An insurance company's supply of payment handling and administrative services to dentists was equivalent to debt collection and was not exempt from VAT. The UK Court of Appeal's decision is likely to be the final word in Axa's litigation on this point.
In 2010, the ECJ ruled in favour of the UK tax authorities (HMRC), finding that a subsidiary company of Axa, which collected payments from dental patients, was making a single supply of debt collection services which fell within the carve-out from the exemption from VAT for transactions concerning, among other things, payments and transfers.
The matter came back to the UK Court of Appeal which was asked to consider whether the UK legislation giving effect to the VAT exemption could be construed as excluding debt collection from the exemption. In addition, the Court was asked to decide whether the ECJ had been entitled to hold that the payment handling services supplied in the case constituted debt collection; this had been a controversial finding by the ECJ.
The Court of Appeal ruled that the exemption had been given effect correctly in UK law and that there was no need for a further reference to the ECJ on the interpretation of debt collection.
Many businesses involved in supplying payment handling services have already taken steps to rearrange their affairs following the ECJ's decision and HMRC's subsequent guidance, but the Court of Appeal's decision is nonetheless disappointing, in particular because it means there is likely to be no further guidance on the exact meaning of debt collection in the context of the VAT exemption unless the point arises in another case. However, unless Axa appeals to the UK Supreme Court, this will be the end of the matter for now.