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ITU 09/2016

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Indirect Tax Update for week ending 04 March 2016

Publicado en: Economía y finanzas
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ITU 09/2016

  1. 1. © 2016 Grant Thornton UK LLP. All rights reserved. ITU Summary The highlight of this week's ITU is the Court of Appeal's judgment in the on-going battle between HMRC and the Open University (OU). The Court unanimously dismissed HMRC's appeal. The question at issue was whether the supply of broadcasting and other services to the OU should have been regarded as exempt from VAT. The Advocate General has also issued an interesting opinion this week in a Polish referral. The question to resolve in this case was whether VAT is due on the retention of goods when a business ceases. Finally, Air France loses another case in the UK – this time in relation to whether Air Passenger Duty (APD) was due on certain classes of passenger transport. HMRC and now the First-tier Tax Tribunal consider that the transport in question was liable to the higher rate of APD. 08 March 2016 HMRC v The Open University – Court of Appeal Generally, under the VAT Directive, the supply of goods and services is subject to VAT. However, there are exceptions to this rule. One of the exceptions is to exempt from VAT the provision of certain categories of education and training provided by certain types of suppliers. To qualify for exemption, not only must the education be of a specific type, but the supplier must also either be a body governed by public law, or a private law entity recognised by the Member State as having similar objects. The British Broadcasting Corporation (the BBC) provided broadcasting and ancillary services to the Open University (OU) and, historically, charged VAT on those services. Being a supplier of university education, which is exempt from VAT, the OU was unable to reclaim any of the VAT charged to it by the BBC. However, following case law developments (including the Horizon College case), the OU took the view that the BBC's supplies should actually have been exempt from VAT. It contended that the BBC was a body governed by public law and that its provision of broadcasting and other services was in line with its stated educational aims. If it was correct, then, under the provisions of the 6th VAT Directive (and the subsequent VAT Directive), the BBC's services should have been exempt from VAT. The OU submitted a claim to HMRC for a refund in excess of £21 million which HMRC refused to pay. The OU initially appealed to the First-tier Tax Tribunal (FTT) which decided the issue in the OU's favour. HMRC appealed to the Upper Tribunal but that appeal was dismissed. HMRC then appealed to the Court of Appeal. On a unanimous verdict (3-0), the Court of Appeal has, once again, dismissed HMRC's appeal. The Court of Appeal did not accept that the BBC was a body governed by public law – such a body is required to be an organ of the state which, clearly, the BBC was not – it was an independent body. However it did consider that, although not provided for expressly in UK VAT law, it was, nevertheless, a body recognised by the UK as having similar objects to a body governed by public law. As a consequence, its supplies of broadcasting and other services to the OU during the period of the claim qualified for exemption from VAT. Comment – a resounding defeat for HMRC. It will be interesting to see if it will appeal to the Supreme Court. What is also interesting is that the Court confirmed that a taxpayer may rely on the direct effect of EU law if it considers that HMRC has failed to recognise it as a body with similar objects to a body governed by public law. This should give hope to other suppliers of education. Issue09/2016 VAT, the BBC & Education! Indirect Tax Update
  2. 2. © 2016 Grant Thornton UK LLP. All rights reserved. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. 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. grant-thornton.co.uk GRT100456 Case C-229/15 - Jan Mateusiak Court of Justice – Advocate General's opinion This is a Polish referral to the Court of Justice. VAT law dictates that a supply of goods takes place when a business acquires goods and then uses them for either a private or non-business purpose or, if the business ceases, they are taken into private ownership. So even where there is, in the ordinary sense, no real supply, where the taxpayer has reclaimed any VAT incurred on the purchase of the goods, there is a deemed supply and output VAT is due. VAT law also stipulates that where the goods in question are 'capital' goods (as defined by the Member State), the recover of input VAT must be adjusted over a set term of up to ten years. The taxpayer in this case acquired a building and incurred input tax on the purchase. As a capital asset, he was required under Polish VAT law to adjust the input tax claim over the ten year period applicable to the building. After the expiry of the adjustment period, the business ceased and Mr Mateusiak took the building into his private ownership. He argued that as the adjustment period had expired, there should be no VAT due on the cessation of the business. Unfortunately, the Advocate General did not agree. The two VAT rules outlined above are stand-alone rules. The fact that the adjustment period for adjusting input tax claimed on the acquisition of the asset had expired does not preclude the requirement to account for output VAT on the deemed supply of the asset upon cessation of the business. If no VAT was chargeable on the deemed supply, the taxpayer would be at a distinct advantage to other private individuals purchasing the same or similar assets. Comment The deemed supply rules are there to ensure that assets acquired by a business but which are used for private or non-business purposes are subject to VAT. This puts a business proprietor on the same footing as an individual that purchases goods as a private person. In such circumstances, VAT is due on the private use of assets or on the retention of goods when a business ceases. Societe Air France – Air Passenger Duty Comment APD is chargeable at the lower rate for 'the lowest class of travel available on the aircraft'. Having considered all the various factors the Tribunal concluded that 'Premium Eco' (PE) customers were travelling in a different and higher class of travel to those travelling in economy. The PE product was not the 'lowest class of travel available on the aircraft' and so APD was due at the full rate. First-tier Tax Tribunal Air France does not seem to be having much luck in its VAT litigation at present. It lost a case in the Court of Justice recently in relation to the VAT liability of 'no-show' air fares. This time, it has lost at the First-tier Tax Tribunal in relation to the rate of Air Passenger Duty in connection with the supply of certain classes of passenger transport. Air France argued that the provision of 'Premuim Eco' flights should be liable to Air Passenger Duty at the lowest rate. HMRC took the view that those flights were not at the lowest class applicable to a flight and were, therefore, subject to Air Passenger Duty at the higher rate. On the evidence, the Tribunal concluded that HMRC's view was correct. It was clear that not only were Premium Eco fares not the lowest available but also the additional services available to such passengers meant that they were clearly not the lowest class of fares. Air Passenger Duty was due at the full rate. As a secondary point, Air France also argued that HMRC's assessments were out of time having been made more than one year after HMRC established sufficient facts on which to base them. Again, the Tribunal dismissed Air France's arguments. HMRC acted correctly and issued the assessment within the time limit specified by the law. Contact Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683 Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556

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