United Kingdom VAT & Duties Tribunals Decisions

You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Charterhall Marketing Ltd v Customs and Excise [2005] UKVAT V19050 (19 April 2005)
URL: http://www.bailii.org/uk/cases/UKVAT/2005/V19050.html
Cite as: [2005] UKVAT V19050

[New search] [Printable RTF version] [Help]

Charterhall Marketing ltd v Customs and Excise [2005] UKVAT V19050 (19 April 2005)

19050

Zero Rating; single or multiple supplies; printed materials consisting of letter and leaflets, and envelope; mail pack; whether "letter" truly a letter; whether one or more documents ancillary to another; Value Added Tax Act 1994 Schedule 8 Group 3 Item 1.

EDINBURGH TRIBUNAL CENTRE

CHARTERHALL MARKETING LTD Appellants

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

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

(Members): Mr K Pritchard, OBE., BL., WS

R L H Crawford, BA., CA., ATII

Sitting in Edinburgh on Monday 7 and Tuesday 8 February 2005

for the Appellants Mr Heriot Currie, QC

for the Respondents Mr Julian Ghosh, Advocate

© CROWN COPYRIGHT 2005.

DECISION

Introduction

This appeal concerns the thorny problem of single or multiple supplies and whether certain printed material supplied in the form of a "mail pack" for onward transmission to potential customers fell to be zero rated under Item 1 of Group 3 in Schedule 8 to the Value Added Tax Act 1994 ("books, booklets, brochures, pamphlets and leaflets"). The Appellants supplied the printed materials to a bank; the mail packs invited customers or potential customers to take out a loan and (usually) a form of loan protection insurance.

The Appellants were represented at the Hearing, which took place at Edinburgh on 7^th and 8^th February 2005, by Heriot W Currie, Q.C., on the instructions of Ernst & Young LLP, London. The Appellants did not give evidence but led the evidence of Steven Griffiths, head of Bank of Scotland and Halifax Marketing at HBOS plc, Halifax. The Respondents ("Customs") were represented by Julian Ghosh, Advocate, on the instructions of Shepherd & Wedderburn, Solicitors, Edinburgh. No evidence was led on behalf of Customs. Quantum was not discussed. It was accepted by the parties that, depending on our decision, quantum may have to be dealt with at another Hearing, if agreement cannot be reached.

The parties helpfully produced written outline or skeleton arguments, bundles of authorities, an agreed bundle of correspondence and productions including prints (in envelopes), as well as photocopies of the printed materials (the mail packs) which were the subject of detailed examination and debate at the Hearing. We were also provided with a written statement, signed by Mr Griffiths, to which he spoke and supplemented when giving evidence.

Facts

The Appellants are owned by the HBOS group of companies. They supply mail packs to HBOS. These mail packs comprised printed documents (we use the neutral term "document" deliberately meantime as there was some debate as to what constitutes a leaflet on the one hand and a letter on the other hand) contained in an envelope. The purpose of the mail packs was to advertise certain financial products provided by HBOS in one corporate form or another. In the context of this appeal, these financial products were simply a loan and related loan protection insurance.

The Appellants either order the components required to compile the mail packs and then compile them, or order the mail packs already made up. The Appellants also distribute the mail packs by having them posted on behalf of HBOS, who by that stage will have authorised their release to potential customers. The supply by the Appellants was treated by all concerned as a supply of goods and not a supply of goods and services.

Mr Griffiths and his marketing team decided upon the design, composition and contents of the mail pack and identified the individual to whom it was ultimately to be sent. The obvious aim was to have as many people as possible take out a loan and the related insurance.

The mail packs were carefully prepared documents and were based upon the extensive experience of HBOS in testing various types of advertising literature. The view of HBOS was and is that certain consumers are more likely to respond to leaflets as they allow information to be presented in a customer-friendly way, whereas some consumers are more receptive to letter-style documents. They are further of the view that in the case of certain products the addition of certain documents or the presentation of information in certain formats increases the response rate. Thus, HBOS often advertise the same products using a number of different types of mail pack. On the other hand, HBOS sometimes advertise different products in the same mail pack. Each constituent element of the mail pack is important to HBOS.

Twenty different mail packs were produced to the Tribunal in printed and photocopy format (B3/1-20). They all relate to loans and "Creditcare" insurance which is a form of loan protection which broadly covers loan repayments in the event of e.g. illness, or redundancy. Creditcare was available with other HBOS loan facilities. The insurance product is just as profitable for HBOS as the loan.

We shall describe each mail pack and then attempt to group them to identify common features. However, it may be stated in general at the outset that each mail pack (i) is addressed to a named individual, rather than to the "householder" or "occupier"; the individual has been selected by HBOS using various marketing tools and information; one such method was described as "propensity modelling" (just what propensity modelling is was not the subject of any evidence which enables us to describe it in any detail at all); (ii) specifies the amount of the loan that can be made, with various illustrative monthly repayments, (iii) specifies repayment interest rates, (iv) contains a reference in one or more of the documents to a telephone number for the potential customer to 'phone, (v) contains a reference in one or more of the documents to a reference code for the potential customer to quote when calling, although loan approval is not conditional upon quoting the Response Code; quoting the Response Code helps HBOS analyse the response rate in relation to different types of mail pack; it also improves the efficiency of processing the loan application; and (vi) contains one, or three documents. A number of documents in the mail packs make reference to a textphone number. This relates to obtaining information in large print, audio and Braille. In considering the detail of each mail pack, we have ignored these references as they seem to us to be irrelevant for present purposes. Neither counsel made anything of them.

Mail Pack B3/1 (ref ZXP116) consists of an envelope and three documents. The envelope is a window style envelope. The envelope contains the words "Would you notice the difference?" in large font and a head and shoulders cartoon type sketch of two children. The first document is A4 size, and contains a blue logo at the top left hand corner. In the top right hand corner is a cartoon type sketch of the body legs and feet of two children wearing short trousers. If one were to combine the head and shoulders from the envelope with the body legs and feet, the sketch would be more or less complete although there are no arms. The top left hand corner of the document contains a blue logo with the words "membership services finance". Below that is the name and address of the intended recipient of the mail pack; below that are the words "Your Response Code" followed by a Code (PH09MP); to the right in large manuscript type font is to be found "8.9%" which is circled followed by the words "Typical APR". Below the reference to the Response Code and across most of the page are the words, again in larger manuscript font "Keep the same repayments with a new Personal Loan and notice the difference with £10,098.00 now". Below that we find the words "Dear Mr Sample". Below that is text which begins as follows "With only one month left before your current Membership Services Finance loan … is repaid in full, it's a good time to review your options". There is further text with reference to a specific monthly repayment which appears to be the same as the customer's existing loan repayments. In bold font in a separate paragraph there are the words "Arrange your new loan in just 15 minutes. There follows a table with amounts, periods in months and APRs. Below the table in very small print is a "Typical Example" which refers to a "Creditcare Silver premium". What that is is not explained at all. The arithmetic and text of the small print is not at all easy to follow. Below that is the exhortation in normal font size, "Apply today, and - without changing your monthly repayment - you could notice a healthy difference in your finances". Below that is "Yours sincerely". The document is signed and the name and position of the signatory is identified. At the very bottom of the letter in large bold font is "Call 0800585597 to apply, QUOTING THE RESPONSE CODE PH09MP".

The above document is plainly a letter. That is the immediate impression it gives despite the differences in layout, font size, the table and the sketch at the top and reference to the telephone number at the bottom. It is personalised, with the name and address of the recipient at the place one would normally expect to find them in a letter; it contains the usual style "Dear Mr" and ends "Yours sincerely".

The next document, described in the productions as leaflet 1, is A5 size (about 21cm x 15cm); it contains a cartoon type sketch similar to the first sketch described above. It refers to Creditcare but the word "cover" rather than insurance is mentioned. It refers to accident, illness and redundancy. It also has the same logo as the letter. On the reverse, not copied in B3/1 (which is a photocopy), there is in small print a reference what is needed to qualify for Creditcare; insurance is mentioned. This is essentially a leaflet about Creditcare insurance.

The third document (leaflet 2) is a long narrow folded, coloured leaflet (51.5cm x 14.5cm approx when opened out). It (i) refers to making the same loan repayment; (ii) has the same logo; (iii) refers to the Response Code on the letter; (iv) contains similar sketches to those mentioned above; (v) refers briefly to Creditcare; this is essentially a cross reference to the other leaflet; and (vi) contains Data Protection Act information in small print.

B3/2 (reference GLN182) contains three documents. The first is obviously a letter. It is on A4 paper. The fonts and colours vary but it is more formal in appearance than B3/1, having no sketch or manuscript style writing. It contains (i) the name and address of the intended recipient, (ii) the layout of a letter- Dear Mr Sample; Yours sincerely etc"; (iii) an APR - a rate is given; (iv) a telephone number to call; (v) a reference to a car which the recipient obtained with the assistance of Capital Bank, a Bank of Scotland Company; (vi) a Response Code; (vii) on the reverse side, a table with APR, amount of loan and monthly repayment details "Without Creditcare". It does not explain what Creditcare is. The text of the letter refers inter alia to home improvements.

Leaflet 1 is A5 size. It contains (i) a telephone number to call, (ii) a reference to the Response Code on the letter; the Response Code is not to be found in the leaflet. On the reverse is a check list referring to building warrants, the use of reliable contractors, insurance for the renovations, a query about how long the work will take; the telephone number is again stated. There is no reference to Creditcare in this leaflet. Nor is there any reference to the Bank of Scotland or to Capital Bank.

The third document, leaflet 2, is one and a half times the size of A4 when unfolded. It is in different colours, and includes photographs. It contains (i) a telephone number to call, (ii) a reference to the Response Code on the letter; the Response Code is not stated in the leaflet, (iii) Data Protection Act information in very small print, and (iv) details of what is required to qualify for Creditcare, again in very small print. This leaflet also contains references to Capital Bank and the Bank of Scotland.

B3/3 (reference GLN173) also contains three documents. The first is plainly a letter. It is similar to the letter in B3/2, containing APR rate, a Response Code, a telephone number and a Table on the reverse. In addition it contains Data Protection Act information in small print. The text is targeting an existing customer who already has a personal loan from Capital Bank.

Leaflet 1 is the same shape as leaflet 2 in B3/2. It contains (i) a telephone number; (ii) a reference to the Response Code on the letter but not the Response Code itself. The Bank of Scotland and Capital Bank are also mentioned. There is a general reference to loans of £1000-£25,000 but no APR or repayment sums are mentioned.

Leaflet 2 relates to Creditcare. It is A5 in size. It contains (i) a telephone number; (ii) a cross reference to the Response Code on the letter; (iii) Creditcare information. This is essentially a leaflet about Creditcare insurance.

B3/4 (reference GLN 166) contains one document. The copy in the bundle is A3 size. The print is smaller in the photocopy; when unfolded the document is about 30cm x 29cm. It is in the general style of a letter (beginning "Dear Mr Sample" and ending on the front side "Yours sincerely") but with a right hand column with a photograph and a variety of fonts and colours. It contains (i) APR; (ii) monthly repayment figures; (iii) text which makes it clear that it is targeting an existing customer; (iv) a telephone number; (v) a Response Code; (vi) Creditcare qualification but no explanation as to what Creditcare is; (vii) Data Protection Act information; (viii) reference to Capital Bank and the Bank of Scotland. The reverse side also contains APR tables and reference to the same telephone number.

Although we consider the matter to be a narrow one, we find that this document is a letter rather than a leaflet. It is perhaps best described as advertising literature in the form of a letter.

B3/5 (reference AXS238) contains three documents. The envelope is about 15.5cm square which smaller than those in B3/1-4; they are A5. The envelope contains the words "Surprise Yourself" in large blue font. The first document, is about 29cm x 14.5cm. It has the Membership Services Finance logo at the top and some photographs along the bottom. It has the general layout of a letter. It contains (i) APR; (ii) monthly repayment figures in a table both with and without Creditcare; (iii) text which makes it clear that it is targeting an existing customer; (iv) a telephone number; (v) a Response Code; (vi) a brief reference to Creditcare.

Leaflet 1 is a small Creditcare leaflet, about 14.5cm square. It contains no telephone number or Response Code and only brief details of who is qualified to take out Creditcare. There are no figures and no cross reference to the first document. This is essentially a leaflet about Creditcare insurance.

The second leaflet is shaped like a plus sign and contains five squares of about 14cm x 14cm. It contains (i) photographs of faces; (ii) no APR; (iii) no monthly repayment figures; (iv) no telephone number;(v) no Response Code but a reference to the Code on the "letter"; (vi) no reference to Creditcare; (vii) Data Protection Information in small print; and (viii) a reference to Membership Services Finance but not to the HBOS group of companies or any of them.

B3/6 (reference LXS74) contains three documents. The first has the general layout of a letter. It is A4 size. At the top left hand corner are the words "Time Card". This was unexplained. The text refers to a Timecard Personal Loan. The document contains (i) APR, (ii) monthly repayment figures; (iii) no text which suggests an existing customer is being targeted; (iv) a Response Code; (v) no reference to Creditcare; (vi) no reference to the Data Protection Act.

Leaflet 1 is 25cm x 19cm and is not A4 as the photocopy in B3/6 indicates. It contains (i) no APR; (ii) no monthly repayment figures; (iii) a telephone number; (iv) no Response Code but a reference to the Response Code on the "letter"; (v) a brief reference to Creditcare described as repayment protection insurance; (vi) no reference to the Data Protection Act.

Leaflet 2 is 21cm x 19.5cm. On one side is a form which the recipient is invited to complete to identify his or her current outstanding debts and monthly repayments and to identify the loan required. The leaflet contains (i) no APR; (ii) no monthly repayment figures: (iii) a telephone number; (iv) no Response Code but a reference to the Response Code on the "letter"; (v) Creditcare qualifications; (vi) Data Protection Information. There is also a reference in small print to the fact that loan will be provided by the Bank of Scotland.

B3/7 (reference LXS71) contains three documents. The first is a letter and is virtually identical to the letter in B3/6.

The second document, leaflet 1, is a leaflet which is 21cm x 19.5cm. It contains (i) the same type of form as leaflet 2 in B3/6; (ii) no APR; (iii) no monthly repayment figures, (iv) a telephone number; (v) no Response Code but a reference to the Response Code "on your letter" (vi) Creditcare qualifications; and (vii) Data Protection Act Information. It is also clear from this leaflet that the lender will be Bank of Scotland.

Leaflet 2 is substantially the same as Leaflet 1 in B3/6.

B3/8 (reference LXS70) contains three documents. The envelope refers to Bank of Scotland and contains the words in large block capitals "WE'D LIKE TO WRITE YOU A CHEQUE". The first document is a letter in substantially the same terms as the letters in B3/6&7, although the table of interest rates more closely resembles the table in letter B3/3, with its reference to Creditcare. Creditcare is also mentioned in the text of the letter although what it is is not explained.

The second document, Leaflet 1, is substantially the same as Leaflet 1 in Bundle B3/7. Leaflet 1 does not explain what Creditcare is. The third document, Leaflet 2 is substantially the same as Leaflet 2 in B3/7 and Leaflet 1 in B3/6.

The main document is the letter which makes sense on its own. Leaflet one contains no explanation of Creditcare. Leaflet 2 contains a brief explanation of Creditcare. To make reasonable sense of the mail pack it is necessary to consider all the documents.

B3/9 (reference AXS249) contains three documents. The envelope is virtually identical to the envelope in B3/1. The first document is similar in layout to the letter in B3/1. It contains (i) the same cartoon type sketch, manuscript heading; (ii) APR rate; (iii) no monthly repayment figures except one in small print on the reverse side in the context of Creditcare; (iv) reference to the fact that the recipient is a pre-existing customer; (v) a Response Code; (vi) brief reference to Creditcare on the reverse without explaining what it is; (vii) Data Protection information; and (viii) clear reference to the Bank of Scotland.

The second document, Leaflet 1, is A5 size, and has a head and shoulders type sketch and a manuscript heading on one side. The reverse side contains (i) general text, and (ii) a reference to the "phone number on the enclosed letter". It contains no reference to Creditcare.

The third document, leaflet 2, is substantially the same leaflet as leaflet 2 in B3/1 without the logo and with some alteration in the text. It contains (i) no APR reference; (ii) no monthly repayment figures; (iii) no telephone number; (iv) no Response Code, but a cross reference to the Response Code "on your letter"; (iv) no reference to Creditcare; and (v) no reference to Data Protection Act information.

B3/10 (reference AXS248) consists of an envelope and three documents. The first document is, in layout, a letter with a table and photograph of a piece of paper with a telephone number written on it. The letter contains (i) APR rates on the front and in small print on the reverse in the context of Creditcare; (ii) no monthly repayment figures except one in small print on the reverse in the context of Creditcare; (iii) reference to the fact that the recipient is a pre-existing customer; (iv) a telephone number; (v) a Response Code; (vi) reference to Creditcare on the reverse without explaining what it is; (vii) Data Protection Act information; and (viii) reference to the Bank of Scotland as lender.

Leaflet 1, in layout, resembles a postcard. The reverse side contains (i) no APR; (ii) no monthly figures; (iii) no telephone number; (iv) no Response Code; (v) no reference to Creditcare; and (vi) no cross reference to the letter.

Leaflet 2 is A4 size. It is folded. It contains (i) colour photographs and text on all sides; (ii) no APR; (ii) no monthly repayment figures; (iii) no telephone number; (iv) no Response Code but a cross reference to the code "on your letter"; and (v) no reference to Creditcare.

B3/11 (reference AXS234) consists of three documents in a coloured envelope with the typescript "Another special delivery from Great Universal". The first document is in the form of a letter and has the membership services finance logo at the top right hand side. It contains (i) APR; (ii) no monthly repayment figures except two in small print on the reverse with and without Creditcare which is not explained; (iii) reference to the fact that the recipient is a pre-existing customer; (iv) a telephone number; (v) a reference to quote rather than a Response Code; (v) brief reference to Creditcare in small print as already noted; (vi) Data Protection Act Information; and (vi) no reference to the Bank of Scotland as the lender, although it is stated that "Loans are provided by Members and Services Finance plc".

The second document, Leaflet 1, is A4 size, folded and has text and sketches on both sides; the above logo is also on one side. It contains (i) no APR; (ii) no monthly repayment figures; (iii) no telephone number; (iv) no Response Code but a cross reference to the code "on your letter"; (v) no reference to Creditcare; (vi) no reference to the Data Protection Act; and (vii) the membership services finance logo.

The third document, Leaflet 2, is smaller than A5 size; it is 21cm x 14.5cm. It is not folded. It contains a drawing and a heading on one side with reference to the "Response Code on your letter". It contains (i) no APR; (ii) no monthly repayment figures; (iii) no telephone number but a cross reference to the "number on the enclosed letter"; (iv) no Response Code but a cross reference to the code "on your letter"; (v) no reference to Creditcare; (vi) no reference to the Data Protection Act; and (vii) no reference to the identity of the lender.

B3/12 (reference AXS234) consists of a blue envelope with text (GOT THE JANUARY BLUES?), and three documents. The first document is in the form of a letter. It is virtually identical to the letter in B3/11.

The second document, Leaflet 1, is identical to Leaflet 1 in B3/11.

The third document, Leaflet 2, is identical to Leaflet 2 in B3/11.

B3/13 (reference AXS233) consists of a small reddish coloured Christmas card type envelope, with text ("The perfect recipe for an unforgettable Christmas") and a photograph of a Christmas pudding, and three documents. The first is small, notelet size, 15cm x 21cm, and is in the form of a letter. It contains (i) APR; (ii) no monthly repayment figures except one in small print on the reverse side; (iii) reference to the fact that the recipient is a pre-existing customer; (iv) a telephone number; (v) a Response Code; (vi) brief reference to Creditcare in small print on the reverse side without explaining what it is; and (vii) reference to the Bank of Scotland as the lender.

The second document, Leaflet 1, is 31cm x 15cm, and contains two folds. It is reddish in colour and has photographs or images of Christmas decorations, presents, mistletoe and a Christmas pudding. It has a 5p piece attached to it. The text essentially contains a Christmas Pudding recipe with cooking instructions. The leaflet also contains (i) no APR; (ii) no monthly repayment figures; (iii) no telephone number but a cross reference to the number "on the enclosed letter"; (iv) no Response Code; (v) no reference to Creditcare; and (vi) no Data Protection Act information.

The third document, Leaflet 2, is small, 10.5cm x 5cm. It continues the Christmas decoration/pudding theme. It contains no reference to, any of the matters mentioned in (i) -(vi) in the preceding paragraph. It reference to the 5p piece as a silver coin and to Christmas traditions and customs.

B3/14 (reference AXS230) consists of an envelope (containing the text "Get ready to treat yourself again") and three documents. The first is an A4 size letter. It is straightforward and business-like in layout. It contains (i) APR; (ii) no monthly repayment figures except in small print on the reverse side; (iii) reference to the fact that the recipient is a pre-existing customer; (iv) a telephone number; (v) a reference to quote; (vi) brief reference to Creditcare in small print on the reverse side without explaining what it is; and (vii) Data Protection Act information. The text also refers to the merger between Bank of Scotland and Halifax and to the fact that future loans will be provided by Halifax.

The second document, Leaflet 1, is 14.5cm by 21cm. It has what may be a 1950s style photograph on one side. The reverse side contains information about Creditcare with a cross reference to the Response Code "on your letter". This is essentially a leaflet about Creditcare insurance.

The third document, Leaflet 2, is a leaflet, which unfolded is 44.5cm x 21cm. It is folded twice and contains photographs and drawings containing images in what may be 1950s style. It contains (i) no APR; (ii) no monthly repayment figures; (iii) reference to the fact that the recipient is a pre-existing customer; (iv) no telephone number; (v) no Response Code but a cross reference to the code "on your letter"; and (vi) brief reference to Creditcare protection.

B3/15 (reference DAH128) consists of an envelope and three documents. The first is a letter and is substantially the same as the letter in B3/7.

The second document, Leaflet 1, is substantially the same as Leaflet 1 in B3/7. The two Leaflets 2 in B3/7 and B3/15 are identical.

B3/16 (DAH127) consists of an envelope and three documents. The first is a letter which is substantially the same as the letter in B3/7 and virtually identical to the letter in B3/15.

The second, Leaflet 1, is substantially the same as Leaflet 1 in B3/7 and is identical to Leaflet 1 in B3/15. Leaflet 2 is identical to Leaflet 2 in B3/7 and B3/15.

B3/17 (reference AMT24) consists of one document the same size as the document in B3/4. It has the recipient's name and address at the top left hand corner, with large text and APR on the top right. Below further text about one third of the way down in the middle is "Dear Mr Sample" followed by a narrative and a table checklist inviting the recipient to calculate how much he needs to settle his bills. At the bottom is a Response Code and telephone number. On the second page is further text and a chart with various monthly loan repayments with and without Creditcare. The third page contains more text, a head and shoulders photograph of a happy couple and a motor car. The fourth and last page contains in the top half, text in small print, making it clear that the loans are provided by the Bank of Scotland, information about Creditcare, and Data Protection Act information. There is further text towards the bottom with a telephone number and Response Code in large font. We make the same finding here as we found in finding of fact 18.

B3/18 (reference JEA21) consists of an envelope and three documents. The first is a letter which is substantially the same as the letter in B3/2 except that "Bank of Scotland" appears on the top right hand side instead of "Capital Bank", and that the recipient has already received a personal loan from the Bank of Scotland "through Norwich Union".

The second document, Leaflet 1, is very similar to Leaflet 1 in B3/2 except that at the bottom of each side is a cross reference to the "number on the enclosed letter" and no reference in the leaflet to a Response Code.

The third document, Leaflet 2, is very similar to Leaflet 2 in B3/2 except that there is no telephone number in the leaflet; instead, there is a cross reference to the "number on the enclosed letter" and a cross reference to the Response Code.

B3/19 (reference LXS24) consists of an envelope and three documents. The first document is a letter and is substantially the same as B3/15 and B3/7.

The second document, Leaflet 1, is virtually identical to Leaflet 2 in B3/15 and B3/7. The third document, Leaflet 2, is identical to Leaflet 1 in B3/15 and B3/7.

B3/20 (reference GLN 169) consists of an envelope and three documents. The first is a letter which is virtually identical to the letter in B3/3. Only the telephone number and the Response Code appear to have changed.

The second document, Leaflet 1, is virtually identical to Leaflet 1 in B3/3, the only difference being that B3/20 contains a telephone number on both sides. The third document, Leaflet 2, is virtually identical to Leaflet 2 in B3/3, the only difference being that the telephone number has changed.

In summary, we find that B3/1-20, with the exception of B3/4 and B3/17, each consists of an envelope, a printed letter containing inter alia the name and address of the recipient, and two leaflets. B3/4 and B3/17 each contains a printed letter containing the name and address of the recipient.

Each mail pack, and in particular, the letter contained in each mail pack, was designed and intended by HBOS to constitute a personal invitation to the recipient, who had been specifically selected by HBOS, to apply for a loan; in addition, in many cases, that invitation extended to Creditcare loan protection insurance.

The letters in B3/1-5, 9-14, and 18 are addressed to existing customers who have borrowed money from HBOS or one of its companies in the past. B3/6-8,15-17, 19 and 20 are not directed to existing customers.

Mail packs B3/4 and 17 contain only a letter. There are no accompanying leaflets. All the letters contain at least one reference to an APR rate. Where the mail packs contain leaflets (all of them except B3/4 and 17), at least one leaflet contains a cross reference to the Response Code or reference on the letter.

Leaflets 1 in B3/16 and 15 are identical. Leaflets 2 in B3/7, 15 and 16 are identical. The letters in B3/11 and 12 are identical apart from a numerical reference. The letters in B3/15 and 16 are identical apart from the Response Code reference.

In five mail packs (consisting of letters and leaflets) Creditcare is mentioned only in the letter. These are B3/9-13. B3/4 and 17 each consists of one document, a letter, and Creditcare is mentioned in each letter.

In five mail packs, Creditcare is mentioned in a leaflet but not in the letter; these are B3/6, 7, 15, 16 and 19.

There are five mail packs where Creditcare is mentioned in a separate leaflet devoted to Creditcare; these are B3/1, 3, 5, 14, and 20.

Only one leaflet, B3/10, does not invite the recipient to refer to the letter for a Response Code.

In relation to each pack which contains a letter and two leaflets (all of them except B3/4 and 17), the letter is the main document. The leaflets are complementary and to some extent supplementary. We make this finding as a matter of impression, and from a detailed consideration of the form, layout contents and text of the documents in each mail pack. From the point of view of HBOS each document is important. It forms part of a persuasive picture which it intends to present to pre-existing or prospective customers.

In September 2002 Customs visited the Appellants' premises in order to investigate the nature of the zero-rated supplies which it made to other members of the HBOS Group. Sample mail packs were examined. Correspondence and meetings ensued. The Appellants and Customs co-operated with each other in order to attempt to resolve the issues which had arisen. Customs examined some 88 mail packs. They took the view that 20 of those 88 mail packs should be standard rated. They confirmed this view in August 2003 and requested details of sales invoices relating to the sample mail packs which they had examined and for similar mail packs. The Appellants requested a reconsideration, which was undertaken, but Customs did not change their views. Information in relation to quantum was subsequently exchanged and discussed.

By letter dated 28/5/04, Customs ruled that the supply of certain quantities of mail packs by the Appellants to HBOS of which examples are to be found in B3/1-20 had been incorrectly zero-rated. Customs issued an Assessment in respect of that under-declaration on or about 4/6/04 for the periods 05/01 to 08/03 in the total sum of £775,269 plus interest. The Appellants requested a further reconsideration. The assessments were subsequently reduced to £683,058 (see B2/20). These assessments were made by Customs to the best of their judgment.

Grounds Of Appeal

The Notice of Appeal asserts that (i) when supplying the mail packs the Appellants were making multiple supplies for VAT purposes; (ii) if the supply was a single supply, it should be zero-rated, and (iii) the assessments were not made to best judgment. The last ground was abandoned at the outset of the Hearing.

Submissions

(a) Appellants

Mr Currie began by referring us to Card Protection Plan Ltd v CC&E 1999 STC 270, paras 29 and 30, Kimberly-Clark Ltd v CC&E 2004 STC 473 paras 46-47, and Dr Beynon and Partners v CC&E 2005 STC 55 paras 19, 25-31 and submitted that the Tribunal should ask itself whether (i) the supply of goods is being artificially split, (ii) one of the elements in the mail pack constitutes the principal goods, and one or more of the other elements is to be regarded as ancillary goods, (iii) each constituent of the mail pack constitutes, so far as HBOS is concerned, an aim in itself. The Tribunal should adopt a level of generality which corresponds with social and economic reality. Regard must be had to the perspective and aim of the recipient of the supply i.e. HBOS; they use the mail packs as an advertising tool. He disagreed with the order of the two step approached proposed by Mr Ghosh (see below). The first question was "Is one item a principal supply and, if so, are the other items ancillary". The level of generality test was a cross check after the application of Card Protection. The starting point is the supply of two leaflets and a letter, and the question is "Is this a transaction which consists of a number of elements?". Paragraph 30 of Card Protection contains the tools to carry out the instruction given in paragraph 29. The approach in paragraphs 6.2 and 6.3 of Customs Notice 701/10 should then be followed. One should not take an overall view that commercially it is a mail pack. That does not resolve the issues posed in Card Protection. It was also wrong to suggest that to constitute an independent supply of goods the goods must be capable of being consumed on a stand alone basis. It would be wrong in law to ask whether the goods are capable of being so consumed.

Mr Currie's principal submission was that the Appellants were making separate supplies of a letter and two leaflets; alternatively the Appellants were making a single supply of leaflets to which the supply of the letter was ancillary. Viewing the packs as comprising a multiple supply was not artificial. Each item had an aim in itself. A cross reference to the constituent parts of a pack does not lead to the result that there is a single supply. The leaflet performs no function for the letter and so cannot be ancillary to it. The aim of the letter was to sell a loan to those who are likely to read a more formal document whereas the aim of the leaflet is to sell the loan to those recipients who are unlikely to read a letter but who will take in information from a less formal leaflet. HBOS view neither as the principal service. Each is independent of the other. The approach of Customs was to view matters through the eyes of the recipient of the mail pack. It was also going too far to describe the letter as the first step towards a bilateral contract; it was no different from, for example, a leaflet about double glazing.

Mr Currie further submitted that if there was not a multiple supply, then the letter may be viewed as ancillary to the leaflet, as it provides the telephone number and Response Code for the leaflet. The Creditcare leaflet constituted an aim in itself. It was not ancillary to the letter and was not a means of better enjoying the letter. He invited the Tribunal to consider each of the twenty mail packs in B3/1-20.

(b) Customs

In summary, Mr Ghosh submitted that the issues were (i) whether each mail pack constituted a single composite supply or whether the documents contained within each pack constituted multiple supplies of goods; and (ii) whether the composite supply constituted the supply of a leaflet within VATA 1994 Schedule 8 Group 3 Item 1. He accepted that the documents within each mail pack were, apart from the document described as a letter, leaflets within the meaning of Item 1 of Group 3.

He submitted that the supply of the mail packs was a composite supply. In particular, (i) the letters could be used by themselves to attract custom, the leaflets could not; all the essential information, namely rates, monthly repayment, telephone number as well as the Response Code, could be found in the letter and not in the leaflets (ii) the perspective of the Appellants and the customer were inextricably linked; he referred to Kimberly Clark at paragraphs 28, 30 and 32 (iii) from the perspective of the customer, the leaflet cannot be used without the letter; (iv) the aim or objective, as described in Card Protection, applied to the appropriate level of generality does not make the subjective perspective conclusive. None of the leaflets, especially the Creditcare leaflets, had any aim or objective independent of the letter; they could not perform a function separate from the letter. He relied on Card Protection under reference to paragraphs 26, 29, and 30 of the Court's judgment and submitted that it was necessary to ask what was the truth of the transaction and not artificially to dissect it; which goods could be consumed on a stand alone basis It was necessary to have regard to all the circumstances including the physical characteristics and function of the various pieces of paper. He also referred to Direct Marketing Bureau (Decision No 16696, 30/6/00 paras 15, 23-25, Direct Marketing Direct Link, Decision No 17006, paras 6-9, Dr Beynon at paras 26, 27, 29 and 31 per Lord Hoffmann.

The letter was the principal element of the supply. In particular, (i) the letter was addressed to the recipient; (ii) the letter alone constitutes the mail pack in B3/4&17; (iii) Mr Griffiths accepted that there was no example of a mail pack without a letter; there was no essential information which was not in the letter; leaflets increased the response rate; it was the essence of something which enhanced the letter and made it more user friendly; it had not been suggested that the leaflets and the letter had different functions; (iv) the Creditcare leaflet, where it formed part of the mail pack, was also ancillary. The fact that HBOS regarded Creditcare as being as important as the loan was relevant but not conclusive; this did not displace the objective conclusion that the letter was the principal element. The physically and economically dissociable test was still alive; here the leaflets cross refer to the letter to give them function or purpose (CC&E v BT plc 1999 STC 758 at pages 763, 766a, 767-769a).

Mr Ghosh suggested that there were two steps which the Tribunal had to take. The first was to ascertain the level of the transaction; in other words; what is the transaction? The second step was to look at the elements of the transaction and make a finding as to whether the goods can be enjoyed or utilised in their own right, or whether the goods only make sense if one looks to something else. This, he said, was a fact finding exercise for the Tribunal. He went on to submit that there were four classes of mail pack:- (i) those seven packs where Creditcare is mentioned only in the letter, namely B3/4, 9-13, and 17; (ii) those three packs where Creditcare is mentioned in both the letter and the or a leaflet, namely B3/2, 8, and 18; (iii) those five cases where Creditcare is mentioned in a leaflet, along with other matters, but not the letter, namely B3/6, 7, 15, 16, and 19; and (iv) those five packs where Creditcare is mentioned in a separate leaflet, namely B3/1, 3, 5, 14, and 20. He also pointed out that there are only three examples of a leaflet which does not invite the recipient to look at the letter for a Response Code, namely B3/6, leaflet 1, B3/10, leaflet 1, and B3/19, leaflet 1. In all packs, leaflet 2 invites the use of the Response Code. He also noted that the specific interest rate or monthly repayment is not mentioned in any leaflet, although B3/11 and 12 reference is made in to an unspecified fixed rate in the leaflet. He argued that none of the non-Creditcare leaflets made sense without the letter. All they said was that the HBOS made loans, something, he submitted, nobody needed to be told. The fact that the Data Protection Act information was always contained in a leaflet demonstrated that the leaflet was ancillary. He also observed that B3/4, 6-8, 15-17, 19 and 20 were not directed to pre-existing customers.

Mr Ghosh further submitted that each letter in the mail packs was indeed a letter and was not ancillary to the leaflets. This followed, firstly as a matter of language, the document being a specific communication to a specific person, and secondly as a matter of function or purpose; it did not convey knowledge for its own sake. He referred us to the New Shorter Oxford English Dictionary (4^th edition) for the meaning of letter (a written typed or printed communication addressed to a person); and for the meaning of leaflet (a small sheet of paper or sheet folded into two or more leaves but not stitched containing printed matter (often advertisements) usually distributed free of charge). He referred to Panini Publishing Ltd and Mirror Group Newspapers ltd (Decision No 3876), and GNP Booth v CEC (Decision No 17555); he relied on factors 1, 2, and 3 but distanced himself from factors 4, 5, and 6 (page 4). The letters were distributed in a discriminating manner; they were personalised; had the stamp, appearance and specificity of a letter. The items specified in Group 3 Item 1 had a common theme, namely a means of conveying general information rather than an express invitation to a specific response; thus personalised letters are not mentioned; not all printed matter is zero rated. In any event, the zero rated items specified should be construed narrowly (Greenwich Property Ltd v CC&E 2001 EWHC Admin 230 para 26).

Discussion

(a) Evidence

Although we heard no submissions on the point, we should record that we found Mr Griffiths to be a credible and generally reliable witness. We also accept that Mr Griffiths evidence was to be treated as the perspective of HBOS in relation to the supply to them of the mail packs for which they provided the detailed specification. The Appellants did not give evidence. There was no discussion as to how HBOS were "invoiced" by the Appellants in relation to the supplies in question or how the purchase price for the mail packs was made up. It was clear from the evidence that in every case there was some basis for the selection of the recipient, whether he or she had been a previous customer of HBOS or one of "their" companies or was an individual who fulfilled some criteria based on market research or other criteria. No recipient was randomly chosen.

(b) Guidance from the authorities

The starting point is Card Protection (as noted in Dr Beynon & Partners paragraph 19). However, we bear in mind that (i) the Court's judgment, especially at paragraphs 29 and 30 should not be read as if it were a statutory provision, (ii) the European Court's caveat, at paragraph 27, that it is not possible to give exhaustive guidance on how to approach the problem correctly in all cases (highlighted in Kimberly-Clark Ltd at para 18), (iii) the Court was concerned with services not goods, and (iv) the language of the Court is therefore, in places, difficult to apply to goods. In particular, the reference to a service being regarded "as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied" is derived from CC&E v Madgett & Baldwin t/a Howden Court Hotel C-308/96 and C-94/97 1988 STC 1189 at 1206 para 24. That case concerned a hotelier who, in return for a package price, offered his guests in addition to accommodation, return transport between distant pick-up points and the hotel and an excursion by coach during their stay at the hotel, those transport services being bought in from third parties; the background was a special scheme which applied to tour operators and travel agents; The European Court noted that where such bought-in services (which made up a small proportion of the package price compared to the accommodation) did not "constitute for customers an aim in itself, but a means of better enjoying the principal service supplied by the trader", the services bought in from third parties remained "purely ancillary in relation to the in-house services" (para 25). This was thus a statement referable to services provided to the ultimate consumer. We do not think that this phrase ("aim in itself" etc) readily translates to all supplies of goods. In the present, case we have found its adoption by both counsel and their somewhat contrived attempts to apply it to the facts of this case of limited assistance.

We also note, in passing, that the price structure of the transaction in question is not determinative (Dr Beynon at para 29). There was no evidence about the price structure of the transactions in question; we have thus been unable to make any findings in fact about that matter.

Dr Beynon & Partners introduced the phrase level of generality which corresponds with social and economic reality (Para 31) as a means of identifying the transaction. There, the social reality was simply that the transaction comprising the patient's visit to the doctor for treatment. The economic reality was that the NHS had always regarded the personal administration of drugs (to non-regulation 20 patients - ie a patient, such as one living in a rural community who has difficulty obtaining drugs from a pharmacy by reason of distance etc – see paras 6-11) as a single supply of services (paragraph 31).

We were also referred briefly to Talacre Beach Caravan Sales Ltd c CC&E 2004 STC 817. There, the court considered whether, where the supply of disparate goods (caravans [zero-rated] and their removable contents [expressly excluded from zero-rating and thus standard rated]) is a single supply, the zero-rated character of the dominant goods prevents effect being given to the statutory exclusion of the ancillary goods from zero-rating. The Court held that it did not and that the removable contents fell to be standard rated (see paragraphs 8, 28, 34, 35 and 42. The circumstances of that case were somewhat special; the speciality was that the removable contents were expressly excluded from zero- rating (paragraph 4). That speciality does not apply here, although there is a similarity in that Parliament has been discriminating about the type of printed materials which are to benefit from zero-rating. It could be said that the effect of Group 3, Item 1 is the same as an express exclusion of printed letters.

We were not addressed on the denouement in Card Protection (2001 STC 174) in the House of Lords although Lord Slynn of Hadley's speech is referred to in some of the cases to which our attention was drawn. Ultimately, the question was whether the arrangements constituted a single supply with some ancillary services or two independent supplies, an exempt insurance supply and a non-exempt card registration service (ibid paragraph 20). Lord Slynn of Hadley, who gave the only reasoned speech, concluded that transaction performed by CCP was to be regarded for VAT purposes as comprising a principal exempt supply and the other supplies in the transaction were ancillary so that they were to be treated as exempt for VAT purposes.

In DL Marketing (Direct Link) Ltd Decision No 17006, 15/12/00, Chairman Paul de Voil, the Appellants supplied creative work, artwork and printing to an insurance company. The question was whether there was a single supply (and if so whether it was of advertising services and thus standard rated, or of printed materials and thus zero rated) or multiple supplies. The Tribunal held that there was no single supply which it would be artificial to split; on the contrary there were separate supplies which it would be artificial to lump together. The Tribunal also observed that if there were only a single supply it would have been of printing materials, the creative work and the artwork being ancillary to that supply. We do not find this case of much assistance, although the approach of the Tribunal was to hold that it would be artificial to lump together what it regarded as separate supplies even if all three services had been charged on the same invoice (paragraphs 16 and 17).

Direct Marketing Bureau Decision No 16696 30/6/00 Chairman IE Vellins is closer to the facts in the present appeal. It concerned the classification of the supply of a mail pack advertising the products of the same insurance company mentioned in the D L Marketing case. The materials, to the design and specification of which the Appellants appeared to contribute, consisted of booklets, brochures, rate tables, application forms, and personalised letters and envelopes with the names of the intended recipients printed on them (para 9). Customs argued that the overall nature of the supply was one of services. The Appellants argued that the predominant supply was brochures (goods), the letters and other documents being incidental or ancillary thereto; the Appellants also argued that the design work was carried out at a different time and separately charged and paid for (para 11). After a detailed examination of the evidence and the law, the Tribunal concluded that the mail packs were supplies of goods (para 124) the design work being separately contracted for and being carried out at a much earlier stage (paras 127, 132, 135). More interestingly, the Tribunal concluded that the predominant feature of the mail pack was the leaflet or brochure (para. 129); the letters and other documents were ancillary and incidental to the brochures; without the brochures the packages would have been meaningless; it was also held that the letters fell within Item 6 of Group 3 to Schedule 8 to the 1994 Act (para 130). That point was not argued in the present appeal.

The Sixth Directive and the domestic legislation make no provision for problems associated with single or multiple supplies. The solution involves the application European law in compliance with the Sixth Directive (Dr Beynon & Partners at para 18; CC&E v FDR Ltd 2000 STC 672 at paragraph 50-we did not, with all due respect, find the discussion at paragraphs 53-55 in FDR Ltd to be of assistance). Mr Ghosh's submission which adopted a "stand alone" test may have been derived from the phrase "free-standing utility" used by the Tribunal in that case (see para 24 page 62a). We do not find the phrase helpful in the context of a supply of goods. Nor do we find the guidance in the authorities easy to apply to the facts in the present case. The approach we adopt, applying the guidance from the authorities as best we can, is as follows:-

Ascertain the essential features and main objective or dominant purpose of the transaction (Card Protection paragraph 29) bearing in mind its economic, and, where appropriate, social reality, at the appropriate level of generality (Dr Beynon at para 31). In other words, identify the basics of the transaction taking an overall view without over zealous dissection or analysis (Lord Slynn in Card Protection at 2001 STC 174 at paragraph 22, page 183d and 25, & 26).

Have regard to all the circumstances in which the transaction takes place (ibid para 28), ultimately the VAT classification of a transaction is a question of fact and degree (CC&E v British Telecommunications 1999 STC 758 at 768, referred to in Dr Beynon at paragraph 27).

Having ascertained the essential features of the transaction and the circumstances in which it has taken place, consider whether the supply of the goods in question comprises one or more elements (Card Protection para 30 and in the House of Lords at 2001STC 174 paragraph 18 page 182c;).

If so, consider whether one or more elements falls to be regarded as the principal goods (ibid para. 30); to which the other goods are ancillary (ibid para 30 and 32); consider whether the circumstances indicate that the customer intended to purchase two or more distinct items or goods (ibid para 31); consider whether some elements of the transaction are physically or economically dissociable from the other elements (per Lord Slynn ibid at para 28, page 184d).

In doing so, take into account that every supply must normally be regarded as distinct and independent, and that a supply, which comprises a single supply of goods from an economic point of view, should not be artificially split (ibid Card Protection 1999 STC para 29).

Consider whether the conclusion as a result of the above distorts the functioning of the VAT system (ibid para 29).

Conclusions

At the most basic level we are concerned with the sale of goods. That is the essential nature of the transaction. The goods are leaflets and letters. These are distinct items. The envelopes can be put to one side; neither counsel made any submission in relation to them. The main objective and dominant purpose of the transaction is to produce persuasive advertising literature for distribution (free of charge), in the form of unsolicited, and perhaps, to some extent, unwanted mail, to selected members of the public, some of whom are or have been customers of HBOS or one of its companies. The main objective from the perspective of HBOS is to produce advertising literature which appeals to as wide a range of individual as possible. For that reason, the advertising literature takes the form of a personalised letter and two leaflets (except B3/4 and 17 where the mail packs consist of a letter without accompanying leaflets). We do not consider it to be over zealous dissection or analysis to state the obvious that the basics of the transaction is the supply of printed letters to named individuals, and the supply of leaflets.

As for the circumstances in which the transaction takes place we refer to the findings of fact. It must be remembered that guidance given in Card Protection and some of the other cases related to a supply between the economic operator and the ultimate consumer. Here, the supply is between two economic operators. The ultimate consumer is the recipient of the mail pack but there is no taxable supply between the Appellants and the ultimate consumer. The perspective of HBOS, as recipient of the goods supplied, is therefore an important consideration. It is easy to analyse the supply from the point of view of the ultimate consumer and to speculate as to which document is or might be important to him, or so far as he or she is concerned which document or documents might be meaningless without the other. That in our view is to place undue emphasis on the perspective of the "ultimate consumer" (if that is the correct term in the present context), who is not the recipient of the supply in question. It follows that the detailed analysis of the contents of the documents, what they might mean to the intended recipient, what documents have to be read together, and the cross references between them all becomes less significant.

It follows from what we have said that, in our view, the transaction in relation to all mail packs (except B3/4 and 17) contains two elements, namely the supply of printed letters as described in our findings of fact, and the supply of leaflets, as so described.

We do not consider that either of the leaflets in any of the mail packs or any of the letters (except B3/4 and B3/17 each of which consists of letter and no leaflets) fall to be regarded as the principal goods. They are distinct items. From the point of view of HBOS, the recipient of the goods, and as the only person who pays for them, each document is significant and important. They are intended to be individual parts of a picture. To HBOS what is important is the complete picture. Only a certain part of that picture may initially attract the attention of the recipient. While the letter may be the focal point, all three documents are important to HBOS because they must consider that placing all three in the envelope increases the chances of the recipient enquiring about a loan and possibly loan protection insurance. It is speculation (at least on the evidence in this case) as to which, if any, is the most important from the potential customer's point of view. A leaflet may be the most important document because it has attracted his attention and has persuaded him to make a telephone enquiry. The letter may be the most important to other customers because the customer is impressed by its personal and more formal nature or because it provides the information enabling the customer to make a telephone enquiry. It does not really matter to HBOS which document triggers the desire to make the telephone enquiry. We are therefore unable to conclude either from the perspective of HBOS, the recipient of the supply, or from the perspective of the intended recipients that any one document dominates or could be classified as the principal supply. We therefore reject Mr Ghosh's argument that the letter in each mail pack is the principal element of supply. We also reject Mr Currie's alternative argument that the letters were ancillary to the leaflets. We are not influenced by the detailed analysis carried out in this case to demonstrate that some documents contain more or less information than others; or that some leaflets make little sense on their own. None can properly be regarded as the principal goods to which the others are ancillary. It is an unnatural use of language to describe the letter as an aim in itself or to describe the leaflets as a means of better enjoying the letter. It makes no commercial sense to speak in these terms in relation to such printed materials. While we regard the letters as the main item in the mail pack, the other documents are also important. None is sufficiently significant to convert the supply of two separate elements into one single composite supply. Each element could have been ordered separately from a different business and assembled by yet another. Various elements are dissociable. Some letters in some mail packs are identical with letters in other mail packs; some leaflets in some mail packs are identical with leaflets in other mail packs (see finding of fact 65). These circumstances point to economic and physical dissociability to some extent.

The supply of personalised printed letters can, we think, be regarded as distinct and independent from the supply of leaflets. The distinction is essentially between the particular and the general. This is a distinction drawn by the class of items identified in Group 3 item 1. Modern computerised technology can make the distinction difficult to draw (see mail packs B3/4 and B3/17, and findings of fact 17, 18, 53 and 54 above). However, as Mr Ghosh points out the items in Group 3 Item 1 are all items which are available for general distribution to a lesser or greater extent. We would regard it as artificial to lump together the supply of two such essentially different items of printed material (letter and leaflet). We recognise that the line between a leaflet and a letter may become blurred where the letter is a circular letter or addressed to the "householder" the "occupier" or "dear shareholder". But we need not consider these possibilities here because the facts do not require us to do so.

We were not addressed on and heard no evidence about whether the functioning of the VAT system would be distorted. Given the existence of the extra statutory "package test" this may not be a consideration of significance in this case.

Our conclusion therefore is that there are multiple supplies, namely supplies of letters and the supplies of leaflets. The supply of the envelopes is not in issue.

Finally, in relation to mail packs B3/4 and 17, which each contained only one document, we have already concluded that the single document in each mail pack is a letter. Each document is in unusual format for a letter see findings of fact 17, 18 and 53 above). However, it is personalised. Letters may take a variety of forms. A letter from a child to her parents may contain doodles and drawings; it is no less a letter for that. On balance, therefore, we have concluded that B3/4 and 17 each contains a letter. It was common ground that printed letters were standard rated. The question of single or multiples supplies does not therefore arise in relation to these two mail packs. They fall to be standard rated.

Disposal

In summary, therefore, the supply of the letters is, under the relevant legislation standard rated, while the supply of the leaflets is zero rated. To that extent, the appeal is allowed. We shall leave it to parties to consider whether, in light of our decision and the extra-statutory package test adopted by Customs, a further hearing is required on quantum. In the meantime, we allow parties 28 days from the date of release of this decision to make any written proposals on the question of expenses. If parties are in dispute on the question of expenses, a hearing will be fixed.

J GORDON REID, QC., F.C.I.Arb

CHAIRMAN

RELEASE: 19 APRIL 2005

EDN/04/127