VAT – Current case law developments

David Bennett

Saffery Champness

david.bennett@saffery.com

+44 (0)20 7841 4052

Astra Zeneca UK Ltd (C-40/09)

• Treatment of vouchers given to an employee in return for a “salary sacrifice”

• Employees can opt to take part of remuneration due in the form of retail vouchers

• Court held that the provision of vouchers in return for a salary sacrifice is an economic activity

• Furthermore, the employer receives consideration in the form of the salary which the employee chooses to forego

Astra Zeneca (cont’d)

• Accordingly, VAT is due on the salary sacrifice and input VAT can be deducted on the purchase of the voucher

• What happens where there is no input VAT on the purchase of the voucher?

• What happens if there is a salary sacrifice for something other than a voucher, eg, discounts on the employer’s own products?

Profaktor Kulesza, Frankowski, Jozwiak, Orlowski (C-188/09)

• B2C businesses in Poland must use a “cash register” to record turnover

• Failure to maintain a cash register is subject to a penalty

• The penalty was in the form of a 30% disallowance of input VAT incurred

Profaktor (cont’d)

• The Court decided that the 30% input VAT disallowance was a fair penalty for failure to comply with administrative requirements

• The penalty did not contravene the principles of proportionality and neutrality

X (C-536/08) and FACET BV (C-539/08)

• Acquisition VAT in a “triangular” contract• Recovery of VAT by the intermediary (ie Party B) in

the triangular contract• Court decision suggests that recovery of the VAT

declared by the intermediary on the acquisition in its own member state should not be automatic

• Recovery should be dependent on being able to demonstrate that VAT has been paid in the member state of arrival

Axa UK Plc (Denplan) (C-175/09) and T-Mobile (UK) Ltd (C-276/09)

• Cases not joined but both involve the treatment of charges made to effect a payment

• Both cases have been heard but no decision (or opinion) yet in either

• Circumstances of the cases are different. T-Mobile involves charges to account holders who choose not to pay by direct debit whilst Axa involves a charge to dentists for collecting amounts due by direct debit

Axa UK Plc and T-Mobile (cont’d)

• Axa has won in the UK courts; T-Mobile lost in the UK courts

• Decision in both will be relevant in determining the scope of exemption for payment handling services. T-Mobile is also relevant to the single or multiple supply issue.

Some forthcoming hearings

• Inter-Mark Group Sp (Poland) – (C-530/09) – treatment of exhibition services

• Fleischerei Nier (C-502/09), Lohmeyer (C-501/09), Flebbe Filmtheater (C-499/09) and Bog (C-497/09) (all Germany) – application of reduced rate for foodstuffs to catering

• Loyalty Management (UK) Ltd (C-53/09) and Baxi Group Ltd (C-55/09) (both UK) – treatment of loyalty schemes

Some forthcoming hearings (cont’d)

• Infringement proceedings against Denmark, Ireland, the Czech Republic, Finland, Sweden, the Netherlands and the UK – all concern domestic implementation of the VAT grouping rules