C-102/86

The Commissioners are responsible for the assessment of liability for, and the collecting of, VAT in the United Kingdom pursuant to the Finance Act 1972, as amended in particular by the Finance Act 1977. Growers in England and Wales of apples and pears for sale who occupy not less than two hectares of land planted with 50 trees or more are required by the Order to register with the Council and they can be required to furnish returns as to their production and sales. The Council was established pursuant to the Industrial Organization and Development Act 1947 by the Apple and Pear Devel- opment Council Order 1966 (SI 1966, N o 1579) and continued in being by the Apple and Pear Development Council By Article 9 of the 1980 Order 'For the Order 1980 (SI 1980, No 623). The latter, purposes of enabling them to meet adminis- as subsequently amended, defined the trative and other expenses incurred or to be Council's powers and functions at the times incurred in the exercise of their functions material to this reference. Those functions the Council may, with the approval of the include promoting the production in Minister, impose an annual charge at a rate England and Wales and the marketing of not exceeding' an amount prescribed (as standard apples and pears, the definition of amended from time to time) in respect of trade descriptions and research into many each hectare planted with trees, the growers aspects of the growing and marketing of being able to elect to pay a charge per 50 apples and pears; they are to be exercised trees rather than per hectare where the 'in such manner as appears to them (the density is less than 125 trees per hectare.

That result was reversed by the Divisional Under the Finance Act 1972 as amended, Court of the High Court of Justice, whose the supply of goods or services in the decision was upheld by the Court of Appeal. United Kingdom by a taxable person in the The latter ruled that there was no course of his business is subject to VAT consideration for the supply of services by unless that supply is an 'exempt supply' or is the Council except as to the Kingdom made otherwise than for a consideration. Scheme and that accordingly there were no Tax paid on the receipt of goods or services taxable supplies. Input tax paid on receipt of is known as input tax: tax charged on the goods or services attributable to the general provision of goods and services is known as scheme could not, therefore, be deducted or output tax. Inputs can be set off against repaid. outputs to the extent that the goods or services received are used or to be used for the purposes of a business carried on. If they are to be used partly for such, purposes and partly for other purposes then the On appeal the House of Lords took the Commissioners must apportion such part of view that the first question was whether the the input tax as is attributable to the taxable charges under the general scheme supplies. constituted consideration for the purposes

APPLE AND PEAR DEVELOPMENT COUNCIL v COMMISSIONERS OF CUSTOMS AND EXCISE

'Does the exercise by the Apple and Pear Development Council of their functions The United Kingdom and the Federal pursuant to Article 3 of the Apple and Pear Republic of Germany contend that the Development Council Order 1980, SI No charges are not consideration for services. If 623 (as amended by the Apple and Pear that is right the Council will not charge tax Development Council (Amendment) Order on the sums levied under the general scheme 1980, SI No 2001), and the imposition on but it will not be able to recover the input growers pursuant to Article 9 (1), of an tax on services or goods supplied to it. In annual charge for the purposes of enabling the result, it will be worse off than if it were the Council to meet administrative and liable for tax on the charges levied. T h e other expenses incurred or to be incurred in charge to growers would ultimately have t o the exercise of such functions, constitute be increased to enable the Council to pay "the supply of. . . services effected for the VAT on goods and services supplied t o consideration" within the meaning of it. Article 2 of the Sixth Council Directive of 17 May 1977? '

Article 2 (1) of the Sixth Directive provides: For there to be liability to tax there must be both a taxable transaction and a taxable person. There is a link between these two concepts as the Court's judgment in Case 'The following shall be subject to 89/81 (the Hong-Kong Trade Development value-added tax: Council case [1982] ECR 1277) shows, and a consideration of one may help in the resolution of the other in any particular case. They are, however, distinct concepts. The question raised here is not whether the (1) the supply of goods or services effected Council is a taxable person but whether for consideration within the territory of there is a taxable transaction. Does the the country by a taxable person acting exercise of the functions described and the as such.' payment of the charges imposed by the

Order constitute 'the supply of services Article 2 is generally descriptive of the scope effected for consideration'? of the tax. The necessary characteristic of the transaction subject to VAT is that there should be a quid pro quo. Article 8 (read with paragraph 13 of Annex A) of the Second Directive and Article 11 of the Sixth Directive have the more precise function of defining how the taxable amount is to be Consideration is not defined in the Sixth assessed and what it is to include in Directive as such, though paragraph 1 (a) of particular cases. Article 11 (A) specificies that the taxable amount shall be 'in respect of supplies of goods and services other than those referred to in (b), (c) and (d) below, everything which constitutes the consideration which has been or is to be obtained by the supplier The object of both directives was to from the purchaser, the customer or a third harmonize the laws of the Member States party for such supplies including subsidies relating to turnover taxes, to establish a directly linked to the price of such supplies'. common system and a uniform basis of assessment.. Each of the language versions must have been intended to have the same meaning and to achieve the same object. It would, therefore, be wrong to construe the phrase 'supply . . . effected for consideration' in the light of the technical meaning of the The Second Directive, which the Sixth words in English domestic law, as it would Directive replaced as and when Member equally be wrong to construe the other States brought it into operation, was in language texts by reference to their different terms. By Article 2 VAT was technical meaning in the appropriate imposed on '(a) the supply of goods and the ' domestic law. T o give such technical provision of services . . . by a taxable person meanings to the words would be capable of against payment'. By Article 8 of the Second producing, if not likely to produce, diversity Directive the basis of assessment of the tax rather than harmonization. The words must was to be '(a) in the case of supply of goods thus be construed in their Community law and of the provision of services, everything context as a Community law phrase, regard which makes up the consideration for the being had to the different language versions. supply of the goods or the provision of services, including all expenses and taxes except the value-added tax itself'. By paragraph 13 of Annex A: 'The expression "consideration" means everything received in return for the supply of goods or the provision of services, including incidental As already noticed the phrase 'against expenses (packing, transport, insurance, payment' in Article 2 of the Second etc.) that is to say not only the cash Directive was changed to 'for consideration' amounts charged, but also, for example, the in Article 2 of the Sixth Directive. That value of the goods received in exchange or, change seems likely to have been made to in the case of goods or services supplied by make it clear that what is received in return order of a public authority, the amount of for services does not necessarily have to be the compensation received'. cash. If reference is made to the language

versions which were official at the time showing that no change in meaning was when the Second Directive was adopted intended. (since the United Kingdom was not at that stage a member of the Community) it is to be seen that they provided in Article 2, of the French text, 'à titre onéreux', of the German, 'gegen Entgelt', of the Italian, 'a titolo oneroso', of the Dutch, 'onder The English language version of the Second bezwarende titel'. Directive in Article 8 speaks of 'the consideration for the supply' and defines it in more detail in paragraph 13 of Annex A ; Article 11 of the Sixth Directive defines the taxable amount in terms of the consideration which has been or is to be The Dictionnaire Littré (1951) defines 'titre obtained by the supplier from the purchaser onéreux' as 'celui par lequel on acquiert une and includes all taxes and duties and chose sous la condition d'acquitter certaines packing and other expenses. charges', Petit Robert (1979) as 'la condition d'acquitter une charge, une obligation'. Its opposite is 'à titre gratuit' and, as I understand it, the phrase denotes the obli- gation to give or the giving of, something in It has been suggested in argument that it is return for a benefit received as opposed to necessary to carry over the definition of gratuitously. The Italian and Dutch texts, I consideration in paragraph 13 of Annex A understand, have similar meanings. 'Gegen of the Second Directive to Article 2 of the Entgelt' is defined as 'against payment' Sixth Directive. Having regard to the (Langenscheidt's Dictionary 1979) as different functions of Article 11 and Article opposed to 'ohne Entgelt' which is 'free of 2 of the Sixth Directive, I am not satisfied charge'. 'Entgelt' is 'the performance which that this a relevant or necessary exercise, the parties regard as the economic equi- though obviously if the supply is for a valent for another performance' (Die consideration, the full consideration will be Struktur des vertraglichen Schuldverhältnisses that obtained by applying the rules in im anglo-amerikanischen Recht, Rheinstein, Article 11. It is sufficient for the purposes of 1932, p. 100.) Article 2 that the services should not be rendered gratuitously but should be for some form of payment. Ascertaining the precise value of the payment is a later exercise.

understand, the Dutch text is similar. T h e general scheme is almost the sole source of key words are then defined in Annex A. I the Council's income. The growers pay for give merely by way of example the French what they get and it is likely that the larger and German texts. 'Contrevaleur' is defined growers who pay the most will get the most as 'tout ce qui est reçu en contrepartie de la benefit from the activities of the Council. livraison'; 'Gegenwert' as 'alles . . . was als There is a link between the concept of a Gegenleistung für die Lieferung . . . erhalten taxable person (which the Council can be wird'. In Article 11 of the Sixth Directive under Article 4 (5) of the Sixth Directive) the words used are simply 'contrepartie' and and the supply of services for consideration. 'Gegenleistung'. There is thus no identity of If the Council is to treated as a taxable language between Article 2 and the words person, it can be argued that it is likely that defining the taxable amount in the later its activities constitute the supply of services Article. It is only the English version which for consideration. has the same term though used for different purposes.

On the behalf of the former it can be said with force that the Council could not perform its functions unless the growers paid the levy. The sole purpose of the levy is Secondly, it is to be noted that by Article 9 to enable it to do so and the levy for the of the 1980 Order the purpose of the charge

APPLE AND PEAR DEVELOPMENT COUNCIL v COMMISSIONERS OF CUSTOMS AND EXCISE

is to enable the Council 'to meet adminis- in Case 89/91 Hong-Kong Trade Devel- trative and other expenses incurred or to be opment Council (supra). incurred in the exercise of the functions referred to in Article 3 which the Council is obliged to exercise. The charge is only made if the Council decides to impose it and if the minister approves. It seems likely that the It seems to me that the payment here is only charge will be imposed annually, though not indirectly for the benefit, if any, received by necessarily certain that the proportion used a particular grower. Although, as is argued, for publicity, advertising and promotion it may well be that growers with larger should continue to constitute approximately holdings will pay more and receive more two-thirds of total expenditure as benefit from the improvement of the apparently it does at present. The fact that industry, and although small growers can be the levy is obligatory may not be conclusive charged according to the number of trees against it being consideration, but the and will pay less and may receive less absence of any consensual element in the benefit, there is no necessary correlation payment and the lack of control by indi- between size and benefit. The obligation is vidual growers over what the Council does to pay towards the Council's expenses of for them are pointers to the levy not being improving the industry. It is not to pay for in any real sense a payment for particular what is individually received. services.

OPINION OF SIR GORDON SLYNN — CASE 102/86

I do not consider that this position is affected by reference to Article 4 of the So far as Annex D is concerned it seems to Sixth Directive. That article provides in me that the Council is plainly not an agri- paragraph 5 that State authorities and other cultural intervention agency, nor is it bodies governed by public law (which I carrying out transactions pursuant to regu- assume the Council to be or to be deemed lations on the common organization of the to be) shall not be considered taxable market.

APPLE AND PEAR DEVELOPMENT COUNCIL v COMMISSIONERS OF CUSTOMS AND EXCISE

Whether it is carrying out the activities of a Nor does Article 13 of the Sixth Directive commercial publicity body in regard to the (referred to by the Council) help in deciding kind of publicity information it engages in is the question. That article merely enables once more a question for the national court. exemptions to be made. It contemplates Even if it were, it seems to me that it would that some activities carried out by public be necessary to consider what part of the bodies and paid for pursuant to a statu- levy related to those publicity activities as tory obligation may be, if not exempted, opposed to its other activities, such as, for liable to VAT. It leaves open the essential example, research, which could not be said question under Article 2 of the Direc- to be those of a commercial publicity body. tive.

Accordingly, I am of the view that the question referred by the House of Lords should be answered along the following lines:

'The phrase "the supply o f . . . services effected for consideration" in Article 2 of the Sixth VAT Directive does not apply to the situation where a body set up by the legislation of a Member State exercises pursuant to that legislation the functions of improving the efficiency of production, keeping up the quality of the products and enhancing the sales of the products in a particular sector of agri- culture and imposes on growers pursuant to that legislation an annual charge for the purpose of enabling it to meet administrative and other expenses incurred or to be incurred in the exercise of such functions.'