Report for the Hearing delivered in Case C-126/88

I — Legislative background

1. Article 2 of Council Directive 77/388/EEC of 17 May 1977 (hereinafter referred to as the Sixth Directive), provides :

2. Article 11 A 1(a) of the Sixth Directive provides :

3. Paragraphs 2 and 3 of that article define what is to be included in the taxable amount and what is not to be included therein. Paragraph 3(b) provides that the taxable amount is not to include price discounts and rebates allowed to the customer and accounted for at the time of the supply.

II — Facts and procedure

4. It appears from the order for reference that The Boots Company pic, the parent company of the group hereinafter referred to as Boots, and its subsidiaries sell various products from stores throughout the United Kingdom. The group, of which The Boots Company pic is the representative member, operates a group registration for VAT pursuant to Section 29 of the Value-Added Tax Act 1983.

5. Boots operates various categories of promotion scheme, one of which involves coupons which a customer can obtain only by buying goods of a particular kind in Boots stores (the premium goods). The coupon is printed on or placed inside the packages of the goods in question. The customer purchasing the goods obtains the coupon without any further payment. On presentation of the coupon the customer is entitled to a price reduction on a subsequent purchase from Boots of the goods specified on the coupon (the redemption goods), which may be of the same kind as or of a different kind from the premium goods.

6. Promotions involving premium goods and redemption goods can be further divided into three subcategories:

7. Boots is liable for VAT, for which it accounts in the following manner:

8. The Commissioners of Customs and Excise (hereinafter referred to as the Commissioners) decided that the consideration for which the goods supplied by Boots were sold did not consist wholly of money, but was a combination of the money paid over and the surrender of the coupon, and that Section 10(3) of the Value-Added Tax Act 1983 was applicable.

9. Section 10(3) provides:

10. Section 10(5) of the Value-Added Tax Act 1983 provides:

11. According to the Commissioners' calculations, Boots should adjust its gross takings by adding to its cash receipts the differences between the cash taken in respect of the redemption goods and their open market value, such differences being the amount by which the purchase prices of the redemption goods were reduced on the coupons' being surrendered. In their decisions, the Commissioners assessed the VAT due at slightly more than UKL 10500 for the 1984 calendar year.

12. Boots appealed to the Value-Added Tax Tribunal which, in a decision dated 18 March 1986, upheld the Commissioners' assessment. In its appeal against that decision to the High Court of Justice, Boots did not dispute that it was liable to account for VAT in respect of any receipt from a manufacturer representing reimbursement, in exchange for coupons sent to it by Boots, of the cost of a promotion when that cost is borne, under the terms of the contract between them, wholly or partly by the manufacturer. Where the cost of the promotion is borne wholly or partly by Boots, however, Boots contended that it was not liable to account for VAT in respect of the open market value of the redemption goods, on the ground that the taxable amount in respect of supplies of the redemption goods is the reduced price actually paid by the customer. It put forward the following contentions:

13. The High Court of Justice considered that the dispute involved the interpretation of the Community legislation at issue, and made an order on 17 December 1987 referring the following questions to the Court for a preliminary ruling:

14. The order of the High Court of Justice was registered at the Court on 11 July 1988.

15. Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted on 19 July 1988, and replaced on 18 October 1988, by Boots, represented by J. P. Lawton QC instructed by Loveli White Durrant; on 20 July 1988 by the Commission, represented by Johannes Føns Buhl, its Legal Adviser, acting as Agent, with an address for service in Luxembourg at the office of Georgios Kremlis, Wagner Centre, Kirchberg; and on 1 August 1988 by the United Kingdom, represented by S. J. Hay, Treasury Solicitor, acting as Agent.

16. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. As the United Kingdom requested that the case be decided in plenary session, pursuant to Article 95(2) of the Rules of Procedure, the Court decided that the case should be judged by the Full Court.

III — Written observations submitted to the Court

The written observations are essentially concentrated on the following points.

The first question

17. The United Kingdom examines the previous decisions of the Court and observes that the term consideration is to be given an autonomous Community construction which must be the same in all the Member States. Its meaning is the same in the Second and Sixth VAT Directives; the United Kingdom therefore considers that, although Article 37 of the Sixth VAT Directive repealed the Second VAT Directive, the definition of consideration in Annex A of the Second Directive, as clarified in the Court's decisions, has equal importance for the purposes of the Sixth VAT Directive and the resolution of the instant case.

18. In the United Kingdom's view, the term consideration is to be construed purposively so as to reflect the true facts of any situation in question. The United Kingdom observes, moreover, that there must be a direct link between the goods or services provided and the consideration received, which must be capable of being expressed in money and valued subjectively. The consideration must be assessed in accordance with its value or benefit in the hands of the recipient, namely the supplier. But the meaning of consideration is not so wide as to include a circumstance where there is no direct causal link with the goods or services provided, or their receipt. The United Kingdom submits, however, that the concept of consideration is to be defined as widely as possible in order to make subject to tax everything which the taxable person receives as consideration for goods or services supplied in the context of a commercial transaction.

19. The Commission and Boots refer to the Court's previous decisions and also observe that the term consideration' is a term of Community law and must have a single, Communitywide meaning in all cases. Article 11 A 1(a) of the Sixth Directive does not differ from the system which was in force under the Second VAT Directive; the Second Directive expresses the same principle as that expressed in Article 11 A 3 of the Sixth Directive.

20. The Commission and Boots rely on the Court's previous decisions, and both agree that the term consideration must have the following characteristics:

21. The United Kingdom proposes that the first question should be answered in the negative. In its view, to quantify the taxable amount by reference to the price paid for the redemption goods alone would be to misunderstand the nature of the transaction and to ignore the weight of the Court's previous decisions.

22. The Commission proposes that the first question should be answered in the following terms:

23. Boots suggests that the answer to the first question should be:

The second question

24. The United Kingdom submits that, because Article 11 A 1(a) of the Sixth Directive provides that the taxable amount is to be everything which constitutes the consideration ... , a correct analysis of the transaction yields only one answer: the consideration comprises in part a sum of money and in pan the surrender of the coupon. The United Kingdom places reliance on the findings of primary fact made by the national court, and considers that the customer had to do two things for the supply of the redemption goods: firstly, acquire the coupon and surrender it to Boots; secondly, pay to Boots the normal retail price of the goods less the sum of money specified on the coupon. Plainly, the redemption goods would not, and could not, be sold at the lesser price unless and until the coupon were surrendered by the customer. The United Kingdom considers, firstly, that the nature and purpose of Boots' promotional schemes are such that, in the circumstances of the present case, the surrender of the coupon by the customer involves some real advantage to Boots in the form of increased sales of both the premium and the redemption goods. It submits that that economic benefit is achieved by Boots in return for the surrender of the coupon. Secondly, the United Kingdom contends that the surrender of the coupon by the customer to Boots is capable of being expressed in pecuniary terms: indeed, the coupon itself bears an express monetary value. Thirdly, the requisite direct link exists between the supply of the redemption goods and the surrender of the coupons by the customer. Accordingly, the United Kingdom submits that the surrender of the coupon constitutes part of the consideration for the supply of the redemption goods and must be included in the taxable amount in conformity with the clear wording of Article 11 A 1(a) of the Sixth VAT Directive. The United Kingdom also places reliance upon the French-language text of the Sixth VAT Directive which, in its use of the words la contrepartie in Article 11, makes it abundantly clear that consideration is not confined to a monetary payment.

25. Boots submits that the coupons surrendered by customers on their purchase of the redemption goods do not form part of the consideration for such acquisition, because they have no value to Boots. Where the coupon scheme is wholly funded by Boots, the coupons only entitle the presenter to obtain a discount upon the purchase of the goods of the retailer who has issued them and may not be used, redeemed or negotiated with any other supplier. In that case, the coupons are returned to Boots and subsequently destroyed. As the coupons clearly have no value to Boots, they may not, under the subjective criterion, form part of the consideration received by Boots upon the purchase by a customer of redemption goods. Furthermore, in Boots' view, the concept of the direct link between the supply of the goods and the consideration received means that one only has to look at the sale of the redemption goods. The consideration received at the time of the supply of the redemption goods is solely the reduced cash sum. The fact that the customer had on an earlier occasion purchased other goods from the same supplier is not relevant to that concept. In any event, the coupons were a legitimate inducement to persuade customers to purchase the premium goods just as much as the redemption goods, so it would be incorrect to treat them as linked to the sale of the redemption goods. The same principles apply, in Boots' submission, to schemes which are wholly or partly funded by manufacturers, the only difference being that Boots receives some reimbursement from the manufacturer. Boots does not dispute that it is liable to account for value-added tax in respect of any receipt from a manufacturer representing reimbursement (in whole or in part) of the cost of a promotion.

26. In the Commission's view, the consideration may include more than the price paid for the goods, as is also clear from the use of the word everything in Article 11 A 1(a). On the other hand, it does not follow that everything which is received by the supplier constitutes consideration.

27. With regard to the relevance of English law to the definition of consideration, the United Kingdom accepts that the meaning of consideration in English case-law is not determinative of its construction in Community legislation or jurisprudence.

28. Boots observes that, because of the unified meaning of the term consideration, it cannot be interpreted according to the law of each Member State. It follows that the Member States have no discretion as to the interpretation of the term. Accordingly, the rules of English law governing the concept of consideration are irrelevant in the context of Article 11 of the Sixth Directive. Moreover, in English law, but not in Scots law, the concept of consideration is of importance in establishing whether or not there is a legally binding contract; the meaning of consideration in English law is irrelevant in the context of the Sixth Directive.

29. The United Kingdom proposes that the second question should be answered in the affirmative, as follows:

30. Boots considers that the answer to the second question should be in the following terms:

31. The Commission proposes that the second question should be answered in the negative.

The third question

(a) Economic aspects

32. In the opinion of the United Kingdom, the situation in the present case falls to be contrasted with the paradigm case of a price discount or rebate where the customer merely pays to the retailer the price of the goods which he has bought, and provides nothing else of value or of benefit to him. The United Kingdom submits that the reductions in the amounts paid for the redemption goods in the instant case on the surrender of the coupons are not price discounts or rebates within the meaning of Article 11 A 3(b) of the Sixth VAT Directive.

33. Boots submits that the reduction of the redemption goods is a price discount or rebate within the meaning of Article IIA 3(b) of the Sixth Council Directive. Boots considers that, from the economic point of view, promotion arrangements under coupon schemes amount to a discount and are comparable to systems whereby coupons are distributed free or in newspapers, where the reduction in price for the goods purchased amounts to a discount. Boots states that it receives nothing in return for the coupon other than the prospect of increased sales on which it would account for VAT in the normal way. Boots also claims that similar arrangements are regarded as discounts in other Member States (France, the Federal Republic of Germany, the Netherlands and Belgium).

34. In the Commission's view, Article 11 A 3(b) makes it expressly clear that price discounts are not to be taxed. If Community laws are applied to the promotion scheme used by Boots, it appears that the selling price for the premium goods constitutes the taxable amount for that transaction, since it is the consideration the supplier obtains from the purchaser for the sale of that item. For the sale of the redemption goods the supplier receives the discount price and a coupon which has been enclosed in the package containing the item previously sold as premium goods. In that situation, the coupon would appear to be simply a method of giving a discount for the purposes of Article IIA 3(b), and even if for some reason it is not, since it is returned to the supplier who gave it away in the first place, that party has received no tangible value for the individual transaction, and Boots is protected by the provisions of Article 11 A 1(a).

(b) Linguistic aspects

35. Boots considers that the words discount or rebate should be given their ordinary meaning given in the Oxford English Dictionary, which describes a discount as any deduction or abatement from the nominal value or price and a rebate as a reduction from a sum of money to be paid, a discount. Accordingly, Boots submits that the reduction in price was a discount so that the reduction should be excluded from the taxable amount.

36. The United Kingdom accepts that the Oxford English Dictionary does include amongst its definitions of discount the words any deduction or abatement from the nominal value or price; but where such deduction or abatement is conditional upon acquisition and surrender of a coupon which has value and is part of the consideration given for the supply of the reduced cash price goods the simple dictionary definition may not apply.

(c) Legal aspects

37. On the question whether the coupons are to be regarded as price discounts or rebates, the United Kingdom considers that the answer must be in the negative. It takes up, in that connection, the observation of the national court that, since the coupon has to be acquired and surrendered as a condition of the reduced cash price being available, the reduction does not have the feel or flavour of a true discount or rebate. The United Kingdom submits that the national court's observations accurately reflect the true contruction of Article IIA of the Sixth VAT Directive. In its view, Article 11 A 3 must be read in conjunction with Article 11 A 1(a). The concept of taxable amount in Article 11 involves the identification of the price or consideration which is actually received for the supply. Given the use of the word price, Article IIA 3(b) is concerned only with the monetary element of consideration. Accordingly, in the United Kingdom's view, only where the price is actually reduced because of the taking of the discount or rebate is the taxable amount to be abated pro tanto. Where the discount or rebate is conditional upon providing the supplier with a benefit additional to the price (in this case, the surrender of a coupon), which benefit is part of the consideration given for the supply of the redemption goods, then the difference between the normal retail selling price of the goods supplied and the sum of money actually received by the retailer for those goods cannot, the United Kingdom submits, be regarded as a true price discount or rebate within the meaning of Article 11 A 3(b). Any different conclusion would entail ignoring the express provisions of Article 11 A 1(a).

38. Boots considers that it is wrong to state that there can be no discount because the deduction or abatement in price is conditional upon acquisition and surrender of a coupon which is part of the consideration under English law. In Boots' submission, there are cases where prompt payment is itself a condition for obtaining a discount, but this is allowed under both English law and Article 11 A 3(a). In addition, Article 11 A 3 does not make any reference to earlier consideration or conditionality and does not state that if there is consideration there cannot be a discount. The article merely says that the discount or rebate is not to be included in the taxable amount. Even if the coupon evidencing the customer's entitlement to a reduced price was acquired for consideration, the effect of Article 11 A 3 is to exclude the reduction from the taxable amount if it amounts to a discount.

39. The Commission considers that the arrangements amount to discounts.

40. The United Kingdom proposes that the third question should be given a negative answer in the following terms:

41. Boots proposes the following answer to the third question:

42. In the Commission's view, the third question should be answered in the affirmative.

The fourth question

43. The United Kingdom submits that the concept of open market value in its national legislation is not an abstract or fictitious concept disassociated from the terms of the particular transaction or supply. Section 10(3) and (5) of the Value-Added Tax Act 1983 is concerned with the open market value of the supply of goods and services (... the value of the supply shall be taken to be its open market value), which imports the concept of the normal value of goods and services in a transaction between parties trading in that market. Thus, the application of the domestic legislation to any given facts involves, in the United Kingdom's submission, the determining or evaluating of the actual value which the parties themselves attribute to the consideration in the context of the particular transaction, and not the importation of a theoretical measure unrelated to the terms of the synallagmatic relationship existing between the parties. Accordingly, in the instant case the Commissioners have, consistently with Article 11, used Boots' own pricing structures to assess the actual value of the supply by reference to the open market value. The actual value attributed to the surrender of the coupon by Boots is the difference between the normal retail price of the product (as sold in Boots' shops and not in other retail outlets) and the price which the customer actually pays for the redemption goods, namely the pecuniary amount printed on the face of the coupon itself. The United Kingdom considers that determining the taxable amount by reference to the open market value of the goods supplied in cases where there is non-monetary consideration is the fairest and most defensible method of ensuring that the taxable amount accurately reflects the value which the supplier himself places upon that consideration which he has received in exchange for his goods — in the present case, the value which Boots places upon the surrender of the coupon by the customer. The United Kingdom also considers that that is what is meant by subjective value and ... the consideration actually received and not a value assessed according to objective criteria as expressed by the Court in its judgment of 5 February 1981 in Case 154/80 Staatssecretaris van Financiën v Cooperative Aardappelenbewaarplaats GA [1981] ECR 445 (the Dutch potato case). The United Kingdom's legislation does measure the value of the consideration received by having regard to the value of the goods with which the supplier has parted in exchange, and is therefore wholly compatible with the Community legislation.

44. Boots submits that the concept of open market value is an artificial and economically incorrect way of dealing with coupon schemes. It reiterates that the coupons have no value to Boots and are eventually disposed of. If the coupons are distributed free of charge, their face value is not included in the gross takings; in that case, if the retailer receives cash and a coupon, he only has to account for value-added tax on the cash actually received. Such a position is in agreement, in Boots' view, with Community law and the Court's previous decisions. Boots repeats that there is no difference between a coupon which is handed out free, or appears in a newspaper, and a coupon which is given by a retailer at the time when goods are bought. Effectively the coupons are a method of selecting those customers who are qualified to buy the goods at a discount; to impose an open market value test is, in effect, to charge taxation on something which Boots has not received and means that Boots has to pay value-added tax on more than it has received in cash. The purpose of coupon promotions is to increase sales, and value-added tax will be paid on the increased sales. However, Boots observes, there is no question of its obtaining any credit for the extra value-added tax paid at the time when the coupon is redeemed.

45. In the Commission's view, the taxable amount can be compounded by the discount price and a coupon, but if the coupon has no value or is incapable of being valued, then the sum of money received by the retailer would in fact be the taxable amount. While the taxable amount may include more than the price paid by the purchaser, it does not follow that everything which is received by the supplier constitutes consideration.

46. The United Kingdom proposes that the fourth question should be given the following answer:

47. Boots considers that the answer to the fourth question should be as follows:

48. The Commission proposes that the fourth question should be answered as follows:

The fifth question

49. Boots answers this question in view of the possibility that it may be held that the promotion scheme does not constitute a discount. It considers that Section 10(3) of the Value-Added Tax Act 1983 is incompatible with Article 11 of the Sixth Directive. In Boots' view, Section 10(3) of the Value-Added Tax Act 1983 is wider in its scope than Article 11 of the Sixth Directive. Since Article 11 is clear in its scope and precisely defined, Member States do not have a discretion in its application. Boots considers that Section 10(3) of the Value-Added Tax Act 1983 in effect imposes an open market value test where the consideration does not consist or does not consist wholly of money. In Boots' view, that test is incompatible with the characteristics of consideration, namely that it has a value which is subjective (what is actually received) and capable of being expressed in money, because it would have the effect that taxable persons would have to pay tax on sums not actually received. No discretion, Boots considers, is given to Member States to substitute the value of what is supplied for the value of the consideration given by the customer.

50. Boots also refers to the drafting history of the Sixth Directive. At the preparation stage in the European Parliament, the Commission proposal for an open market value basis of valuation was not accepted by the Parliament's Committee on Budgets because it was not felt to be a satisfactory criterion.

51. The United Kingdom submits that the consideration need not consist wholly of money. It clearly follows that Article 11 A 1(a) authorizes the valuation of non-monetary consideration. The United Kingdom also submits that, although the meaning of consideration is to be given a common, uniform construction throughout the Community, and its interpretation may not be left to the discretion of each Member State, it is for the Member States to determine or evaluate the component parts of the consideration for a supply in any given case, because the method of valuing non-monetary consideration is not specified. Article 11 A 1(a) confines itself, in the United Kingdom's submission, to identifying the component parts to be valued, but does not specify how non-monetary consideration is to be valued. In that regard, the United Kingdom considers that the critical feature of the transaction involved is the surrender by the customer to Boots of the coupon in exchange for the redemption goods at a lesser price. It is for that reason that the United Kingdom has opted to value non-monetary consideration by reference to the open market value of the supplies under Section 10(3) of the Value-Added Tax Act 1983. The United Kingdom submits that the actual value attributed to the surrender of the coupon by Boots falls to be calculated, indirectly, by reference to the normal retail price of the product. Thus, the subjective value ascribed to that element in the transaction by the parties yields an identical result to the open market value, and is equivalent to the monetary sum printed on the face of the coupon itself. In the United Kingdom's submission, valuation of the component parts of the consideration by reference to open market value as provided for under Section 10(3) of the Value-Added Tax Act 1983 leads to a result identical to that achieved by quantification of the taxable amount under Article 11 A 1(a) of the Sixth VAT Directive. The United Kingdom therefore maintains that its national legislation is in conformity with the spirit and intendment of, and partakes of the same logic as, the Community provisions.

52. In support of its view that Article 11 A 1(a) provides for a margin of discretion on the part of Member States, the United Kingdom relies on a comparison of the terms of Article 11 A 1(a) with those of Article 11 A 1(b), (c) and (d); it also compares Article 11 A 1(a) with Article 11 B 1(b). The provisions of Article 11 A 1(b) to (d) all relate, in the United Kingdom's submission, to the taxable amount on a deemed supply of goods or services, in other words, in circumstances where no actual consideration may be received. Accordingly, the Community provisions must require the taxable amount to be determined uniformly and precisely. In subparagraph (a), however, the taxable amount is determined by reference to the consideration actually received in accordance with the terms of the transaction agreed between the parties. Furthermore, in the context of Article 11 B 1(b), the concept of value-added tax on importation is, in the United Kingdom's view, wholly distinguishable from the concept of value-added tax on supplies: the latter is based on consideration, the former is not.

53. In that context, the United Kingdom refers to the Minutes of the proceedings of the Committee of the European Parliament of 14 March 1974 and observes that the European Parliament proposed separate paragraphs for the valuation of consideration which consisted wholly of money and consideration which did not, or did not wholly, consist of money. The European Parliament, in the United Kingdom's submission, supported the Commission's proposal that open market value should apply to supplies where money was not the sole consideration. In the result, the United Kingdom claims, the Council appeared to have combined the Parliament's separate paragraphs into one, and specifically chose to exclude the concept of open market value from the eventual provision. The reason for the exclusion may be found in Document COM(74) 795 of 26 July 1974, being the Commission's amendments to the proposal for a Sixth Council Directive on the harmonization of legislation of Member States concerning turnover taxes. Under the heading Taxable amount within the territory of the country, the Commission stated: ...the concept now defined in subparagraph (a), which deals with normal supplies of goods and services, is based on the actual consideration, a standard which was already used in the Second Directive. Therefore the taxable amount must include not only amounts of money received or receivable but also the value of any goods or services received or receivable, together with anything that may be granted to the supplier in respect of the supply in question by any person other than the recipient of the supply. The United Kingdom submits that that document is, in two principal respects, supportive of its argument that Article 11 A 1 (a) leaves Member States a margin of discretion: although it is plain that the Commission did not wish to create a definitive rule of open market value which Member States would then be obliged to adopt, its proposed amendments make it abundantly clear that consideration' is not confined to monetary payment alone; the Commission's proposals also make it clear that non-monetary consideration has to be valued, notwithstanding that the exact mode of quantification has not been precisely defined.

54. The Commission observes that the rules contained in the Sixth Directive are precisely defined and do not confer a discretion upon Member States to substitute a different taxable amount for the supply of goods. Individuals may not, therefore, be denied the right to rely on the obligations imposed on the Member States by those provisions. In the Commission's view, there is no dispute in the present case that Article 11 of the Sixth Directive has direct effect and accordingly, if there is any conflict between that provision and Section 10(3) of the Value-Added Tax Act 1983, then Article 11 of the Sixth Directive will prevail with regard to the determination of the taxable amount.

55. Boots proposes the following answer to the fifth question:

56. The United Kingdom proposes that the fifth question should be given a negative answer, in the following terms:

57. In the Commission's view, the answer to the fifth question should be in the affirmative.

The sixth question

58. Boots submits that, since Section 10(3) of the Value-Added Tax Act 1983 is incompatible with Article 11, it should, according to Article 27 of the Sixth Directive, have been notified to the Commission before 1 January 1978 and that failure to do so results in the United Kingdom not being able to rely on Section 10(3) as against Boots in the national courts.

59. Boots further observes that Section 10(3) and (5) of the Value-Added Tax Act 1983 repeats in identical terms the provision of Section 10 of the Finance Act 1972, which introduced value-added tax into the United Kingdom, the content of which provision has not been modified. Boots also remarks that Article 27 of the Sixth Directive states, inter alia, that Member States which introduce or which applied on 1 January 1977 special measures for derogation from the provisions of the Sixth Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance must notify those measures to the Commission if they are introducing them (Article 27(1)) or should have notified them to the Commission before 1 January 1978 if they were in existence in 1977 (Article 27(5)). Article 27 also provides that measures intended to simplify the procedure for charging the tax may not affect the amount of tax due at the final consumption stage.

60. Boots submits that Section 10(3) amounts to a special measure within the meaning of Article 27. It replaces the taxation of consideration actually obtained which is envisaged in Article 11 by the application of the open market value test with the clear aim of avoiding a loss of revenue by increasing the taxable amount over and above the consideration obtained by the supplier from his customer. If, therefore, the United Kingdom wishes to rely on Section 10(3) it has to comply with Article 27. If, on the other hand, Section 10(3) is intended as a simplification measure, it is not even capable of authorization or retention under Article 27, because it substantially affects the amount of tax due at the final consumption stage. Boots therefore concludes that to adopt as the taxable amount not the consideration actually received but the open market value of a supply is a measure which must be authorized or retained on the basis of Article 27 of the Sixth Directive.

61. The Commission takes a similar view.

62. The United Kingdom, for the reasons already advanced in its observations, contends that its national provisions contained in Section 10(3) of the Value-Added Tax Act 1983 are consistent and compatible with the provisions of Article 11 of the Sixth VAT Directive; and, accordingly, no authorization for a derogation from its terms under Article 27 of the directive, or any other provision, is required.

63. Boots proposes the following answer to the sixth question:

64. The Commission proposes that the sixth question should be answered in the following terms:

65. The United Kingdom considers that the sixth question should be answered in the negative.

1 Language of the case: English.