Weekly VAT News

General Election

Following last week’s General Election, the Commons will first meet on Tuesday 9 July 2024 for the election of the Speaker and the commencement of swearing-in of MPs. The new parliament will begin formally on Wednesday 17 July 2024 with the State Opening of Parliament. This will include a King’s Speech in which the new government will set out its general legislative agenda for the first parliamentary session. A summary of the tax measures within the Labour Party’s manifesto is available on TaxScape.

Credidam: collective copyright management – CJEU

The Centrul Român pentru Administrarea Drepturilor Artiștilor Interpreți (Credidam) is a collective copyright management association in Romania, which collects and distributes remuneration due to performing artists (rightholders) by users of their artistic services. Credidam charges a management fee to cover its operating costs, which is deducted from the remuneration paid to the rightholders. Under Romanian law, remuneration collected by collective management organisations on behalf of rightholders does not fall within the scope of VAT, but the management fees are subject to VAT. Credidam challenged this, on the basis that the fees were ancillary to the remuneration and should follow the same VAT treatment. Credidam also argued that even if the fees were not ancillary, they could not be regarded as consideration for a service, as there was no legal relationship between Credidam and the rightholders in which there was reciprocal performance, because the obligation to pay the fees, and the amount thereof, were imposed by law. The CJEU has held that Credidam was supplying services to rightholders for consideration. There was a legal relationship between Credidam and the rightholders, in which there was reciprocal performance, and a direct link between the services supplied by Credidam and the management fee paid. This assessment was not altered by the fact that the provision of the services and the payment of the fee were regulated by statute. Also, the fact that the remuneration paid by users to rightholders was itself outside the scope of VAT did not change the taxable nature of the management services. (Contact: Donna Huggard)

Latvijas Informācijas un komunikācijas tehnoloģijas asociācija: VAT and state-funded training services – CJEU

Latvijas Informâcijas un komunikâcijas tehnoloìijas asociâcija (the Association) is a Latvian non-profit organisation that arranges training for businesses, subsidised through EU funding. The Association sub-contracted the delivery of the training to third parties. The Latvian tax authorities challenged the ability of the Association to recover input tax, on the basis that it was not carrying on an economic activity. The CJEU has ruled that the Association was carrying on an economic activity. Although the Association did not carry out the actual training itself, sub-contracting the delivery of services is common business practice. The Association organised the delivery of the training. It was providing services for consideration. The fact that it was a non-profit organisation did not preclude it carrying on an economic activity, given the nature of its activity and that its activity was comparable to other operators in the training sector. The consideration received by the Association for the services it provided must include the subsidies it received, which for some programmes was up to 70% of the cost of the training. (Contact: Andrew Clarke)

VAT case update

We understand that Hotel La Tour has applied to the Supreme Court for permission to appeal against the Court of Appeal judgment on VAT recovery on fundraising share costs.
On 11 July, the CJEU will deliver its judgments in Makowit on VAT and compulsory land purchases, and in Finanzamt T II on VAT grouping.