Indirect Tax Update 09/2014 - ITU for week endin 28 February 2014

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Information about Indirect Tax Update 09/2014 - ITU for week endin 28 February 2014
Finance

Published on March 3, 2014

Author: GrahamBrearley

Source: slideshare.net

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The Court of Justice is back from holiday and has issued an interesting judgment relating to the ever developing world of 'fiscal neutrality'. In a German case, the Court has ruled that the principle of fiscal neutrality is not offended where, as in Germany, Taxi rides are taxed at one rate of VAT whereas Minicab rides are taxed at a different rate! According to the Upper Tribunal's website, HMRC has withdrawn its appeal in the Bridport and West Dorset Golf Club Case.

Indirect Tax Update 09/2014 Indirect Tax Update for week ending 28 February 2014 The Court of Justice is back from holiday and has issued an interesting judgment relating to the ever developing world of 'fiscal neutrality'. In a German case, the Court has ruled that the principle of fiscal neutrality is not offended where, as in Germany, Taxi rides are taxed at one rate of VAT whereas Minicab rides are taxed at a different rate! According to the Upper Tribunal's website, HMRC has withdrawn its appeal in the Bridport and West Dorset Golf Club Case. The principle of fiscal neutrality is a subject that appears quite frequently in this Indirect Tax Update. It is a European law concept based on the principle of equal treatment and is intended, in a VAT context, to prevent Member States from applying different rates to what are, effectively, the supply of the same goods or services by different suppliers. Imagine, then, that you are a minicab operator in Germany and that, under German VAT law, you are required to account for VAT at the full rate on passenger transport services. By contrast, the local licensed Taxi service supplies the same kind of service (ie transport of passengers by car) but must only apply a reduced rate of VAT. It is not surprising that the German Minicab operators were a bit disgruntled and took the matter to Court. In a surprising judgment, the Court has said that even though both services involve the transportation of passengers by motor vehicle, the different VAT treatment is justified as the transportation by taxi service is a 'concrete and specific aspect' of the supplies falling within Annex III to the VAT Directive. This means that Member States may apply reduced rates of VAT provided that two conditions are met. Firstly, the particular services attracting the reduced rate must be identified as being 'concrete and specific' aspects of the category of services (here passenger transport) and secondly, Member States must comply with the principle of fiscal neutrality. In this case, the Court found that German Taxis operate under a legal framework which requires a license and the fulfilment of a number of obligations. These requirements are not imposed on German Minicabs. As such, the Court has said that this could constitute a concrete and specific aspect of the service category. 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 – Although not particularly relevant in the UK (as both private hire and Black Cab operators are treated the same for VAT purposes), the case demonstrates that the principle of fiscal neutrality which precludes the same or similar supplies being treated differently can have some unexpected exceptions. The keen-eyed observer will have noticed that HMRC has withdrawn its appeal to the Upper Tribunal in the Bridport and West Dorset Golf Club - VAT on 'Green Fees' case. The CJEU has ruled that green fees paid by visitors should be exempt from VAT. It seems HMRC has capitulated. We await a communiqué from HMRC on how they are to deal with the backlog of golf club claims. © 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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