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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Customs and Excise v Isle of Wight Council [2004] EWHC 2541 (Ch) (12 November 2004) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/2541.html Cite as: [2004] 48 EG 132, [2004] STI 2379, [2005] 1 CMLR 6, [2005] BVC 228, [2004] EWHC 2541 (Ch), [2005] Eu LR 193, [2005] BTC 5197, [2005] STC 257 |
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CHANCERY DIVISION
Strand, London, WC2A 2LL Appellant Respondent |
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B e f o r e :
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Commissioners for Customs and Excise |
Appellant |
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- and - |
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Isle of Wight Council |
Respondent |
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Julie Anderson (instructed by Linda Leach of Chiltern plc) for the Respondent
Hearing dates: 26 & 27 October 2004
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Crown Copyright ©
Mr Justice Pumfrey :
Introduction
"2. The Appeal concerns the Council's liability to VAT on payments received in respect of its operation of off-street parking facilities. The Appeal raises four issues:
The first ("the special legal régime issue") is whether, as the Council contends, its provision of off-street parking facilities is excluded from charge to VAT by the operation of article 4.5 of the EC Sixth Directive as being "activities or transactions in which they engage as public authorities";
The second ("the implementation issue") is whether the second paragraph of article 4.5 (which treats as taxable persons local authorities that engage in such activities ("where treatment as non-taxable would lead to significant distortions of competition") has been properly implemented into UK law;
The third ("the competition issue") is whether, as the Commissioners contend and assuming that the second paragraph of article 4.5 has been properly implement, treatment of the Council as a non-taxable person would lead to significant distortions of competition and
The fourth ("the overpayment issue") is whether VAT is chargeable on amount which exceed the published tariff in circumstances where the parking machine cannot give change."
Conclusions
The Domestic Provisions
The Sixth Directive
"the economic activities referred to in paragraph 1 shall comprise all activities of produces, traders and persons supplying services including mining and agriculture activities and activities of the profession. The exploitation of tangible and intangible property for the purpose for obtaining income there from on a continuing basis shall also be considered an economic activity."
By article 4.5:
"States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, in connection with these activities or transactions.
However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition.
In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided that they are not carried out on such a small scale as to be negligible.
Member states may consider activities of these bodies which are exempt under article 13 or 28 as activities which they engage in as public authorities."
The Marleasing Doctrine
" 6. With regard to the question whether an individual may rely on the directive against a national law, it should be observed that, as the Court has consistently held, a directive may not of itself impose obligations on an individual and, consequently, a provision of a directive may not be relied upon as such against such a person (judgment in case 152/84 Marshall v. Southampton and South West Hampshire Area Health Authority [1986] ECR 723 ).
7. However, it is apparent from the documents before the Court that the national court seeks in substance to ascertain whether a national court hearing a case which falls within the scope of directive 68/151 is required to interpret its national law in the light of the wording and the purpose of that directive in order to preclude a declaration nullity of a public limited company on a ground other than those listed in article 11 of the directive.
8. In order to reply to that question, it should be observed that, as the court pointed out in its judgment in Case 14/83 Von Colson and Kamann v. Land and Nordrhein-Westfalen [1984] ECR 1891 paragraph 26, the Member States' obligation arising from a directive to achieve the result envisaged by the directive and their duty article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States, including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty.
9. It follows that the requirement that national law must be interpreted in conformity with article 11 of Directive 68/151 precludes the interpretation of provisions and national law relating to public limited companies in such a manner that the nullity may be ordered on grounds other than those exhaustively listed in article 11 of the directive in question."
"35 in summary, I am of the opinion that the courts case law establishes two rules: (1) a directive cannot of itself impose obligations on individuals in the absence of proper implementation in national law; (2) the national courts must nevertheless interpret national law, as far as possible, in the light of the wording and purpose of the relevant directive. While that process of interpretation cannot, of itself and independently of a national law implementing the directive, have the effect of determining or aggravating criminal liability, it may well lead to the imposition upon an individual of civil liability or a civil obligation which would not otherwise have existed."
"In this act "business" includes any trade profession, or vocation and all the economic activities of local authorities, except where those activities are carried out pursuant to a special legal régime different to that applicable to private traders, unless to treat such special legal régime activities as non-business would lead to significant distortions of competition."
'…article 4.5 should not be dissected and …reliance should not be placed on the first indent while ignoring the second. The second indent is an extension of the first and both together provide that public bodies are not taxable persons when they are acting as such but that they are taxable persons when their activities would create significant distortions of competition.'
'(1) whether the principle set out in the first sub-paragraph of article 4(5) of the Sixth Directive, which excludes from the category of activities subject to VAT so-called 'institutional' activities is directly applicable in the absence of a specific national provision;
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(4) whether the second subparagraph of article 4(5) must be interpreted as requiring the Member States to incorporate in their VAT legislation the criterion of 'significant distortions of competition' in regard to the taxation of the transactions referred to in the first subparagraph.'
'21. It should first be pointed out that it follows from both the wording and structure of Article 4(5) of the Sixth Directive that the expression "these activities or transactions" in the second subparagraph corresponds to the activities or transactions referred to in the first subparagraph, that is to say, activities or transactions engaged in by bodies governed by public law as public authorities, to the exclusion, as indicated above, of activities engaged by them as persons subject to private law.
22 It should next be noted that the second subparagraph of that provision contains a derogation from the rule of treatment of bodies governed by public law as non-taxable persons in respect of activities or transactions engaged in by them as public authorities where that treatment would lead to significant distortions of competition. Thus, with a view to ensuring the neutrality of the tax, which is the major objective of the Sixth Directive, that provision envisages the situation in which bodies governed by public law engage, under the special legal regime applicable to them, in activities which may also be engaged in, in competition with them, by private individuals under a regime governed by private law or on the basis of administrative concessions.
23 In that situation, the Member States are required by the third paragraph of Article 189 of the Treaty to ensure that bodies governed by public law are treated as taxable persons where the contrary would lead to significant distortions of competition. On the other hand, they are not obliged to transpose that criterion literally into their national law or to lay down precise quantitative limits for treatment as non-taxable persons.
24 The answer to the second question should therefore be that the second subparagraph of Article 4(5) of the Sixth Directive must be interpreted as meaning that the Member States are required to ensure that bodies governed by public law are treated as taxable persons in respect of activities in which they engage as public authorities where those activities may also be engaged in, in competition with them, by private individuals, in cases in which the treatment of those bodies as non-taxable persons could lead to significant distortions of competition, but they are not obliged to transpose that criterion literally into their national law or to lay down precise quantitative limits for such treatment.'
Direct applicability of article 4.5
29 The fourth question seeks to ascertain whether a body governed by public law may rely on Article 4(5) of the Sixth Directive for the purpose of opposing the application of a national provision making it subject to VAT in respect of an activity in which it was engaged as a public authority and which is not listed in Annex D, where treatment of the activity as non-taxable is not liable to give rise to significant distortions of competition.
30 As the Court has consistently held (see, in particular, the judgment of 19 January 1982 in Case 8/81 Becker v Finanzamt Muenster-Innenstadt [1982] ECR 53), wherever the provisions of a directive appear, as far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the State.
31 Article 4(5) of the Sixth Directive fulfils those criteria, since the bodies and activities in regard to which the rule of treatment as non-taxable persons applies are clearly defined in that provision. Bodies governed by public law, which, in this context must be assimilated to individuals, are therefore entitled to rely on that rule in respect of activities engaged in as public authorities but not listed in Annex D to the directive.
32 That conclusion is not invalidated by the fact that the second subparagraph of Article 4(5) of the Sixth Directive requires activities to be treated as taxable if their treatment as non-taxable would lead to significant distortions of competition. That limitation placed on the rule of treatment as non-taxable persons is thus only a conditional limitation, and whilst it is true that its application involves an assessment of economic circumstances, that assessment is not exempt from judicial review.
33 The answer to the fourth question should therefore be that a body governed by public law may rely on Article 4(5) of the Sixth Directive for the purpose of opposing the application of a national provision making it subject to VAT in respect of an activity in which it engages as a public authority, which is not listed in Annex D and whose treatment as non-taxable is not liable to give rise to significant distortions of competition'