Weekly VAT News

Derby Quad Ltd: VAT and cultural exemption – FTT

People in Derby may not be able to travel to Stratford-upon-Avon to see the Royal Shakespeare Company’s performance of The Tempest; in which case they may visit Derby Quad, the local cultural hub, to watch a simultaneous screening. There is still a sense of occasion around such live event cinema, and customers watch the same performance that is taking place in Stratford-upon-Avon. However, the First-tier Tribunal considered that the audience was not watching a theatrical performance, and must pay VAT on their tickets. For the FTT, the critical difference was that the performers would get no feedback from the remote audience in Derby, as they would from the audience in Stratford-upon-Avon. The FTT therefore rejected Derby Quad’s arguments that this type of event cinema was a modern variant of a theatre performance. There were significant differences between what was going on in Stratford-upon-Avon and in Derby, meaning that the “always speaking” doctrine could not extend the concept of “performance” to Derby Quad’s screenings. Its tickets did not qualify for VAT exemption, and its appeal was dismissed. (Contact: Nick Comer)

Vistry Homes Ltd: strike out application dismissed – FTT

Vistry Homes Ltd entered into development agreements with housing associations (HAs) for the construction of houses. It considered that the transfer of land to the HA formed a single indivisible supply with its construction services, and that all of its services should therefore be treated as zero-rated for VAT purposes (a form of the “golden brick” approach described in HMRC’s internal manual on VAT Construction). In 2018, HMRC concluded that Vistry Homes was separately supplying zero-rated construction services and exempt land (leading to an input tax restriction). Vistry Homes appealed this decision and asked for a development agreement with Merlin Housing Society Ltd to be treated as a representative example, but then withdrew its appeal before it was scheduled to be heard by the First-tier Tribunal. HMRC then assessed Vistry Homes for input tax recovered on land purchases in 2018 and 2019, and Vistry Homes appealed those assessments. HMRC considered that Vistry Home’s withdrawal from the first appeal had established that it was not making “golden brick” supplies, and HMRC therefore applied to strike out the second appeal. The FTT has rejected HMRC’s application. The FTT considered that the first appeal was only going to deal with the Merlin agreement. The question of whether other development agreements qualified for “golden brick” treatment would involve a detailed consideration of their terms, in the context of their commercial and economic reality. Consequently, the FTT decided that Vistry Homes was not barred from appealing the assessments by cause of action estoppel, issue estoppel, or abuse of process. (Contact: Sarah Grace)

Gebühren Info Service GmbH: VAT and Austrian public broadcaster fees – CJEU

In 2018, BM wrote to Gebühren Info Service GmbH (which collects licence fees for the Austrian national broadcaster) claiming repayment of €100, which represented the VAT element of their licence fees for the previous five years. The non-commercial activities of public broadcasters are generally exempt from VAT, but Austria obtained a derogation that allowed it to continue to charge VAT when it joined the EU. Relying on the CJEU’s judgment in Cesky Rozhlas, BM argued that the licence fee was not even consideration for a supply, and that VAT should not have been charged regardless of the terms of the exemption or Austria’s derogation. The CJEU has now rejected that argument. It accepted (like Advocate General Maciej Szpunar) that VAT exemption can only apply to an activity that is a supply for VAT purposes. The mere existence of an exemption for non-commercial public broadcasting services does not automatically mean that they are activities that would otherwise be subject to VAT. Unlike the Advocate General, however, the CJEU ruled that the terms of the derogation (Article 378 of the EU Principal VAT Directive) allowed Austria, by exception, to continue to treat the licence fee as subject to VAT. The plain terms of that derogation applied, regardless of whether the fee should be defined as consideration for a supply. BM did not therefore have a valid claim that VAT had been overcharged on the Austrian licence fee. (Contact: David Walters)

EMEA Dbriefs webcasts

The next EMEA Dbriefs Tax webcast is on Wednesday 8 November 2023 at 15.00. Policy And Practice: The UK’s Post-Brexit Trade Landscape is from our Indirect Tax and Trade series and will be hosted by Amanda Tickel. During this webcast, our panel will discuss the UK’s newest trade agreements, new trade opportunities, UK-EU trade relations, the state of the UK border, and the Windsor Framework.