No reduction

The taxpayer company sold goods by mail order using the services of agents who earned commission on their sales. Agents could claim commission as a cheque payment or set against the balance of their account to reduce outstanding debts.

The company accounted for VAT on the full catalogue price of goods including the commission paid to the agents. It subsequently claimed a VAT repayment on the amount representing commission on the ground it was a discount and VAT was payable only on the net sum.

HMRC repaid the VAT for the years back to 1979 but not for the period from 1973 to 1978. The company appealed and the matter was referred to the European Court of Justice.

Backing HMRC the European Court of Justice ruled that the Second Directive which was in place before the Sixth Directive took effect in 1978 did...