Revenue

Value added tax - supply of goods or services - part-exchange of car to purchase new car - customer to be paid 'true value' of car part-exchanged in event of cancellation of principal transaction if part-exchanged car already sold - VAT payable on part-exchange value, not 'true value'Lex Services Plc v Commissioners of Customs and Excise: CA (Lords Justice Aldous, Chadwick and Sedley): 26 October 2001The purchase price for the car supplied by the company was satisfied partly in cash and partly by a part-exchange car.The customer was entitled to cancel the transaction upon giving notice within a specified time and where the customer exercised that right of cancellation he was entitled to the return of the part-exchange car or, in cases where the part exchange car had already been sold on by Lex, to a refund of an amount which was not the part-exchange price but a lesser amount, described as 'the true value'.

An issue arose as to whether the value to be attributed to the non-monetary element of the consideration (that is to say, the part-exchange car) was the part-exchange price, or the true value.

Mr Justice Arden, upholding the decision of a VAT tribunal, held that VAT was payable on the part-exchange value.

The company appealed.Kevin Prosser QC (instructed by Klegal) for the company.

Rupert Anderson (instructed by Solicitor, Customs and Excise) for the Customs Commissioners.Held, dismissing the appeal, the question was whether the parties to the transaction had placed a value on the non-monetary element of the consideration for the purposes of the transaction, and if so what it was; that the monetary equivalent of the part-exchange car, in the context of the supply of the Lex car, was agreed between Lex and its customer for the purposes of that transaction; and that the documentation made it clear that the value attributed to the part-exchange car for the purposes of the supply of the Lex car was the part-exchange price and not the true value.