International cases – April 2013

In April 2013 the following VAT/GST decisions were handed down in the UK and Canada.

Of interest is a decision of the UK Supreme Court dealing with VAT, in WHA Limited v Her Majesty’s Revenue and Customs [2013] UKSC 24 which considered the effectiveness of a scheme which was designed to minimise the overall liability to VAT of a group of companies involved in motor breakdown insurance.

This case involved a group of companies involved in motor breakdown insurance (“MBI”) and the essential question was whether, in circumstances where the repairers repaired the insured’s vehicle and WHA (a group entity) paid the repairer (or reimbursed the insured who had paid the repairer), there was a supply of repair services by the repairers to WHA instead of, or as well as, a supply to the insured. This decision provides an illustration of how the Courts in the UK seek to characterise the VAT implications of a transaction by reference to the “economic reality” of the transaction. The Supreme Court observed that the contractual position is “the most useful starting point” but is not conclusive of the taxable supplies being made between the participants in the arrangements. The position in Australia, after the decision of the High Court in Qantas is not so clear. In that case, the High Court focused on the terms of the contract between Qantas and its customers and expressly rejected the relevance of concepts such as the “essential purpose” of the transaction.

My analysis of the decision can be accessed here.

United Kingdom

Supreme Court

Upper Tax Tribunal

  • HMRC v The British Disabled Flying Association [2013] UKUT 162 – VAT – zero rating – aircraft for use by disabled persons – whether aircraft modified for use by disabled persons after manufacture are ” designed” for such use – held yes but one aircraft not so designed at time of supply – whether Respondent is a ” relevant establishment” for the purposes of Group 15 to Schedule 8 VAT Act 1994 – held no – whether Tribunal has jurisdiction to decide whether appellant had legitimate expectation – held no – appeal allowed in relation to one aircraft and dismissed in relation to the other
  • HMRC v Esporta Limited [2013] UKUT 173 – VAT –whether First-tier Tribunal erred in concluding that membership fees recovered after access to club’s facilities had been denied due to non-payment were not consideration for a supply but compensation – held yes – appeal allowed
  • Scottish Football League v HMRC [2013] UKUT 160 – Value Added Tax; supply of goods; business gift; disposal otherwise than for a consideration; supply by football association of end of season medals to league division points champion clubs; whether output tax payable on the value of such medals – yes; or whether accounted for by output on membership, sponsorship, copyright royalties, and/or broadcasting fees; no; Value Added Tax 1994 Schedule 4, paragraph 5; Principal VAT Directive 2006/112/EC Article 16

First Tier Tribunal

  • H Q Graphics Ltd v Revenue & Customs [2013] UKFTT 226 – VAT – INPUT TAX – Article 5 of VAT (Special Provisions) Order 1995 –  sale of printing machinery and office equipment to appellant not to be treated as a supply of goods on basis the seller of the machinery and equipment had transferred its business as a going concern to the appellant – – appeal dismissed
  • N & M Walkingshaw Ltd v Revenue and Customs [2013] UKFTT 269 – VAT – sale of motor car on part-exchange terms – price of part-exchange car includes ‘over-allowance’ – value of supply of replacement car – periods prior to 1 August 1992 – s 10 VATA 1983 – application of ‘open market value’ – whether such value of replacement car should reflect a discount on a cash sale equivalent to the amount of the over-allowance


Tax Court

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