VAT question on card handling fees referred to the ECJ – Bookit Ltd v HMRC3

The FTT is to refer questions surrounding the scope of Article 135(1)(d) of the Principal VAT  Directive, which relates to the exemptions of certain transactions from the payment of VAT, to the ECJ. 

HMRC’s primary position was that Bookit’s credit and debit card handling fees were standard  rated. In the event that the services did fall within the exemption, HMRC’s secondary position  was that the arrangements were abusive and failed the test in Halifax plc and others v HMCE4. Specifically, that the arrangements were contrary to the purpose of the Principal VAT Directive.


The appellant, a wholly owned subsidiary of Odeon Cinemas Holding Limited, charged credit  and debit card handling fees to customers purchasing advance tickets by telephone or online.  The appellant would send a customer’s card details to the card issuer via a merchant acquirer,  upon which an authorisation code would be received by the appellant allowing the transaction  with the customer to be confirmed. At the end of each day, the appellant would transmit  customers’ payment information to the respective card issuers through the acquirer, which  triggered the payments and resulted in the appellant’s receipt of the tickets’ proceeds plus the  card handling fees from the acquirer, minus a merchant service charge. The appellant would  subsequently account to Odeon for the value of the ticket sales less the merchant service  charge, and would retain the card handling fees.


The FTT has decided to refer questions to the ECJ. This issue was previously considered in Bookit Ltd v Revenue & Customs Commissioners5, in which the Court of Appeal determined that  these types of services were exempt. The two cases contain only one factual difference, which  the FTT has declared as immaterial: in the instant case the card authorisations were not sent  directly to the card issuer and instead went through the intermediary acquirer.

Nevertheless, the reason for the referral is threefold. Firstly, there have been doubts raised  in factually similar cases, which are currently being appealed to the Upper Tribunal (National Exhibition Centre Ltd v HMRCand Way Ahead Group Ltd v HMRC7) Second, there have been  similar reservations regarding the scope of this exemption raised in Axa UK (Taxation)8 and  Everything Everywhere Ltd v HMRC9 ,but which were not dealt with by the ECJ. Third, HMRC referred to Nordea Pankki Suomi Oyj10, in which the services of the Society for Worldwide  Interbank Financial Communication  were found not to be exempt for VAT purposes.

The FTT has concluded that, in any event, the card handling services would not fall within the  exclusion to the Article 135(1)(d) exemption. These services were not a form of debt collection;  such services imply a collection on behalf of the creditor, which was not the case here. In addition, the FTT found that the arrangements involving the appellant would not constitute an  abuse of rights within the Halifax11 principle , as the services were consistent with commercial  realities, and the division of what would have been a single supply, if made by a single person, is  not contrary to the purpose of the Principal VAT Directive.


Given the enduring confusion over the application of Article 135, and the potentially broad  impact of any decision on the point, many businesses will be watching developments in this  case closely.

To read the decision click here.