Weekly VAT News

Charge My Street Limited: Reduced VAT rate for public EV charging – FTT

Charge My Street Limited (CMS) supplies electric vehicle (EV) charging to EVs at its charging stations in public places. CMS considered the reduced VAT rate of 5% applied to its supplies, on the basis that they fell within the de minimis limit for supplies of electricity and so were deemed to be for “domestic use”. HMRC ruled that the standard rate applied. The First-tier Tribunal has agreed with CMS. Under Note 5(g), Item 1, Group 1, Schedule 7A of the VAT Act 1994, the provision of electricity to a person at any premises at a rate not exceeding 1000 kilowatt hours (kWh) a month is deemed to be for “domestic use”. The FTT found that, contrary to HMRC’s arguments, “premises” did not require any concept of legal ownership by the recipient of the electricity, nor was it confined to buildings, but could include defined public spaces, such as car parks. HMRC also argued that the “rate” at which electricity is provided must be calculated by reference only to the period during which the electricity was actually being provided, except for what HMRC referred to as continuous supply contracts. The FTT disagreed, accepting CMS’s approach that the limit is measured simply in terms of how much electricity is provided by a supplier to a person at any premises in the month in question, which for public EV charging would almost always be under the 1000 kWh limit. Accordingly, the FTT allowed CMS’s appeal in principle. (Contact: Oliver Jarratt)

Aspire in the Community Services Limited: Pre-registration VAT – FTT

From 2009, Aspire in the Community (ACL) provided VAT exempt welfare services. Aspire in the Community Services Limited (ACSL) was incorporated in 2011, and later became a supplier to local authorities and clinical commissioning groups. As ACSL was not registered with the Care Quality Commission, its supplies would be taxable, and it formed a VAT group with ACL, with ACSL as the representative member. The effective date of registration was 1 May 2021, with ACSL subsequently making its first taxable supplies in November 2021. On its first VAT return for the period 07/21, the VAT group claimed VAT on costs incurred pre-registration under VAT legislation allowing VAT incurred prior to VAT registration to be claimed as if it were input tax, subject to certain criteria. HMRC calculated the amount of VAT that the VAT group could claim by taking into account pre-registration use of the goods and services, which was to make wholly exempt supplies, and the estimated post-registration use, which was partly taxable. ACSL argued that the partial exemption calculation should be based solely on the post-VAT registration current or future use of the goods and services. The First-tier Tribunal has agreed with ACSL. HMRC exercised its discretion to treat all of the pre-registration VAT as input tax, and that is in the first VAT return that the taxable person is required to make. There is no basis for taking into account pre-registration use. The FTT upheld ACSL’s appeal against HMRC’s calculation of the VAT claimable. According to the decision, there are at least seven appeals stayed behind this appeal. (Contact: Jacqui Nicholls)

Lyko Operations AB: VAT treatment of loyalty schemes – CJEU

Swedish company Lyko Operations AB sold hair care and beauty products in physical shops and online. Lyko was developing a customer loyalty programme whereby customers could receive points for purchases, which they could redeem for goods from a ‘points shop’, but only in connection with a subsequent purchase. Lyko applied for a ruling from the Swedish Revenue Law Commission to clarify how the programme should be treated for VAT purposes. This subsequently resulted in a referral to the CJEU asking whether the points awarded in Lyko’s programme were vouchers (under Article 30a of the EU Principal VAT Directive (PVD)), and, if so, how the taxable amount would be determined upon redemption. The CJEU has held that the issue of the points did not constitute a voucher. Under the PVD, the definition of voucher requires two conditions: there must be an obligation to accept the voucher as consideration or part consideration for a supply of goods or services, and the goods or services to be supplied or the potential supplier’s identity must be indicated on the voucher or in related documentation. While Lyko’s programme would satisfy the second condition, it would not meet the first. The points must be used in Lyko’s points shop, in combination with a new purchase of goods, and did not create any obligation on Lyko to accept them as consideration for a supply of goods. Given this finding, it was not necessary for the CJEU to consider the taxable amount. (Contact: Andrew Roberts)

‘Žaidimų valiuta’ MB– VAT treatment of sale of in-game currency – CJEU

‘Žaidimų valiuta’ MB (Zv), based in Lithuania, purchased in-game ‘Gold’ from players of an online game and re-sold it to other players. Customers purchased Gold to enhance their in-game experience. The Lithuanian tax authorities considered that Zv should be registered and accounting for VAT. The issue was referred to the CJEU, asking whether the supply of Gold was VAT exempt as a financial transaction, and if not, whether the taxable value was the total amount of consideration received for the sale of Gold, or the difference between the sale and purchase prices. The CJEU has held that the financial services exemption did not apply to Gold. Non-traditional currencies can qualify for the financial services exemption if the currency is accepted by the parties as an alternative to legal means of payment, and has no purpose other than being a means of payment. Gold’s only purpose was its use in the game, and therefore it did not constitute a currency accepted as a means of payment for ‘real’ goods or services outside the game. Accordingly, Gold did not meet the conditions for the financial services exemption. In terms of the value, the CJEU found that the Gold was not a voucher, and so the taxable amount was the entire consideration received by Zv. The CJEU judgment did not include any commentary on whether, as raised by the Advocate General, the second-hand margin scheme could be extended to apply to services, such as Gold, traded on a secondary market. (Contact: Chris Hawkins)

This week’s CJEU VAT case calendar

On 12 March, there will be judgments in Randstad Espana on deductibility of entertainment expenditure and the application of the standstill clause, Aptiv Services Hungary on input tax recovery in respect of intra-EU acquisitions, and Harry and Associés on an EU VAT refund claim denied due to technical errors.