VAT – Update on ECJ casesNEXIA ETG meeting

Athens February 2011

David Bennett

Saffery Champness

david.bennett@saffery.com

+44 (0)20 7841 4052

AXA UK Plc (“Denplan”) (C-175/09) and T-Mobile (“Everything Everywhere”) (C-276/09)

• Both cases involve the treatment of charges made to effect a payment

• T-Mobile involved charges to account holders who choose not to pay by direct debit. AXA involved a charge to dentists for collecting amounts due by direct debit.

T-Mobile

• Charges made to customers were not consideration for a supply of payment services

• The customer did not intend to purchase a separate supply of payment services

• The charge was part of the value of the telecoms service (and hence subject to VAT)

• Therefore the Court did not need to consider the treatment of the charge

Denplan

• The service provided did effect the financial and legal relationship of the parties (ie, the creditor and the debtor)

• But the service can also be characterised as debt collection, even though the amount was not overdue at the time of payment

• Debt collection services are excluded from the financial service exemption

• Exemption should be narrowly construed so debt collection should have a wide meaning

• HMRC Brief

RBS Deutschland Holdings GmbH

• Car leasing scheme• Leases in question were considered by the UK to be

services supplied in Germany (where the supplier was established) but as supplies of goods by Germany with a UK place of supply

• Accordingly, no output VAT due on the leases• UK refused to repay input VAT to the company and

claimed the arrangements were abusive

RBS Deutschland Holdings GmbH (cont’d)

• The Court allowed the input VAT claim:– The fact that supplies have not been taxed in another

member state does not prevent input VAT recovery– Categorisation of a supply in another member state cannot

deny recovery of the input VAT– The leases had commercial substance and the parties were

unconnected. The fact that the terms of the lease were chosen to achieve a VAT advantage did not make the arrangements abusive.

Minerva Kulturreisen GmbH (C-31/10)

• Application of the travel agent’s special scheme to opera tickets– Yes when sold with travel services– No when sold on their own

Loyalty Management (UK) Ltd (C-53/09)

• Treatment of loyalty schemes, specifically the Nectar scheme

• Recovery of input VAT on charges made by those supplying the goods and services chosen by members of the scheme

• Court held that recovery is not possible: payments by the scheme operator are third party consideration for the supplies made to scheme members. The supply is not made to the scheme operator

Forthcoming hearings

• Infringement proceedings– VAT Grouping Rules: Denmark, Ireland, Czech Republic,

Finland, Sweden, the Netherlands and the UK – Incorrect implementation of the travel agent’s special

scheme: France, Spain, Italy, Poland, Greece, Finland, Czech Republic, Portugal