United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2005] UKVAT V18963

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Empowerment Enterprises Ltd v Customs and Excise [2005] UKVAT V18963 (21 February 2005)

18963

Exempt Supplies- education; tuition given privately by teacher, who is director and employee of limited company; EC Sixth Directive Article 13A.1(j); whether properly implemented by domestic legislation by Value Added Tax Act 1994 Schedule 9 group 6 item 2; whether domestic legislation compatible with EC Sixth Directive; No; appeal allowed.

EDINBURGH TRIBUNAL CENTRE

EMPOWERMENT ENTERPRISES LTD Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: (Chairman): J Gordon Reid, QC., F.C.I.Arb.,

(Members): Mrs Charlotte Barbour, CA., ATII

W Ruthven Gemmell, WS

Sitting in Edinburgh on Wednesday 19 January 2005

for the Appellant Mr Bernard Rice ATII

for the Respondents Miss Gillian Carty, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2005.


 
DECISION

Introduction

This appeal, heard on 19^th January 2005, raises the question whether Article 13A.1(j) of the Sixth Council Directive 77/388/EEC has been properly implemented by the Value Added Tax Act 1994 Schedule 9, Group 6 Item 2. These provisions, which are appended hereto, relate, in summary, to the supply of private tuition by teachers of subjects ordinarily taught in a school or university. Ultimately, the issue for decision is whether this particular exemption can only be claimed by an individual as opposed to some other form of legal entity such as a limited company.

Mr Bernard Rice, ATII, B J Rice & Associates, Chartered Accountants, 12 Wheatsheaf Close, Maidstone, Kent appeared on behalf of the Appellants. He produced a lengthy skeleton argument and a bundle of authorities. Gillian Carty, Shepherd & Wedderburn, solicitors, Edinburgh, appeared on behalf of the Respondents ("Customs"). She, too, provided authorities for our consideration. A Statement of Agreed Facts was tendered and was subject to agreed amendment in the course of the hearing. Parties also produced an agreed bundle of documents. We heard no oral evidence. There was no dispute on quantum. The amount of the disputed assessment is £7,977 plus interest.

Facts

The Statement of Agreed Facts, as amended, provides as follows:-

1. The Appellant is Empowerment Enterprises Limited, a company incorporated under the Companies Acts (Registration Number SC238709) and having its Registered Office at Easter Cottage, Fowlis Wester, Crieff, Perthshire PH7 3NL ("the Appellant Company").

2. The Present appeal is an appeal against:

   a. A decision of the Commissioners contained in a letter dated 25 September 2003 and

   b. An assessment to VAT issued by the Commissioners to the Appellant on 29 April 2004 in the sum of £7977 (excluding interest) in respect of the period 1 February 2003 to 31 October 2003. Item 5 of the Parties Joint Bundle of documents is a copy of said assessment dated 29 April 2004 and is equivalent to the original.

3. The present appeal lies to the tribunal by virtue of:

   a. Section 83(b) of the VAT Act 1994 and

   b. Section 83(p) of the VAT Act 1994.

4. The Appellant Company is registered for VAT purposes under VAT registration number 761 7374 14 and has been so registered since 1 February 2003.

5. Prior to 1 February 2003, Mr John Page, a director of the Appellant Company was registered as a sole proprietor under VAT registration number 761 7374 14. He had been so registered since 1 June 1994.

6. The Appellant Company trades under the name of the Upledger Institute and is engaged in the provision of training courses in Craniosacral Therapy.

7. In 1998 an assurance visit was conducted by Murray McDonald, an Officer of HM Customs and Excise. At the time of the said assurance visit Mr John Page was carrying on business as a sole proprietor trading under the name of the Upledger Institute. As a result of the enquiries made by the Commissioners a decision was issued by them to the effect that the tuition supplied by Mr John Page did not qualify for exemption for VAT purposes in terms of Item 2 of Group 6 of Schedule 9 to the VAT Act 1994. That decision was appealed to the VAT tribunal (EDN/99/144). It was later conceded by the Commissioners that the supplies made by Mr Page personally did qualify for exemption for VAT purposes but that the supplies made by others for whom payment was made to the Appellant in that case did not.

8. It was held by the tribunal in their decision in appeal number EDN/00/144 that the supply of tuition by persons other than Mr Page personally is not an exempt supply. The appeal was refused. Item 1 of the Parties' Joint Bundle of Documents is a true copy of the decision of the tribunal and is equivalent to the original.

9. The Appellant Company was set up by Mr Page in or around October 2002 and was registered for VAT purposes as aforesaid.

10. On 14 May 2003 a visit was conducted by Murray McDonald, an Officer of HM Customs and Excise to the Appellant Company's accountant. At that visit Mr McDonald was made aware that certain of the supplies made by the Appellant Company, namely tuition provided by Mr Page, was being treated as an exempt supply for VAT purposes. The officer concluded that as the supplies were being made by the Appellant Company, they did not qualify for exemption for VAT purposes.

11. On 25 September 2003 Mr McDonald, on behalf of HM Customs and Excise issued a decision to the Appellant Company in which the Commissioners determined that as the Appellant Company is not an eligible body under Item 1 of Group 6 to Schedule 9 to the VAT Act 1994 all supplies of tuition are standard rated supplies for VAT purposes. Item 14 of the Parties' Joint Bundle of documents is a true copy of the letter of 25 September 2003 and is equivalent to the original.

12. By letter dated 9 October 2003 from the Appellant Company's VAT consultant, J K Merry, a reconsideration of the Commissioner's decision was requested. Item 15 of the Parties' Joint Bundle of documents is a true copy of the letter of 9 October 2003 and is equivalent to the original.

13. To enable the reconsideration to proceed, Officer McCue of HM Customs and Excise requested, by letter dated 8 December 2003 certain further information from the Appellant Company's consultant. Item 19 of the Parties Joint Bundle of documents is a true copy of the letter of 8 December 2003 and is equivalent to the original.

14. The Appellant Company's consultant replied by letter dated 19 January 2004. Item 20 of the Parties' Joint Bundle of documents is a true copy of the letter of 19 January 2004 and is equivalent to the original.

15. In said letter it was confirmed on behalf of the Appellant Company (and it remains true) that:

    a. Mr Page is a director of the Appellant Company.

    b. There is no written agreement between the Appellant Company and Mr Page.

    c. The students receiving tuition are invoiced by the Appellant Company.

    d. Mr Page does not invoice the Appellant Company.

    e. The payments made by students in settlement of the invoices rendered by the Appellant Company are banked into the Appellant Company's bank account and the money is treated as income of the Appellant Company.

    f. All overhead and running costs are incurred by the Appellant Company and recorded through the books and records of the Appellant Company.

16. It has further been confirmed on behalf of the Appellant Company (and remains true) that the supplies of tuition made by the Appellant Company are provided by the teaching staff of the Appellant Company. Mr Page is a director and an employee of the Appellant Company. Mr Page is the only permanent member of the teaching staff of the Appellant Company. Occasionally additional teaching staff are required to provide tuition and other individuals are engaged by the Appellant Company to provide tuition as employees of the Appellant Company.

17. By letter dated 16 February 2004 Officer McCue of HM Customs and Excise upheld the previous decision of Officer McDonald dated 25 September 2004.

18. Items 7, 8, 9, 12, 16 and 21 of the Parties Joint Bundle of documents are true copies letters from the Commissioners sent to the Appellant Company, Mr Page or the Appellant Company's consultant dated 18 February 2003, 15 May 2003, 1 July 2003 and 29 October 2003 respectively and are equivalent to the originals.

19. Items 6, 10, 11, 13, 17 and 18 of the Parties Joint Bundle of documents are true copies letters from Appellant Company or the Appellant Company's consultant to the Commissioners dated 29 August 2003, 6 June 2003, 18 June 2003, 21 July 2003, 3 November 2003 and 27 November 2003 respectively and are equivalent to the originals.

20. Items 2, 3 and 4 of the Parties Joint Bundle of documents are true copies of Forms VAT, VAT 68 and Trib 1 respectively and are equivalent to the originals.

    The documents referred to in the Statement either rehearse arguments or provide factual information the essentials of which are reflected in the Statement. It is unnecessary to set out the terms of these documents in detail.

    We should also add that (i) in relation to the 2000 Decision, given by a differently constituted Tribunal, Mr Page was the taxable person; in the present appeal, "his" company is the taxable person; (ii) it is common ground that the tuition provided is of a type which falls within the phrase "ordinarily taught in a school or university". At the hearing there was no discussion of the nature of such training and we refer to the first and second pages of the 2000 Decision [Bundle pages 2 and 3] for a fuller description, and (iii) the supplies in question which are the subject of the present appeal were made by the appellant company rather than by Mr Page.

    Submissions

    Mr Rice began by presenting a procedural argument based upon the terms of Customs' Amended Statement of Case, lodged on 20 August 2004. As the argument developed, it became increasingly difficult to follow it or its purpose. Eventually Mr Rice stated that the argument had no bearing on the merits of the appeal. We therefore treat the argument as abandoned and say no more about it.

    Mr Rice submitted, in summary, that Article 13A.1(j) has not been properly implemented by the domestic legislation and therefore the Appellant was entitled to rely on the Directive (Becker v Finanzamt Munster-Innenstadt 1982 ECR 53 paragraphs 7 and 20). In particular, the domestic legislation unjustifiably contains the word "independently". His fundamental submission was that Article 13A.1(j) included supplies not only by individual teachers but also by any other legal entity. Tuition carried out by Mr Page and other employees of the Appellant company, for which the company rendered invoices, was all exempt. In support of these propositions he submitted that (i) value added tax was a tax on supply of goods and services which did not depend upon the legal form of the taxable person; this was the principle of fiscal neutrality (Ambulanter Pflegedienst Kugler GmbH v Finanzamt fur Korperschaften 2002 ECR 1-6833, paragraphs 20, 51; (ii) the exemptions contained in Article 13 should be strictly interpreted (Stichting Uitvoering Financiele Acties v Staatssecretaris van Financien Case 348/87 1989 ECR 1737 paragraph and Kugler paragraph 25; (iii) the addition of the word "independently" in the domestic legislation offended against the principle of fiscal neutrality; (iv) that principle had been applied in construing other exemptions in Article 13A.1 (Gregg & Anr 1999 STC 934 paragraph 14 of the Advocate General's Opinion, and paragraphs 13,14, 20, 26, and 30 of the Court's Judgment, Kugler Opinion of the Advocate General at paragraphs 29, 30, Judgment of the Court paragraphs 27, 29, 31, 58), and Hoffman C-144/00 3/4/03 paragraphs 20,22 & 27 (v) Kugler concerned Article 13A.1(c) and (g) [medical care]; the wording of paragraph (c) and (j) are similar and Kugler held that the form of legal entity was not restricted so that other forms of legal entity were included within its scope as well as individuals; (v) the word "privately" in Article 13A.1(j) simply meant a private contract, which could e.g. be with the parents of the pupil, (vi) the exemptions must be read in the light of the purpose of Article 13 which referred to the "public interest"; the exemptions related to activities; it was not concerned with the size of the entity or the scale of activity (vii) the word "teachers" in the Directive must include a limited company; (viii) it was clear that the equivalent Irish legislation did not restrict the exemption to individuals (Value Added Tax 1972 First Schedule, Exempted Activities paragraph (viii); and Relative Notes for Guidance page 192); either the Irish legislation or the UK legislation has incorrectly implemented Article 13A.1(j).

    He also referred to CIR v Yorkshire Agricultural Society 13 TC 58, which concerned charitable purposes under English law, which we found to be of no assistance for present purposes. He also submitted that the case may be suitable for reference to the European Court of Justice (James Buchanan & Co Ltd v Babco L td 1978 AC 141 per Lord Wilberforce). He also drew our attention to another Tribunal case (Kingscrest Associates Ltd LON/2002/691) in which the Tribunal has, in relation to Article 13A.1(g) & (h), referred certain issues to the Court of Justice. The Tribunal had the choice either to rule that the domestic legislation was ultra vires or make a reference. In the light of C Clarke 9/10/07 LON96/1446) it would be easy for Mr Page to have entered into a partnership with the Appellant company, ensure that all tuition is given by him and thus fall within the exemption as expressed in the domestic legislation.

    Miss Carty for Customs submitted, in summary, that (i) Items 1 and 2 of Group 6 Schedule 9 reflect Article 13A.1(i) & (j); (ii) the Appellant was not providing private tuition in terms of the domestic legislation (Mr Rice did not dispute this); (iii) the teachers in question, including Mr Page, were not acting independently of the Appellant (again, Mr Rice did not dispute this); (iii) tuition was not being given privately; and (iv) the principle of fiscal neutrality should not affect the ordinary meaning of the words of the Directive.

    Miss Carty accepted that the exemptions should be construed narrowly, and that the Appellant was entitled to rely on the direct effect of the Directive if it had not been properly implemented in the domestic legislation. She drew our attention to Ellicot v CC&E 19995 1 CMLR 813 and Clarke. She pointed out that in Gregg which originated from the Northern Ireland Tribunal, the partnership had no separate legal personality so that the decision would have been different had it been a Scottish case. In Hoffman and Kugler the same person providing the service was making the supply. The exemption envisaged the teacher acting on his own account. The word "teachers" should be given its ordinary meaning and if that is done it is not open to include a limited company as falling within the exemption. The Directive could easily have made it clear that persons other than individuals fell within the exemption. Considering other paragraphs of Article 13A.1 is not helpful as their structure is different. The Directive is prescriptive; the formulation in the Irish Act is different. She did, however, acknowledge that either the Irish or the UK Act incorrectly transposed Article 13A.1(j).

    In considering the principle of fiscal neutrality, Miss Carty argued, in particular, that this should not affect the ordinary meaning of the word "teachers". She, too, referred to Gregg (Advocate General's Opinion paragraph 26, 28, 29, and to the Judgement of the Court at paragraph 12, 20 ,21) Kugler and Hoffmann. These cases essentially said the greater includes the lesser but do not establish that the lesser included the greater. Paragraph (j) relates to individuals; paragraph (i) covers other legal entities. Note 1(e) is an addition which narrows the scope of the exemption. The Appellant cannot qualify under (i) because it is profit making; it would be anomalous if it could qualify under (j). A reference to the European Court was unnecessary as the domestic legislation was compatible with Article 13. The assessment was therefore made to best judgement and should be upheld, there being no dispute on quantum.

    Discussion

    (a) Legislation

    The critical words in the domestic legislation are:-

    "The supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer."

    We refer to Clarke for the history of the legislation. Under the Value Added Tax Act 1983 Schedule 6 Group 6 Item 3, the provision there related to Private tuition, rather than The supply of private tuition; to an individual pupil, to by a teacher, rather than by an individual teacher, to any employer or organisation rather than to an employer. It seems to us plain that both versions were intended to relate to the provision of tuition by an individual teacher and were intended to exclude the provision of tuition by a teacher who was an employee of a legal entity such as a limited company who made the contract for the provision of tuition. Accordingly, if Schedule 9 Group 6 Item 2 to the 1994 Act correctly transposes Article 13A.1(j) then the appeal must fail as the supply of the tuition, made by the Appellant company through the medium of Mr Page and other teaching staff of the Appellant (see paragraph 16 of the Statement of Agreed Facts), does not meet the statutory criteria. The tuition is not being supplied by an individual acting independently of an employer.

    The arguments presented to us require us to examine the text of Article 13A.1. The principal part which requires examination is Article 13A.1(j):-

    "tuition given privately by teachers and covering school or university education;"

    The first critical word is tuition. The Oxford English Dictionary (2^nd Edition) defines tuition as inter alia the action or business of teaching a pupil or pupils; the function of a tutor or instructor; teaching; instruction. The next critical word is teachers. Teacher is so defined as inter alia one who or that which teaches or instructs.. one whose function is to give instruction especially in a school. The next critical word is privately. It is so defined as meaning inter alia unofficially, individually, personally. We also note with interest that the French Text of Article 13A.1(j) quoted in Ellicot at page 821 and 823 refers to a titre personnel i.e. in a personal capacity.

    We consider that if we apply the plain ordinary meaning of the words tuition given privately by teachers it is reasonably clear that the exemption is directed to an educational service given by an individual in his personal capacity. In other words the activity being exempted is the provision of teaching by an individual teacher to an individual or individuals. The word privately does not intend to draw a distinction between the public sector and the private sector; nor does it relate to the contractual nature of the transaction whereby the teaching service is provided. The word given is qualified by both privately and by teachers. The service is to be given or the activity is to be performed personally; the service is to be given by the teacher. This may be contrasted with for example, distance learning or interactive learning over the Internet.

    This clearly points towards the exemption being directed to not only the activity (tuition) but also to the manner in which that activity or service is to be given. If our analysis of the ordinary meaning of the words of the exemption is correct, then the exemption relates to, and only to, the supply of tuition in a specified manner. The exemption prescribes and describes the activity exempted. The exemption says nothing of the legal form of the economic operator or taxable person supplying the service, and whose supplies are exempt from general liability to VAT.

    An examination of the description of other exemptions is of some assistance. While their structure is not identical, in general, they refer to activities rather than to the legal personality of the taxable person. For example, bodies or establishments could be trusts or voluntary associations or companies limited by guarantee.

    Accordingly, if we had to look no further we would be at least doubtful whether the domestic legislation has properly implemented Article 13A.1(j). However, Mr Rice has presented a number of significant arguments based principally upon the case law of the European Court of Justice which reinforce our doubts.

    (b) Case Law

    It is reasonably plain the decision in Bulthuis-Griffioen v Inspector der Omzetbelasting 1995 STC 954 has been superseded by the later cases of Gregg, Kugler and Hoffmann. We therefore do not find it necessary to consider it in detail although we note that the principle of fiscal neutrality does not appear to have been discussed. The Court, at paragraph 18 applied the settled case law that the exemptions provided for in Article 13 of the Sixth Directive have their own independent meaning in Community Law citing Stichtung 1989 ECR 1737 at 1752 para 11.

    Gregg concerned a partnership (operating a nursing home business), which under the law of Northern Ireland, had no separate legal personality distinct from its partners. The issue was whether Article 13A.1 of the Sixth Directive was to be interpreted as meaning that the terms other duly recognised establishments of a similar nature and other organisations recognised as charitable by the Member State concerned in sub-paragraphs (b) and (g) respectively excluded from the exemption from VAT natural persons running such a business. The European Court held that it did not. The words were broad enough to include individuals as well as other legal entities. In his Opinion, the Advocate General pointed out that the Community legislation may define not only the activity to be exempted but may also lay down in mandatory fashion the economic operators permitted to provide the supplies exempted from tax; but he also pointed out that those operators will necessarily have to have legal personality (paragraph 26). He further observed that tailoring different tax treatment to the personality of the operator of the activity and consequently the alteration of conditions of the operator of the activity and the conditions of competition on the sole basis of the legal guise of that activity is to be avoided (paragraph 28). The Court noted that the terms used to describe the exemptions envisaged by Article 13 are to be strictly interpreted as they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (paragraph 12). At paragraphs 12-17 the Court made three further points. The first was that although the exemptions are granted in favour of activities pursuing specific objectives, most of the provisions also defined the bodies authorised to supply the exempted services which in turn were not defined by reference to purely functional material, noting that in some exemptions the activity is described by reference to individuals in their professional capacity such as teachers. The second point was that the identification of a particular economic operator in an exemption was not intended to limit the type of legal entity entitled to the exemption. Thus the terms establishment and organisations were sufficiently broad to include natural persons. The third point was that this interpretation was consistent with the principle of fiscal neutrality inherent in the common system of VAT; the exemptions must be applied in compliance with that principle. The Court observed that the principle of fiscal neutrality precluded inter alia

    "Economic operators carrying on the same activities from being treated differently as far as the levying of VAT is concerned. It follows that the principle would be frustrated if the possibility of relying on the benefit of the exemption provided for activities carried on by the establishments or organisations referred to in art 13A(1)(b) and (g) was dependent on the legal form in which the taxable person carried on his activity." (paragraph 20)

    Kugler concerned out patient care service operated by a limited company and the interpretation of Article 13A.1(c) and (g). The issue was in a sense the converse of Gregg because the tax authorities had assessed the company to VAT because it was not a natural person and could therefore not fulfil the requirements of the exemption. One issue was therefore whether the exemption under paragraph (c) depended on the legal form of the taxable person supplying the medical or paramedical services in the exercise of those professions. The Court noted that the exemptions constituted independent concepts of Community law which had to be placed in the general context of the common system of VAT introduced by the Sixth Directive (paragraph 25), pointing out that paragraph (c) defined the exempt transactions by reference to the nature of the services supplied without mentioning the legal form of the person supplying them. The conclusion was that only two conditions had to be complied with for paragraph (c) to apply, namely the involvement of medical services and the supply by persons who possess the necessary professional qualifications (paragraph 27). This interpretation was seen to be consistent with the objective of reducing the cost of medical care and the principle of fiscal neutrality (paragraph 29); that latter principle would be disregarded if the possibility of relying on the exemption which is envisaged for the provision of medical care under paragraph (c) were dependent on the legal form in which the taxable person carried on the activity (paragraph 30).

    Hoffmann was a concert promoter who organised the world-wide tour of the Three Tenors (Placido Domingo, Jose Carreras and Luciano Pavarotti). Issues arose in relation to VAT on the fees paid to the solists. The matter came before the European Court in relation to Article 13A.1(n) [certain cultural services] on inter alia the question whether other (recognised) cultural bodies excluded soloists performing individually. The Court held that it did not. In his Opinion, the Advocate General observed that Article 13 provides for exemption from VAT for certain categories of activity (paragraph 27); The Court applied the principle of fiscal neutrality and adopted the approach in Gregg (paragraphs 24-27). The Court further observed that the activities which are to be exempted from VAT are specifically defined by the content of Article 13A (paragraph 38).

    Ellicot concerned an appeal by an individual on the question whether she was making exempt supplies by teaching mathematics to students by a particular method which she was licensed to teach by a limited company to whom she paid a licence fee. The Tribunal held that she was. The Tribunal observed that paragraph (j) contemplated supplies that are necessarily small in scale and independent of the supplies of some body or organisation falling within exemption (i) (paragraph 21). However, in the later case of Clarke (which concerned the question whether a partnership in Northern Ireland was making exempt supplies in connection with its activities of providing dance tuition), the same Chairman, (in holding that the supplies were exempt) observed, in the face of an argument based on Ellicot, that Article 13 was concerned to remove particular types of supplies from charge and that the quantity of the supplier's turnover, whether large or small was irrelevant. We agree with that view which is consistent with the European case law discussed above.

    The Tribunal is aware that there are many other authorities dealing with exemptions under the VAT regime such as EC Commission v Federal Republic of Germany 2002 STC 982, Institute of the Motor Industry v CC&E 1998 STC 1219, CC&E v University of Leicester 2002 STC 147, Expert Witness Institute v CC&E 2002 STC 42 and CC&E v Christoph Dornier v Finanzmt Giessen C-45/01 6/11/03 ( in which Kugler was applied) to name but a few. We draw the following propositions from the authorities cited to us:-

1. Where the provisions of a Directive appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of correct 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. Moreover, a Member State may not rely, as against a taxpayer who is able to show that his tax position actually falls within one of the categories of exemption laid down in the Sixth Directive, upon its failure to adopt the very provisions which are intended to facilitate the application of that exemption. Article 13A.1(j) is sufficiently precise and unconditional in its identification of the activity to which the exemption applies.

2. The terms of Article 13 of the Sixth Directive are to be interpreted strictly. The reason is that they are detailed exceptions to the general principle that VAT is levied on all services supplied for consideration by a taxable person, whatever legal form that taxable person may take.

3. The aim of Article 13 is to exempt certain activities or categories of transactions as to which it is generally in the public interest to minimise the cost of providing such services. These exemptions are independent concepts of Community law which fall to be considered and construed in the context of the common system of VAT introduced by the Sixth Directive.

4. The principle of fiscal neutrality precludes economic operators carrying on the same activities in a similar situation from being treated differently as far as the levying of VAT is concerned. The exemptions in Article 13A.1 must be interpreted and applied in a way which complies and is consistent with that principle. Entitlement to rely on an exemption should not, unless the exemption so specifies, depend upon the legal form in which the taxable person carries on the activity in question.

   Conclusions

   In our view, paragraph (j) identifies the activity (and the manner of its performance) which falls within the exemption. It does not go beyond that. In particular, it does not identify the legal form of the taxable person carrying out the activity in question. The activity here is tuition. The manner of supply is identified. It is to be given by teachers personally. It does not lay down, any more than paragraphs (c), (g) or (n) do, the legal form of the taxable person who is entitled to rely on the exemption. The reference to teachers is not a reference to the legal form of the taxable person. Rather, it is descriptive, indeed prescriptive of the activity in question. The words tuition and teachers complement each other.

   No legal person who supplies the service of tuition given privately by a teacher is excluded from the exemption. To hold otherwise would be inconsistent with the general principles mentioned above and would infringe the principle of fiscal neutrality. To confine the exemption to a taxable person who is an individual would create significant anomalies. Teachers acting in partnership in England or Northern Ireland would fall within the exemption but the activities of the same teachers forming a partnership under Scots Law would not be exempt. A "one man" limited company would not fall within the exemption. Such a result does not achieve the straightforward application of the exemption contained in paragraph (j). In our view, our conclusion is not negated by any of the other provisions of Article 13 as they do not identify or restrict the scope of the legal form of the taxable person entitled to the exemption in Article 13A.1(j).

   It follows, if the foregoing is correct, that the exemption contained in Article 13A.1(j) of the Sixth Directive has not been properly transposed into the domestic legislation. Item 2 of Group 6 of Schedule 9 to the 1994 Act unjustifiably limits the scope of the exemption. In these circumstances, as the relevant provision contained in the Directive is sufficiently unconditional and precise, the Appellant is entitled to rely upon it. In our view, the Appellant is entitled to succeed, and the issues are not sufficiently in doubt as to justify a reference to the European Court of Justice.

   Disposal

   We shall allow the appeal. Parties were agreed that if the Appellants were successful they should be found entitled to expenses. The Tribunal therefore finds the Appellants entitled to expenses and directs, in terms of Rule 29 of the Tribunal Rules, that the expenses of the Appellants of, incidental and consequent upon the appeal shall, failing agreement, be taxed by the Auditor of the Court of Session on a party and party basis.

   J GORDON REID, QC, F.C.I.Arb., CHAIRMAN
   RELEASE: 21 FEBRUARY 2005

   EDN/04/22

   VALUE ADDED TAX 1994 SCHEDULE 9 GROUP 6

   1
   The provision by an eligible body of—

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