Embed Size (px)
DESCRIPTION
Indirect Tax Update for week ending 5 September 2014 The undoubted highlight this week is the release by the Court of Justice of its judgment in the GMAC 'windfall' case – a resounding victory for the taxpayer. The First-tier has also published its decision in the latest 'Bookit' appeal relating to whether card handling fees are exempt from VAT The Court of Justice (CJEU) is back from a long summer holiday and has started the new term with a bit of a bang! The long-running case concerning GMAC has finally come to an end in the taxpayer's favour. ITU readers will be aware that under UK law, the sale of a motor car that has been repossessed is treated as neither a supply of goods nor a supply of services. GMAC claimed that this provision means that there can be no VAT due when they sold a repossessed car. Readers will also be aware that under EU VAT law, a taxpayer is entitled to reduce the taxable amount in respect of a supply where, after the supply has been made, there is a change in the consideration for the supply. GMAC argued that where a customer defaulted, it was entitled to make an adjustment to the VAT it had previously declared and to claim Bad Debt Relief (BDR) in relation to any balance. HMRC argued that this scenario would produce a 'windfall' in GMAC's favour and so the Upper Tier Tribunal requested clarification from the CJEU in relation to the extent to which a taxable person could rely on the direct effect of one provision in respect of one transaction, and rely on the provisions of national law in relation to the other when, in essence, it concerned the same transaction and the cumulative fiscal result was, arguably, not intended by either of the provisions. The CJEU has confirmed that Member States may not prevent a taxable person from invoking the direct effect of a provision by arguing that a person can rely on a national provision. Comment – The end of the road for HMRC on this one. Businesses with a similar fact pattern as GMAC should now have their respective claims processed and paid. Although an important victory for GMAC, the opportunity for taxpayers generally is somewhat limited. What is important, however, is the principle established by the CJEU's ruling. In essence, where a provision of EU law has direct effect, Member States are not allowed to set it aside in favour of a national provision. In what can only be described as a re-run of the original Bookit case (albeit with slightly different facts) the First-tier Tribunal has decided to refer question to the CJEU on whether charges made by Bookit for 'payment handling services' should be exempt from VAT (as claimed by Bookit) or (following the earlier CJEU judgment in Axa Denplan) standard rated as 'debt collection services'. Comment – It is difficult to see how the CJEU could classify the nature of Bookit's services as 'debt collection' but we shall see!
Citation preview
Indirect Tax Update for week ending 5 September 2014
The undoubted highlight this week is the release by the Court of Justice of its judgment in the GMAC 'windfall' case – a resounding victory for the taxpayer. The First-tier has also published its decision in the latest 'Bookit' appeal relating to whether card handling fees are exempt from VAT
The Court of Justice (CJEU) is back from a long summer holiday and has started the new term with a bit of a bang! The long-running case concerning GMAC has finally come to an end in the taxpayer's favour. ITU readers will be aware that under UK law, the sale of a motor car that has been repossessed is treated as neither a supply of goods nor a supply of services. GMAC claimed that this provision means that there can be no VAT due when they sold a repossessed car. Readers will also be aware that under EU VAT law, a taxpayer is entitled to reduce the taxable amount in respect of a supply where, after the supply has been made, there is a change in the consideration for the supply. GMAC argued that where a customer defaulted, it was entitled to make an adjustment to the VAT it had previously declared and to claim Bad Debt Relief (BDR) in relation to any balance.
HMRC argued that this scenario would produce a 'windfall' in GMAC's favour and so the Upper Tier Tribunal requested clarification from the CJEU in relation to the extent to which a taxable person could rely on the direct effect of one provision in respect of one transaction, and rely on the provisions of national law in relation to the other when, in essence, it concerned the same transaction and the cumulative fiscal result was, arguably, not intended by either of the provisions. The CJEU has confirmed that Member States may not prevent a taxable person from invoking the direct effect of a provision by arguing that a person can rely on a national provision.
Comment – The end of the road for HMRC on this one. Businesses with a similar fact pattern as GMAC should now have their respective claims processed and paid. Although an important victory for GMAC, the opportunity for taxpayers generally is somewhat limited. What is important, however, is the principle established by the CJEU's ruling. In essence, where a provision of EU law has direct effect, Member States are not allowed to set it aside in favour of a national provision.
In what can only be described as a re-run of the original Bookit case (albeit with slightly different facts) the First-tier Tribunal has decided to refer question to the CJEU on whether charges made by Bookit for 'payment handling services' should be exempt from VAT (as claimed by Bookit) or (following the earlier CJEU judgment in Axa Denplan) standard rated as 'debt collection services'.
Comment – It is difficult to see how the CJEU could classify the nature of Bookit's services as 'debt collection' but we shall see!
For further information in relation to any of the issues highlighted in this Indirect Tax Update please contact:
London/South East Karen Robb [email protected]
The Regions Stuart Brodie [email protected]
The Midlands Mike Sheppard [email protected]
© 2014 Grant Thornton UK LLP All rights reserved ‘Grant Thornton’ means Grant Thornton UK LLP, a limited liability partnership Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another's acts or omissions. This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.
www.grant-thornton.co.uk
Indirect Tax Update 32/2014
