragraphs 50 to 52 of their decision the Tribunal concluded that this part of the test was impossible to apply due to the lack of any identifiable typical consumer. Though they referred in paragraph 54 to the possibility of identifying the minimum attributes of members they did not do so. This criticism was accepted by the judge. In paragraph 52 of his judgment he said:

"52...I would accept [counsel for HMRC]'s criticism insofar as he states that the Tribunal could, and should, have identified a profile of a typical consumer. In the course of argument on the appeal to the High Court, counsel for both parties had little difficulty in describing the typical consumer for present purposes. Such a person was overweight, wanted to lose weight, wanted to get assistance for the purpose of losing weight, wanted to obtain that assistance over a period of time and (in the case of meetings members) wanted to have the opportunity to attend meetings and obtain the printed material on offer. However, having accepted [counsel]'s criticism up to a point, it does not seem to me that the difficulty the Tribunal thought it encountered in identifying a typical consumer really affected any part of its later reasoning and resulting conclusions. At paragraph 52, the Tribunal stated that the reference in the authorities to a typical consumer was really directed at the need to decide objectively whether it would be artificial to split the transaction. In the same paragraph, the Tribunal stated that if one did ascribe attributes to a representative consumer, they would be general and would not have any real meaning for present purposes. At paragraph 54, the Tribunal said:

"we can consider objectively what is supplied to Members in the light of what are their minimum attributes."

It seems to me that this comment by the Tribunal was an appropriate recognition of the task in hand. The concept of a typical consumer requires one to look at the matter from the perspective of the consumer not from the perspective of the supplier. The Tribunal adopted that perspective. The concept also requires one to approach the matter objectively rather than subjectively; the Tribunal did that. The concept also requires one to look at the various customers to identify the common themes which unite them rather than the many differences between them. As I read the Tribunal's decision they adopted that approach."

40. The judge's approach was criticised before us on the basis that he should have corrected the Tribunal's obvious error of law and not, in effect, given them the benefit of the doubt. Counsel pointed out that not only did the Tribunal fail to identify the typical consumer they did not even ascertain the minimum attributes of the members. Had they done so they should have appreciated that they were the same for all meetings. Counsel submitted that the judge was wrong to have considered that errors in relation to the typical consumer were somehow redeemed by an objective approach. As he submitted, those two elements are cumulative not alternative. Counsel for WW accepted the judge's description of the typical consumer. He supported the judge's conclusion for the reasons he gave. He contended that the reference to the typical consumer did no more than affirm the need for an objective consideration of all the circumstances.
41. Once again I prefer the submissions of counsel for HMRC. First, the failure of the Tribunal to recognise that there could be a typical consumer in relation to the goods and services supplied by WW indicates that they failed to appreciate the essential perspective of the Levob test. This failure is apparent from their reference in paragraph 54 to the differing aims or intentions of customers and in paragraph 58 to the possibility of WW charging separately for the leaflets and magazine. Second, the application of an objective test is not, as the judge thought, an alternative requirement of the Levob test. An objective approach is required in addition to adopting the perspective of the typical consumer. Third, the Tribunal did not adopt the perspective of the consumer when they came later to apply the test in paragraph 58 of their decision. In that context at least they adopted the viewpoint of the supplier. Accordingly, in my view, the Tribunal were wrong in law on this aspect of the case too. It follows that in my view the judge was entitled and bound to re-examine their conclusions on that ground also.
42. The third specific criticism of counsel for HMRC was to the effect that the Tribunal had got so bogged down in the detail of the transactions that they failed to stand back and take the overview they should have done. This criticism was rejected by Morgan J in paragraph 51 of his judgment where he said:

"I do not accept the criticism that the Tribunal failed to form an overview having regard to all the circumstances. The Tribunal had correctly directed themselves by reference to the legal test identified in Levob. The fact that the Tribunal set out their detailed reasoning over four pages of the decision and the fact that that detailed reasoning examined a number of individual arguments and pointers does not indicate that the Tribunal failed to form an overview. The ultimate conclusion of the Tribunal is the way in which the Tribunal expressed its overview. [Counsel for HMRC] draws attention to the Tribunal's statement in paragraph 53 that it was not helpful to select a label for the transaction before deciding the question whether there was a single supply or separate supplies. I do not regard that comment by the Tribunal as being inapposite nor do I regard it as an indication that the Tribunal failed to form an overview."

Before us counsel for HMRC, in effect, made the same criticism of the judge as he had made of the Tribunal.

43. For my part I do not see this as a separate criticism or error of law. If there were no error of law in relation to the economic aspect or the typical consumer perspective then it would be likely to follow that the Tribunal was entitled to reach the conclusion it did. In the event of either or both those errors being made out then the appellate court is bound to intervene irrespective of whether the Tribunal had conducted an overview. The need for an overview arises from the requirement to have regard to all the circumstances of the transaction and the good sense of a judge or tribunal testing prima facie conclusions on one aspect of a case by reference to similar conclusions on another. That said, if the Tribunal had properly performed that exercise they would and should have appreciated that in relation to both category of meeting a single price was charged. Whilst that fact is not decisive it is at least a relevant consideration.
44. The judge tested his conclusions in relation to the different category of meeting primarily by reference to the likelihood of his conclusions leading to practical difficulties. He stated in paragraph 65 that there are real distinctions between the first and subsequent meetings but he did not go on to consider the reason for those distinctions nor whether they justified different conclusions on the issue of supply.
45. For all these reasons I consider that the judge was entitled and bound to correct the errors of law to which I have referred and was wrong not himself to have applied the correct legal test to the facts as found by the Tribunal. That task now falls to this court. In my view the correct legal test points clearly to the conclusions that there was a single supply at meetings of each description in accordance with the original ruling of HMRC referred to in paragraph 2 above.
46. I reach that conclusion for the following reasons. First, the typical consumer, as described by the judge in paragraph 52 of his judgment, is or is about to become a member of WW. Second, the purpose of such a consumer in being or becoming a member is to obtain the benefit of the weight loss programme marketed by WW under the title "Switch". Third, one of the cardinal features of that programme for a member entitled to attend meetings, unlike At Home or Online members, is the reinforcing combination of the diets as taught in the Handbook and the group therapy to be derived from the meetings. Fourth, if it is the combination which the Meeting Member is buying, then it makes no sense from an economic point of view to pay (be charged) separately for the meetings and the publications. Fifth, there is no difference between one meeting and another except in the case of a customer who is enrolling for the first time or enrolling again so as to attend the meeting without paying for missed meetings since the last enrolment. He or she is not a typical consumer, as described, but a subset of that class, and is only paying the higher price in order to obtain or continue to obtain the benefit of the combination I have mentioned. Sixth, it follows that the events of the first meeting, from the point of view of the enrolling member, are merely a necessary preliminary to obtaining the benefits of the programme as a whole at that and any subsequent meeting that member attends.
47. In these circumstances it is unnecessary to consider whether Morgan J applied sufficient or excessive circumspection in his treatment of the various decisions of the Tribunal. I would only add that I agree with him that an appellate court on an appeal on a point of law such as this is entitled to interfere with the decision of the lower court or tribunal on wider grounds than those enunciated by the House of Lords in Edwards v Bairstow [1956] AC 14. In that case the House of Lords was considering findings of fact. In Dr Beynon the House of Lords held that the characterisation of a supply for VAT purposes was a question of law. It may be that in some circumstances the different tests would lead to the same result but that does not mean that the tests are the same or applicable in the same circumstances.
48. For all these reasons I would

(1) allow the appeal of HMRC,

(2) dismiss the appeal of WW, and, if necessary,

(3) affirm the ruling given by HMRC on 11th March 2005.

Hooper LJ

49. I agree

Lloyd LJ

50. I also agree.