International cases update – November 2012

In November 2012 the following judgments dealing with GST/VAT were handed down in the UK, NZ and Canada.  It was a busy month.

I have previously published posts discussing the decisions of the UK Tax Tribunal in Borough Council of King’s Lynn and West Norfolk v Revenue & Customs [2012] UKFTT 671 (see here) and Dixons Retail plc v Revenue & Customs [2012] UKFTT 666 (see here).

I also published a post discussing the decision of the NZ Supreme Court in Stiassny and others v Commissioner of Inland Revenue [2012] NZSC 106 – see here.

Finally, the Tax Court in Canada handed down an interesting decision in Mac’s Convenience Stores Inc v The Queen [2012] TCC 393 dealing with the GST treatment of payments received by the owner of convenience stores for the provision of ATMs for a bank – some of the ATMs were owned by the bank  and some by the taxpayer.  The Court also considered the scope of the words “relate to”. Where the ATMs were owned by the bank, the taxpayer argued that the fees were consideration for an exempt supply of financial services, being “arranging” a financial service.  The Revenue argued that the dominant element of the supply was real property (i.e., the space in the stores) and the taxpayer’s conduct was “akin to the role that any landlord would play when providing space for an ATM”.  The Court agreed with the Revenue, essentially because the taxpayer took no active role in the operation of the ATMs and was largely a bystander with respect to the ATM transactions.  For the ATMs owned by the taxpayer, the issue was whether the taxpayer could claim input tax credits for the acquisition of the ATMs, notwithstanding that it was using the ATMs to make financial supplies.  The taxpayer relied on the exception which allowed entities (which are not financial institutions) to claim credits for property or services consumed “in the course of making supplies of financial services that relate to commercial activities of the registrant.  The Court rejected the Revenue’s contention that the words “relate to” require that the financial service must be incidental or ancillary to the entity’s primary business operations and must facilitate those business operations.  Adopting the ordinary meaning of “relate to” (having a very wide scope), the Court found that the taxpayer need only establish that there is “some connection” between the making of a supply of a financial service in respect of which credits are claimed and the taxpayer’s other activities. The Court noted that this is a much lower threshold than suggested by the Revenue.  The Court found that the taxpayer’s ATM operations did “relate to” its other convenience store activities.

United Kingdom

Upper Tax Tribunal

  • HMRC v European Tour Operators [2012] UKUT 377 – VAT – Exempt services – Item 1(d) of Group 9 of Schedule 9 VATA 1994 – Whether membership subscriptions of a trade association constitute exempt supplies – Case remitted to First-tier Tribunal for further findings of fact – Appeal allowed to that extent
  • Marcus Webb Golf Professional v HMRC [2012] UKUT 378 – VAT – exemption in Item 2 of Group 6, Schedule 9, VATA 1994 – whether tuition supplied by an individual teacher acting independently of an employer – relevance of principle of fiscal neutrality – appeal dismissed
  • Tanjoukian v HMRC [2012] UKUT 361 – VAT – Sale of vehicle registration marks – Whether transaction zero rated as an international supply – Place of supply in UK – Whether transaction involving a transfer or assignment of rights within para 1 of schedule 5 to VATA 1994 – Whether the DVLA a taxable person – Whether sale of registration marks by the DVLA an economic activity – Appeal dismissed
  • HMRC v Volkswagen Financial Services (UK) Ltd [2012] UKUT 394 – VAT – partial exemption special method – hire purchase transactions – taxable supplies of motor vehicles and exempt supplies of credit – whether residual cost inputs have a direct and immediate link with and are cost components of taxable supplies of motor vehicles – whether a methodology which attributes 50% of residual input tax to taxable supplies is fair and reasonable.
  • HMRC v UK Storage (SW) Ltd [2012] UKUT 359 – Value Added Tax – were storage units immovable property? – held no – was right to store goods in units exempt supply of licence to occupy land or standard rated supply of storage services? – held if units were immovable property then exempt supply of licence to occupy land otherwise standard rated supply of storage services – was single supply a supply of licence to occupy land or of storage services? – held single supply of storage services – appeal allowed

First-tier Tax Tribunal

  • Aabsolute Bond Ltd v Revenue & Customs [2012] UKFTT 672 – VAT – tax warehouse – assessment relating to goods considered to be missing – corresponding excise duty assessment withdrawn as out of time – whether VAT liability affected – no – whether assessment should have been made by reason of allegedly incomplete or incorrect return rather than under s 73(7B) VATA 1994 – no – whether a supply of goods at or before the duty point – held, on facts, goods delivered to warehouse and removed in circumstances constituting supplies – subject to adjustment, assessment confirmed and appeal dismissed
  • Borough Council of King’s Lynn and West Norfolk v Revenue & Customs [2012] UKFTT 671 – VAT – Overpayment – Whether consideration for a supply – No – No VAT charge on overpaid amounts – Appeal allowed – to see my post click here
  • Cloud Electronics Holdings Ltd v Revenue & Customs [2012] UKFTT TC02368 – VAT – input tax – professional fees incurred by holding company – whether there has been a supply of services – whether services used for business purpose
  • Dixons Retail plc v Revenue & Customs [2012] UKFTT 666 – claim for refund of VAT where retailer accounted for VAT on sales of goods for which customers fraudulently presented credit or debit cards and the retailer received payment from the card operator and retailer no obliged to repay the payments once frauds discovered – referral of question to ECJ – to see my post click here – to see my post click here
  • Mark Young (t/a The St Helens) v Revenue & Customs [2012] UKFTT TC02371 – VAT – s 49 VATA  – whether transfer of a business as a going concern where no supply by outgoing trader to new trader – yes on facts – whether legitimate expectation means not liable to VAT – stayed pending

New Zealand

Supreme Court


Tax Court

  • Mac’s Convenience Stores Inc v The Queen [2012] TCC 393 – whether service charge received for allowing the Automated Banking Machines of third party bank on the appellant’s convenience stores consideration for an exempt supply of financial services or a taxable supply of real property – whether appellant entitled to input tax credits for the purchase of ATMs – whether the ATMs “relate to” the other activities of the convenience stores
  • Tran v The Queen [2012] TCC 404 – whether acupuncture services performed by the appellant’s clinic are exempt supplies s a listed health service
  • Palangio and The Queen [2012] TCC 405 – whether taxpayer carrying on commercial activities and making taxable supplies – whether reasonable expectation of profit

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