International cases update – October 2012: analysis of three decisions with Australian implications

In October the following decisions dealing with VAT and GST were handed down in the UK and Canada.  From my research no decisions were handed down in New Zealand.

This month I have analysed three decisions, each of which has potential interest in the Australian context:

  • Whether a payment received under a Settlement Agreement in respect of the breach/termination of an agreement is taxable in Canada: Surrey City Centre Mall Ltd v The Queen 2012 TCC 346.  The Canadian legislation has a specific deeming provision which treats payments for the breach of an agreement to make a taxable supply to be consideration for that taxable supply.  Australia contains no such provision and whether such a payment is taxable depends on whether it is consideration “in connection with” a supply. Under the current view of the Commissioner in GSTR 2001/4, the payment would not appear to be subject to GST as it is in the nature of damages.  However, the recent decision of the High Court in Qantas gives cause to revisit the issue.  My analysis of the decision can be accessed here.
  • Whether the supply of “hot food” in UK is taxable or zero-rated: Sub One Limited T/A Subway v HMRC [2012] UKUT 34.  The Upper Tribunal found that the subjective test applied by the Courts since 1988 was contrary to EU law, which required that an objective test be applied.  This raises the question of whether the test to be applied in Australia is subjective or objective.  My analysis of the decision can be accessed here.
  • Whether the sale of goods sold online where a charge was imposed for postage involved the single supply of delivered goods (all taxable) or two supplies: Orchardcrown Ltd v Revenue & Customs [2012] UKFTT 608. The Tribunal applied the established principles in Card Protection Plan and found there was a single supply.  In light of the recent decision of the High Court in Qantas, this raises the question of whether that test will continue to be applied here.  My analysis of the decision can be accessed here.

United Kingdom

Upper Taxation Tribunal

  • HMRC v The Rank Group Plc [2012] 347 – whether imposing VAT on gaming machines a breach of the principle of fiscal neutrality
  • Sub One Limited T/A Subway v HMRC [2012] UKUT 34 – Value Added Tax – zero-rating – Value Added Tax Act 1994 Schedule 8 Part II Group 1 Note (3)(b)(i) – food – toasted sandwiches and meatball marinara – whether heated for the purposes of enabling it to be consumed at temperature above ambient air temperature – whether legislation and/or interpretation and/or application thereof infringed principle of fiscal neutrality – whether FTT findings irrational – application to adduce further evidence – for my case analysis click here

Tax Tribunal

  • Damazda International UK Ltd v Revenue & Customs [2012] UKFTT 615 – Value Added Tax Act 1994 sec 84(7B) &  Sch 11 para 6A – Directive 2006/112 Art 273 – Direction to keep records – scope of appeal jurisdiction – proportionality – risk of tax loss – appeal allowed
  • Isle of Wight Council v Revenue & Customs [2012] UKFTT 648 – Value Added Tax – Taxable person – Local authority – Provision of off-street car parking – Impact of exemption on relevant market – Distortion of competition – Whether local authorities taxable persons in respect of provision of such parking – Questions referred to ECJ for determination – Application of ruling of ECJ (Case C-288/07) – EC Council Directive 77/388, art 4(5) (now art 13 of Directive 2006/114)
  • Kandiah Skandamoorthy v Revenue & Customs [2012] UKFTT 638 – VATA 1994 s73 – incomplete records – assessment to ‘best of their judgment’ – whether all relevant evidence taken into account – prolonged delays by taxpayer – appeal dismissed
  • Orchardcrown Ltd v Revenue & Customs [2012] UKFTT 608 – VAT – output tax – supply of goods with charge for postage – whether a single supply – whether supplier acts as agent for customer in contracting with Royal Mail – Customs & Excise Commissioners v Plantiflor Ltd considered – single supply by appellant – no agency established – appeal dismissed
  • Pinevale Ltd v Revenue & Customs [2012] UKFTT 606 – Value Added Tax – Reduced rate supply – Energy saving materials – Insulation for roofs – Polycarbonate panels for conservatories – Panels supplied to create new roof – Panels supplied to replace existing panels – Radiation reflector strips installed in  existing panels – Whether energy saving materials comprising insulation for roofs – Appeal allowed


Tax Court

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