Input tax — Supply of services — Company in business of constructing houses — Estate Agents Package Scheme — Whether estate agents services supplied to builder — Whether VAT on estate agent’s services allowable as input tax — VAT tribunal holding that there was supply to builder giving rise to deduct input tax — High Court upholding that decision
Redrow Group plc (“Redrow”) represented a group of 21 companies. Redrow designed and operated a sales incentive scheme called Estate Agents Package Scheme (“EAPS”). Under EAPS the purchaser’s estate agent’s fees, on their previous property, were paid by Redrow when the purchase of the new property was completed. Before a VAT tribunal Redrow maintained that the estate agent’s services were supplied to it as well as to the purchaser so that VAT thereon was allowable input tax in its hands. The commissioners contended that the estate agent’s services were supplied to the purchaser only, that Redrow merely indemnified the purchaser in respect of the estate agent’s fees so that the VAT element in those fees was not allowable input tax. To recover input tax so claimed and deducted by Redrow, the commissioners assessed it to tax of £58,853 and £6,638.12 default interest. The assessment related to 48 consecutive monthly accounting periods. The tribunal held that there was a supply to Redrow giving rise to a right to deduct input tax. The commissioners appealed.
Held The appeal was dismissed.
1. The tribunal essentially had to decide a question of fact: were “supplies” made by the estate agents to Redrow.
2. Under EAPS Redrow was undoubtedly a party to a contract with the estate agents. Redrow chose the agent which accepted instructions from Redrow and reported progress to it. The asking price had to be agreed with Redrow and the instructions to the agent could not be changed without Redrow’s agreement. Finally Redrow was contractually liable as principal for the agent’s fees unless the prospective purchaser did not proceed to buy a house from it.
3. The tribunal therefore approached the “supply issue” by looking to see whether and to what extent Redrow received the services supplied by the estate agents. Having done so it concluded that there was a client-principal relationship between Redrow and the estate agent and that the estate agent’s services were provided to both Redrow and the prospective purchaser.
4. There was no misdirection on the part of the tribunal as would assist the commissioners in the present appeal. Provided that there was evidence available to show that at the time of supply, supplies had been made by the estate agents to Redrow, the tribunal was entitled to conclude as it did. The tribunal’s decision depended on its overall view of the facts of the case.
5. The fact that the potential purchaser might not complete the purchase of the Redrow home could not be decisive on this exercise. There was abundant unchallenged evidence from which the tribunal could conclude that at the time of supply, services had been supplied for the purposes of VAT.
Melanie Hall (instructed by the solicitor to Customs & Excise) appeared for the commissioners; Richard Bramwell QC (instructed by Redrow Group plc) appeared for Redrow.
