Ex-Works Argument Dispatched by the ECJ
Case C-409/04, The Queen, on the application of Teleos plc and others v HMCE
The applicants were UK mobile phone traders who had supplied phones to a Spanish company. The goods’ destination was France or Spain and the traders argued that by placing the goods at the purchasers’ disposal at a UK bonded warehouse under “ex-works”, a standard Incoterm, the goods had been “dispatched” for the purposes of an intra-Community acquisition of goods, so that the intra-Community supply of goods was exempt from VAT. The traders were assessed for VAT by HMCE retrospectively.
The High Court judge found that the traders had made all such investigations as were reasonably possible and that the right to dispose of the goods as owner had been transferred to the purchaser.
In this context the question of the meaning of “dispatch” was referred to the ECJ, which held that in order to qualify for exemption, “dispatch” within the meaning of Article 28 of the Sixth VAT Directive means not only that (a) the right to dispose of the goods as owner had to have been transferred to the purchaser, but also that (b) the supplier had to establish that those goods had physically left the UK. However, the ECJ also held that the fact that a supplier acted in good faith and that it took every reasonable measure in its power and that its participation in fraud is excluded were important points in deciding whether such a supplier could be obliged to account for the VAT after the event. The ECJ observed that, once the supplier has fulfilled all its obligations, where the contractual obligation to dispatch or transport the goods out of the Member State of supply had not been satisfied by the purchaser, it is the latter who should be held liable for the VAT in that Member State. The case now returns to the High Court for a decision on the facts.
Rupert Anderson QC and Rebecca Haynes of Monckton Chambers acted for HMCE. Philip Moser of Monckton Chambers acted for Teleos and others.