C-353/00

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OPINION OF MRS STIX-HACKL — CASE C-353/00

B — National law 5. Regulation 4 governs applications for grants. Regulation 4(2) provides:

'An application shall be in writing, signed either by the applicant or by a person specified or of a description specified by the administering agency for the area and shall be in such form ... as is laid down by that administering agency.' 3. The Energy Action Grants Agency (here- inafter 'the EAGA') is the body responsible for implementing the Home Energy Effi- ciency Scheme (hereinafter 'the HEES'). The HEES is subject to the Home Energy Efficiency Grants Regulations 1992 (here- 6. Regulation 5 sets out the work that may inafter 'the Regulations'). These replaced be subsidised. It includes 'energy advice'. the original 1990 regulations and were amended by the Home Energy Efficiency Grants Regulations of 1993, 1994, 1995 and 1996. However the parties to the national proceedings requested that the appeal be decided on the footing of the 7. If an application has been made to the Regulations, since the amendments did not network installer for the locality, Regu- appear to be material to the points in issue lation 7(1) requires the installer to consider here. whether the applicant is eligible for a grant. Regulation 7(3) provides:

'If the network installer is satisfied that there is eligibility for grant, he shall

(a) send the application to the administer- 4. Section 2(1) of the Regulations defines ing agency for the area for deter- the term 'energy advice' as '[a]dvice relat- mination, and at the same time certify ing to thermal insulation or to the eco- to the administering agency in writing nomic and efficient use of domestic that he has carried out such verification appliances or of facilities for lighting, or as to the eligibility of a grant as may be for space or water heating in certain laid down from time to time by that dwellings'. administering agency; and

8. Regulation 7(4) provides that a 'material misrepresentation' for the purposes of the regulation is any representation by or on behalf of the applicant in respect of any of 1. The contractor will carry out the works the matters relating to eligibility for a grant for the price described in section 3 on the which is false. front page.

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OPINION OF MRS STIX-HACKL — CASE C-353/00

2. (a) The contractor is entitled to the III — Facts and Procedure following:

12. Keeping Newcastle "Warm (hereinafter — The payment, if any, due from you 'KNW') is registered for VAT in the United in section 3 on the front page. Kingdom as a limited company. Its princi- However you should only pay this pal object is to promote the efficient use of when the work has been completed energy in general, and in particular among to your reasonable satisfaction. persons who are necessitous, and to under- take the works necessary therefor such as promotion, advice and education related to energy efficiency. KNW affirms that it is a non-profit organisation.

— The grant payable under the Home Energy Efficiency Grants Regu- lations when EAGA Ltd pays the grant to the contractor.

and 31 August 1996; the claim was for a 17. In the proceedings before the VAT and total of GBP 939 492.01. Duties Tribunal, the Commissioners of Customs and Excise claimed that a grant was only payable if the other party to the contract in question (here KNW) and the customer had entered into an agreement complying with the formal requirements of Regulation 8(2) of the Regulations. Although payment under Regulation 10(2) may be made direct through the network installer, there still has to be a contract 15. KNW appealed against the decision of between the network installer and the the VAT and Duties Tribunal to the High householder, and the grant is paid to the Court of Justice. KNW argued that it is householder's benefit. The grant forms part common ground that the GBP 10 received of the consideration and therefore of the by it from the EAGA for advice it provided basis of assessment. constituted part of the consideration within the meaning of the jurisprudence in Tolsma 3 .

21. There is no such direct link in this case. Either the price is the amount charged by KNW for energy advice, in which case — because, first, there is a cap of GBP 10 and, (3) If the answer to Question 2 is no, is secondly, it is common ground that the that payment none the less part of the advice cannot be given for less — it always taxable amount by reason of constitut- corresponds to the cap, so that there is no ing the consideration (or part of the direct link. Or one goes by the actual cost consideration) for a supply?' to the consumer, in which case, since the consumer incurs no cost, the payment can in fact be regarded as a flat-rate subsidy to the general operating costs of KNW and not directly linked to the price.

V — Arguments of the parties

any express provision to the contrary, 25. The United Kingdom further submits subsidies are not subject to VAT. That that, under the case-law of the Court of interpretation is confirmed by Article 19 of Justice, VAT is very wide in its scope, and the Sixth Directive which governs calcu- that the concept of 'consideration' should lation of the deductible proportion of tax. be given the broadest possible meaning so as to ensure that the principle of the neutrality of tax is observed. In the light of this, the words 'including subsidies directly linked to the price of such supplies' in Article 11A(1)(a) should merely be regarded as clarificatory. The whole of the last sentence of that provision is intended to emphasise that the origin of 23. The test for including a subsidy within the consideration is not relevant. That the 'consideration' is therefore narrower interpretation is confirmed both by the than that for determining what constitutes historical context of the provision and by consideration. For that reason, it is not the the legislative preparatory documents. test laid down by the Court in the Tolsma case, but Article 11A(1)(a), that is decisive.

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OPINION OF MRS STIX-HACKL — CASE C-353/00

the principle that as a rule everything third party includes subsidies directly obtained by a supplier for his supply goes related to the price. The rule that payment to make up the value of the consideration. made by a third party, including a public body, in respect of the supply of a service or of goods to an individual forms part of the basis of assessment does not apply to general subsidies such as those made towards ongoing operating costs. The Commission refers in this connection to the judgments of the Court in the cases of Mohr 7 and Landboden-Agrardienste. 8 28. Finally, the United Kingdom draws attention to the fact that energy advice is not free. Indeed, even where no grant is made, there is still a price to be paid. In such a case the total amount is taxable. Whether there is a direct link between the subsidy and the price is a question of fact 31. Irrespective of whether energy advice is best determined by the national courts. regarded as a separate service or as part of a complex supply, the grant represents a reduction in, or even the entirety of, the amount payable.

29. At the hearing the United Kingdom advanced the view, in reliance on the Office 32. In contrast to KNW, the Commission des produits wallons case, 6 that there is does not consider that it follows from the here a direct link within the meaning of fact that the amount of GBP 10 is paid Article HA(1)(a) of the Sixth Directive systematically that the subsidy is not between the subsidy and the price. directly linked to the price, since the grant is awarded to cover the cost of energy advice, subject to a ceiling of GBP 10.

part of the consideration. In these proceed- dispensed to householders should be ings it does. KNW provides a service, included in the basis of assessment. The namely advice to householders on energy three questions referred are considered saving measures, for which it receives a together here. specific sum. That sum therefore represents the basis of assessment, irrespective of whether the payment constitutes a subsidy within the meaning of Article 11A(1)(a), third party consideration for a service provided to the householder, or indeed consideration for the supply to the EAGA 36. First of all, I concur with the view of of a service consisting in the provision of KNW and the United Kingdom that a energy advice to the householder. subsidy is ordinarily understood to mean a sum paid from public funds, usually in the general interest. The Sixth Directive does not provide any particular definition of the term, and the Court of Justice also seems to use the word 'subsidy' in this sense. 9 34. The Commission pointed out at the hearing that the test established by the Court of Justice for including subsidies in the basis of assessment in Office des pro- duits wallons is satisfied in this case. 37. In any event, by its reference to sub- sidies in Article 11A(1)(a) of the Sixth Directive, the Community legislature clearly established the principle that sub- sidies can be subject to VAT. What remains unclear, as in this case, is the extent to which, and the conditions upon which, that is so. VI — Opinion

38. Article 2(1) of the Sixth Directive, 35. The questions referred by the national which defines the scope of VAT, provides court relate to the interpretation of the that 'the supply of goods or services for words 'subsidies directly linked to the consideration' is to be subject to VAT. It is price' for the purposes of Article 11A(1)(a) therefore a feature of a taxable transaction of the Sixth Directive, and specifically the question whether a payment such as that in the main proceedings made by a national 9 — Cf. judgment in Case C-384/95 (cited in footnote 8), agency to an undertaking for energy advice paragraph 20.

44. Where there is, and the supply is not made or the service provided to benefit the

41. The Court of Justice ruled to that effect 10—Judgment in Case C-184/00 (cited in footnote 6), para- in its judgment in the Office des products graph 10.

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body which grants the subsidy, it is clear constitutes consideration. 14 First, the price from the requirement that there be a direct of the goods or service must in principle be link between the subsidy and the price of determined no later than the time of the the transaction that the subsidy should — triggering event. Secondly, the undertaking as the general rule in Article 11A(1)(a) to pay the subsidy made by the person who envisages — only be taxed if it constitutes grants it must have as its corollary the right part of the consideration, i.e. if it is paid of the beneficiary to receive the subsidy specifically to the subsidised body to enable where a taxable supply has been made by it to provide particular goods or services. 11 him. Finally, the price of the goods or services must be ascertainable.

45. According to the settled case-law of the Court of Justice, in order for a payment to 48. As is clear from the facts as they are be classified as consideration for the supply described by the national court, KNW of a service or of goods, there must be a provides to householders the service of 'direct link' between the supply of the energy advice pursuant to an agreement goods or service and the consideration paid which stipulates that the service is to be in respect thereof. 12 provided at a specific, stated price ('in section 3 on the front page'). The price of the energy advice is therefore fixed and ascertainable.

54. In that connection, reference must be made to the Court's case-law 17 pursuant to 51. The fact that the subsidy is granted by a which the decisive factor for determining third party is no reason not to regard it as consideration is its subjective rather than its consideration. The situation is comparable objective value. to that of refund vouchers, where part of the consideration consists in a voucher presented to the retailer by the end-user to obtain a reduction in the price. In such cases, upon presentation of the voucher, a third party — namely the issuer of the voucher — subsequently pays the retailer the difference between the price actually 55. As the Commission rightly pointed out paid by the end-user and the 'usual', non- at the hearing, it is precisely in cases where discounted, price. the price consists in the subsidy that there is a direct link between the price and the subsidy.

56. The reply to be given to the national 52. A refund of this kind by a third party court is therefore that a payment such as covering part only of the consideration has that in the main proceedings should, as a also been determined by the Court of subsidy in the sense of Article 11A(1)(a) of Justice to constitute consideration. 16 the Sixth Directive, be included in the basis of assessment. 15 — Cf the judgment in Case 184/00 (cited in footnote 6), paragraph 15. 16 — Case C-288/94 Argos Distributors [1996] ECR I-5311, 17 — Case C-288/94 (cited in footnote 16), paragraphs 16 and paragraph 18. 17, and the cases therein referred to.

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