New GST Ruling and Determination published today plus international cases update for March 2012

Today the Commissioner issued his first GST ruling for the year, GSTR 2012/1 – Goods and services tax: loyalty programs and a GST Determination, GSTD 2012/4 – Goods and services tax: what is ‘hospital treatment’ for the purposes of section 38-20 of the GST Act.

The GST Ruling considers the GST implications of certain loyalty programs, which are particularly complex.  Paragraph 2 of the Ruling states that its particular focus is on the following issues:

  • whether it is necessary to apportion some consideration to the supply of points, when a member pays the consideration to purchase goods or services and as a consequence has points allocated to them;
  • whether a payment from a program partner to the loyalty program operator is consideration for a supply;
  • to the extent that such a payment is consideration for a supply, how is that supply characterised? and the implications of such characterisation in determining whether the supply is to any extent GST free or input taxed.
  • whether the provision of a reward to the member (upon redemption of points by them) is a supply to the member for consideration.
  • whether any payments made by the loyalty program to a redemption partner is consideration for  a supply made by the redemption partner to the loyalty program operator, or is instead consideration for the supply of the reward made to the member; and
  • whether the redemption partner makes a supply to the program member, even if it also makes a supply to the loyalty program operator.


The following cases were handed down in the UK (some of the first tier tribunal cases were only published in March), by the ECJ and the NZ Court of Appeal.

New Zealand Court of Appeal

United Kingdom

High Court

Upper Tax Tribunal
  • HMRC v Pendragon Plc [2012] UKUT B1 – VALUE ADDED TAX — margin scheme for second-hand goods — arrangement by which motor dealer raised finance and became able to sell demonstrator cars within margin scheme — whether abusive — yes — appeal allowed

First Tier Tribunal

  • Chan v Revenue & Customs [2012] UKFTT 155 – VAT – Regulation 34 VAT Regulations 1995 – whether Appellant could recover VAT deliberately overpaid in earlier period by adjusting subsequent returns without making voluntary disclosure – no – HMRC’s  assessment also subject to time limits under Schedule 39 Finance Act 2008 – overpaid tax not recoverable
  • El Flood & Sons Partnership v Revenue & Customs [2012] UKFTT 147 – Value Added Tax  –  whether work in replacing a damaged plasterboard ceiling with a lath and plaster ceiling in a Grade II listed building, the change of fabric resulting from insistence by the planning authority, qualified as an alteration to the fabric of a listed building, and thus to be zero-rated  –  Appeal allowed
  • Gosling Leisure Ltd v Revenue & Customs [2012] UKFTT (TC) – Value Added Tax  –  Whether capital costs, incurred by the Appellant, were directly and immediately related to supplies made by the Appellant, so as to rank as deductible input tax  –  how supplies under a licence, rather than a lease or sub-lease were treated for VAT purposes  –  how to deal with a relatively minor category of supplies made by the Appellant to its parent company  –  decision in principle  –  Appeal allowed
  • Macaw Properties Ltd v Revenue & Customs [2012] UKFTT 170 (TC) – VALUE ADDED TAX – whether tax on supplies was input tax on the basis that it was tax on goods or services to be used for the purpose of a business to be carried on by the Appellant – whether (and when) the Appellant had formed the intention of carrying on a business – Rompelman v Minister van Financïen considered and applied – declared intention by the Appellant that it had formed the intention on the acquisition of an historic estate – whether (and from when) there was objective evidence to support such declared intention – evidence considered – appeal allowed in part
  • Majid v Revenue & Customs [2012[ UKFTT 144 – VAT – registration – whether Appellant liable to register in respect of earnings from part-time judicial appointment in absence of earnings from practice as barrister – classification previously for income tax purposes as self-employed – EC Directive 2006 arts 9, 10 – held, not a taxable person so not liable to register – appeal allowed

European Court of Justice

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