Case C‑589/12

Commissioners for Her Majesty’s Revenue & Customs

v

GMAC UK plc

(Request for a preliminary ruling from the Upper Tribunal (Tax and Chancery Chamber))

‛Reference for a preliminary ruling — VAT — Sixth Directive 77/388/EEC — Article 11C(1), first subparagraph — Direct effect — Reduction of the taxable amount — Two transactions concerning the same goods — Supply of goods — Cars, sold on a hire purchase basis, repossessed and sold at auction — Abuse of rights’

Summary — Judgment of the Court (Second Chamber), 3 September 2014

Harmonisation of fiscal legislation — Common system of value added tax — Taxable amount — Reduction in the case of total or partial non-payment — Termination of a hire purchase contract relating to a motor car following which the car is sold — Member State preventing the taxable person from invoking the direct effect of the directive with regard to such a reduction — Not permissible — Conditions

(Council Directive 77/388, Art. 11C(1), first subpara.)

The first subparagraph of Article 11C(1) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that, in the case of termination of a hire purchase contract relating to a motor car following which the car is sold, a Member State may not prevent a taxable person from invoking the direct effect of that provision in respect of one transaction by arguing that that person may rely on the provisions of national law in relation to another transaction concerning the same goods and that the cumulative application of those provisions would produce an overall fiscal result which neither national law nor that directive, applied separately to those transactions, produces or is intended to produce.

The first subparagraph of Article 11C(1) of the Sixth Directive has direct effect, so that the question as to whether a taxable person may rely, after supplying goods under a hire purchase contract, on the right which that provision confers on it to obtain a reduction in the taxable amount depends on whether its customers fail to perform in whole or in part their payment obligation under that contract.

Therefore, in the event of total or partial non-payment, the amount of the tax base of the hire purchase contract for a car must be adjusted by reference to the consideration actually received by the taxable person under that contract. The consideration received by that taxable person which is paid by a third party in the context of a different transaction — in the event the sale at auction of the car returned by the hire purchase customer — has no effect on the conclusion that the taxable person may rely on the direct effect of the first subparagraph of Article 11C(1) of the Sixth Directive in the context of the hire purchase contract.

(see paras 36, 42, 49, operative part)