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City Cabs (Edinburgh) Ltd v The Commissioners of Customs and Excise

Edinburgh VAT Tribunal

EDN/79/30, (Transcript)

HEARING-DATES: 24, 25 April, 1 May 1980

1 May 1980

COUNSEL:
D G Rennie (Solicitor) for the Appellant; S A Mook-Sang (solicitor) for the Commissioners.

PANEL: R A Bennett QC, H W Millar FCCA and Dr G R Thomson

JUDGMENT-1:

The Tribunal: The Appellants, who are a limited company not having a share capital, are an association of taxi cab proprietors in the city of Edinburgh who provide certain services for their members. The Appellants are registered for the purposes of value added tax. On 1st November 1979 the Respondents assessed the Appellants to value added tax allegedly underdeclared in the sum of £3,867.58 for the period from 1st January 1978 to 31st December 1978. The assessment was stated to be of value added tax due on radio subscriptions (less allowance for input tax previously treated as irrecoverable). The Appellants disputed this decision, and appealed to the tribunal.

The grounds of their appeal are that the subscriptions paid by the members to the Appellants were exempt by virtue of Goup 9 of the Fifth Schedule to the Finance Act 1972 (as amended) item 1(a) and (b). Prior to 1st January 1978, under section 45(1)(c) of the said Act the provision by an organisation to which that subsection applied of the advantages of membership was to be deemed to be the carrying on of a business. By section 45(2) the subsection only applied to an organisation of persons carrying on a trade, profession or vocation if the organisation so elected.

The provisions of the said section 45 were extensively amended by the Finance Act 1977, and by the Value Added Tax (Trade Unions and Professional Bodies) Order 1977 1977 No 1788, now revoked and replaced by the Value Added Tax (Consolidation) Order 1978 No 1064., a new Group 9 was added to the Fifth Schedule of the 1972 Act with effect from 1st January 1978. As a result, with effect from said date the provision by a club, association or organisation (for a subscription or other consideration) of the facilities or advantages available to its members is deemed to be the carrying on of a business, but supplies falling within such new Group 9 are exempt from tax. Group 9 in so far as material to this appeal is in the following terms:

'1. The supply to its members of such services and, in connection with those services, of such goods as are both referable only to its aims and available without payment other than a membership subscription by any of the following non-profit making organisations: -

(a) a trade union or other organisation of persons having as its main object the negotiation on behalf of its members of the terms and conditions of their employment;

(b) a professional association, membership of which is wholly or mainly restricted to individuals who have or are seeking a qualification appropriate to the practice of the profession concerned;'

Note (2) to the said Group 9 provides: '"trade union" has the meaning ascribed in section 28(1) of the Trade Union and Labour Relations Act 1974.'

The principal object of the Memorandum of Association of the Appellants (Production 'A1') is stated in clause 3(B) as being:

'To promote, encourage and protect the interests of motor cab proprietors.'

The Appellants' rules (Production 'A2') provide that no applicant will be eligible for membership of the Association unless taxi cab driving is his sole occupation, and is to remain his sole occupation while a member of City Cabs. During the relevant period there were about 187 members, all of whom paid a basic subscription of £2 per week. For those who wished to make radio subscriptions (which consisted of all but about 25 members) an additional subscription of £11.89 per week was charged. In return for these subscriptions the Appellants provided the following facilities:

1. A 24-hour radio taxi service, which included the loan of a radio and the maintenance thereof, the insurance of the radio, the charges payable for the broadcasting licence and use of main-mast aerials, the supply and payment to the Post Office for certain direct lines between some of their credit customers and the radio office, the services of 27 full and part-time radio operators in the said office, and radio office premises at 155 Morrison Street, Edinburgh.

2. The Appellants, acting as agent for their members, arranged fixed price contracts for certain credit customers (some of whom had a direct line to the radio office), such as hospitals and hotels.

3. The Appellants owned a garage at East London Street, Edinburgh where they provided on a 24-hour basis petrol and diesel supplies, a restroom, and a ramp to enable members to carry out their own repairs. They also had a stock of small spare parts there. Members paid the full commercial price for fuel and spare parts. The members were bound to buy all their fuel from the Appellants. The restroom had vending machines which supplied food and drink but there were no cooking or canteen facilities. The Appellants employed 7 persons on shift work at the garage, together with a manager. The accounts department was also located at the garage, and there were two employees in that department.

4. The Appellants had representation on the Edinburgh Taxi Owners' Association, which negotiated on their behalf with Edinburgh District Council in relation to fares exigible, taxi ranks, etc, and also on the National Federation of Taxi Cab Owners, who negotiated with Government on behalf of the Appellants. The members of the Appellants were all members of the said Association and Federation, and their subscriptions were paid to each body by the Appellants on their behalf from the subscriptions which they received. The Appellants themselves did not carry out any negotiations in relation to fares and conditions apart from the said fixed price contracts.

The Appellants' members, according to the nature of their subscription, received all the foregoing facilities free of any charge beyond their subscriptions. Of these facilities by far the most important was the radio subscription since according to Mr Dixon, the Appellants' chairman, it enabled the Appellants to achieve what they regarded as their main object, which was to obtain work for the members. The members either employed drivers or were self-employed, and the Appellants had no control over their hours or places of work or the conditions thereof. Nor had the Appellants any concern with the terms and conditions of the employment by a member of a driver for his taxi.

It is also relevant in this case to note the qualifications which a taxi driver required to have before he could be licensed by the local authority. He must make written application to the Licensing Authority with the names of two referees as to character and written evidence that he had a taxi or a promise of employment by a taxi owner. He was then submitted to a very rigorous topographical test of his knowledge of the streets in the district, the hospitals, the places of public interest, and the hotels. The test was conducted by or on behalf of the Cab Inspector, and usually a candidate had to sit the test three or four times before he was able to pass. The Cab Inspector then arranged for a driving assessment, checked on the candidates' references and confirmed that he had no previous convictions for serious offences in relation to driving, indecency, theft, or assault. If the Licensing Authority, upon the Cab Inspector's report, then granted a licence, the taxi driver was briefed by the police as to the by-laws applicable, the extent of his licensing area, the fare structure, and the conduct which he should show towards passengers. The licence which was issued was restricted to operations in the area of Edinburgh District Council.

On the foregoing facts, it was not in dispute that the Appellants satisfied the opening words of item 1 of Group 9 above referred to. In particular it was not disputed that the services supplied by the Appellants to their members were referable only to its aims; that the services were available without payment other than a member's subscription; and that the Appellants were a non-profit making organisation. The dispute centred upon paragraphs (a) and (b) of item 1. In regard to (a) the Appellants' solicitor, while conceding that the Appellants were not a 'trade union' within the meaning of section 28(1) of the Trade Union and Labour Relations Act 1974, contended that the Appellants were an 'organisation of persons having as its main object the negotiation on behalf of its members of the terms and conditions of their employment'. In the first place, we are of opinion that the 'employment' referred to is employment on an employer/employee basis such as normally is negotiated by a trade union, and does not refer to cases of self-employment. The members is the present case were all employers of self-employed. In any event, if we are wrong in this view, we are of opinion that the main object of the Appellants, as their Memorandum and their activities in pursuance thereof show, was to promote the interests of motor cab proprietors by obtaining work for them through the medium of the radio network and associated services to enable a 24-hour operation to be maintained.

The Memorandum itself, while setting forth many ancillary objects besides that referred to, makes no reference to the Appellants' power of negotiation on behalf ot its members of terms and conditions of their employment. One would have expected such mention if the exercise of these powers was a main object of the Appellants. Furthermore, in actual fact the Appellants themselves carried out no negotiations either with the local authority or with central government. The only 'negotiation' was tendering for a limited number of fixed-price contracts with certain large customers, which was relatively unimportant and unprofitable compared to the operation of the radio links. We do not think that this minor activity can be characterised as negotiation on behalf of the members of the 'terms and conditions of their employment'. We adopt the analogous argument on subsection (c) set forth by the London Tribunal in The Bookmakers Protection Association (Southern Area) Ltd v The Commissioners LON/79/129 unreported at p 15.

As to (b), the Appellants' solicitor argued that the Appellants were a 'professional association, membership of which is wholly or mainly restricted to individuals who have or are seeking a qualification appropriate to the practice of the profession concerned'. While it cannot be disputed that membership of the Appellants was wholly restricted to individuals who had the appropriate qualifications as licensed cab drivers, after passing the various tests and investigations, we do not accept that the Appellants are a professional association. In this connection we cannot do better than refer to the dicta of Du Parcq LJ in Carr v Commissioners of Inland Revenue [1944] 2 All ER 163 at p 166, where he refused to define the word 'profession' and said:

'Ultimately one has to answer this question: Would the ordinary man, the ordinary reasonable man - the man, if you like to refer to an old friend, on the Clapham omnibus - say now, in the time in which we live, of any particular occupation, that it is properly described as a profession? I do not believe one can escape from that very practical way of putting the question; in other words, I think it would be in a proper case a question for a jury, and I think in a case like this it is eminently one for the Commissioners.

Times have changed. There are professions to-day which nobody would have considered to be professions in times past. Our forefathers restricted the professions to a very small number; the work of the surgeon used to be carried on by the barber, whom nobody would have considered a professional man. The profession of the chartered accountant has grown up in comparatively recent times, and other trades, or vocations, I carenot what word you use in relation to them, may in future years acquire the status of professions. It must be the intention of the legislature, when it refers to a profession, to indicate what the ordinary intelligent subject, taking down the volume of the statutes and reading the section, will think that "profession" means. I do not think that the lawyer as such can help him very much.'

In our opinion, no ordinary intelligent man today would regard the driving of a taxi cab as a profession. Even the Appellants do not seem to do so, since both their witnesses made frequent references to the 'cab trade'. The Act itself, in section 45(1) (as amended) defines a 'business' as including any 'trade, profession or vocation'; this wording would seem to contrast a trade with a profession. Accordingly if an activity is to be properly regarded as a trade (as we consider the driving of a taxi to be) it cannot be a profession. We agree with the expression of opinion to that effect in the case of The Bookmakers Protection Association (Southern Area) Ltd at page 18, LON/79/129 unreported.

We accordingly reject the Appellants' submission that they are entitled to exemption from value added tax in respect of the said supplies. There being no dispute as to the sum due on that view of the law, we refuse the appeal.

We assume that the successful Respondents will not, in accordance with their usual practice, be asking for expenses against the Appellants, but if they wish to raise this matter they have fourteen days to do so from the date of this decision.

Appeal dismissed.

SOLICITORS:
Connell & Connell; The Solicitor's Office of HM Customs and Excise.