The judgments of the Court of Justice of the European Union (ECJ) in Case C-607/14 Bookit Ltd and Case C-130/15 National Exhibition Centre Limited, have confirmed that in order for debit and credit card handling charges to fall within the VAT exemption found in Article 135(1)(d) VAT Directive 2006/112/EC, the services must effect the change in the legal and financial ownership of the funds in question.
On the facts, the services provided by the taxpayers, including the transmission of authorisation codes that automatically triggered payment, did not cause the change in the legal and financial ownership of the funds but rather consisted of obtaining and exchanging the information necessary to enable the taxpayers to receive payment by debit or credit card.
In the light of the ECJ’s decision, it appears the Court of Appeal’s application of Sparekassernes Datacenter Case C-2/95 in Bookit Ltd v HMRC1 was too wide. The cases will now return to the UK tribunals for determination, but given the ECJ’s clear ruling, the ECJ’s judgment appears determinative. The ECJ’s judgment confirms that the exemption is narrow, and vindicates HMRC’s long running attempts to challenge the correctness of the Court of Appeal’s decision.
The ECJ also made comments (even though the issue was not referred to it) about the composite supply doctrine, which could provide HMRC with ammunition to re-open the debate about whether the single-composite supply test can be applied even if the relevant services are made by two distinct (non-VAT grouped) entities.
The Bookit judgment is available to view here.
The National Exhibit Centre judgment is available to view here.