Indirect Tax Update 08/2014: Indirect Tax Update for week ending 21 February 2014

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Finance

Published on February 24, 2014

Author: GrahamBrearley

Source: slideshare.net

Indirect Tax Update 08/2014 Indirect Tax Update for week ending 21 February 2014 With the Court of Justice on yet another holiday, attention turns to the UK Tribunal this week. Two important decisions have been released. Firstly, in the case of Avon Cosmetics ltd, where the Tribunal has confirmed that the 'party-plan' derogation operated by the UK is invalid and secondly, In the Way Ahead Group decision, the Tribunal confirms that a ticket agent's 'booking' fee is exempt from VAT. In Avon Cosmetics Ltd – The First-tier Tribunal has confirmed that the long-standing 'party-plan' derogation operated by the UK is invalid. The derogation was authorised by the EU Council in 1985 and allows HMRC to impose a market value on the supply of goods through a party-plan type chain where, ultimately, the retail sale to the final consumer is through a non-VAT registered business. Avon Cosmetics Ltd has asserted that, whilst it has no objection to a market value direction, the fact that a direction does not allow for input VAT incurred by the non-VAT registered sellers to be offset (and thus reduce its overall liability) offends the principle of neutrality inherent in the VAT system. In principle, the First-tier Tribunal agrees entirely with Avon Cosmetics. However, it is unclear how it is to remedy the situation and has decided to refer the matter to the Court of Justice. HMRC has, as expected, confirmed that it will seek leave to appeal to the Upper Tribunal on the question of whether the matter should be referred to the Court of Justice and the Tribunal has decided to delay such a referral until the outcome of HMRC's appeal on the point has been decided. For further information in relation to any of the issues highlighted in this Indirect Tax Update please contact: London/South East Karen Robb karen.robb@uk.gt.com The Regions Stuart Brodie stuart.brodie@uk.gt.com The Midlands Mike Sheppard mike.sheppard@uk.gt.com Comment – There appear to be two remedies available. The first involves interpreting the derogation in such a way that credit for input tax is given. The second involves a finding that, as the derogation infringes the principle of fiscal neutrality, the whole of the derogation must be invalid. This could open some fairly serious floodgates allowing affected taxpayers the possibility of making substantial claims. In Way Ahead Group Ltd, the Tribunal has confirmed that a 'booking' fee charged by a ticket agent to customers paying by credit or debit card constitutes a supply of card handling services which is exempt from VAT. HMRC had claimed that the supply was a single supply of ticketing services and that there was no separate supply of payment handling services. The Tribunal found for the taxpayer. On the facts and evidence, the ticket agent supplied a single 'payment handling' service which was exempt from VAT. Comment – another case in the long line of SDC – Bookit – NEC. HMRC even tried to argue that, following the case of AXA (Denplan), what was being supplied was debt collection services. The Tribunal did point out that the ticket agent's service was to the customer and not to the creditor so, logically, could not be collection of a debt due to the promoter! © 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

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