Highlighting the latest VAT cases and recent VAT developments.
Return of trading details
eBrief 50/16 outlines further updates to the return of trading details (RTD) filing process. The RTD is an annual statistical return to be filed by all VAT-registered traders, showing an analysis of their sales and purchases at different VAT rates. Revenue can withhold tax refunds where the taxpayer has outstanding RTD. This eBrief sets out the following updates to the RTD filing process in ROS:
Management of special investment funds
eBrief No.63/16 provides links to two new VAT manuals, which update Revenues guidance on the VAT exemption for management of special investment funds (SIFs). By way of background, investment management is a generally VATable service but, by way of exception, the management of certain SIFs defined in Irish law is exempt from VAT, In an Irish context, SIFs typically include UCITs, ICAVs, defined contribution pension schemes and certain life assurance funds.
The first manual includes an update to Revenue guidance on the meaning of management in this context. This follows the European VAT judgement in the GtbK case (C-275/11), which issued in 2013. The manual confirms that investment advisory services qualify for VAT exemption provided the services are specific to and essential for the management of the fund. However, mere support or technical supplies such as the making available of IT systems, provision of software, general legal and accountancy services and so on are not within the scope of this VAT exemption.
The second manual updates Revenue guidance in relation to the VAT treatment of the management of self-directed life assurance bonds and equivalent products, which are treated as SIFs for Irish VAT purposes. The manual updates previous Revenue guidance for developments in relation to the scope of VAT exemption for the management of SIFs, as noted above. The manual also provides guidance to help determine the VAT treatment of the management of self-directed life assurance bonds and equivalent products sold and managed from Ireland into other jurisdictions, which are the subject to the local regulatory and tax requirements of those jurisdictions.
The manual restates that VAT exemption does not apply to the management of life products that would be regarded as personal portfolio products under Section 730BA of the Taxes Consolidation Act 1997, which allow the policy holder to select, or to influence the selection of, the assets that determine the policy benefit.
VAT exemption for payment handling services
The Court of Justice of the European Union (CJEU) judgements in the Bookit (C-607/14) and the National Exhibition Centre (C-130/15) cases considered the scope of the VAT exemptions for payments handling services. The CJEU found that the card handling fees charged by the taxpayers did not qualify for VAT exemption.
The facts of both cases are detailed but for illustrative purposes, I will set out briefly the facts in Bookit. Bookit sold cinema tickets via online and phone bookings, which customers paid for by credit or debit cards. Bookit charged a card handling fee to the customer in addition to the cinema ticket price. Bookit treated these fees as exempt from VAT as a transaction in payments. The UK tax authorities challenged this VAT exemption treatment and, while Bookit was successful in the UK courts, the case was referred to the CJEU.
The CJEU held that the activities carried out by Bookit were not sufficient to come within the VAT exemption for transaction in payments. To come within that exemption, the supplier must have the power to bring about a change in the legal and financial situation of the payer and payee (i.e. cause the money to move from one person or account to another).
Bookit was involved in taking card details from the customer, transmitting and receiving information from those cards through the card network to validate the card, and then providing settlement files of bookings received to allow the payments to be processed. However the CJEU held that Bookits activities did not have the effect of transmitting the payment.
To support its conclusion, the CJEU added that, if Bookits activities were exempt from VAT, the same argument could be made for any business receiving a debit or credit card payment. The CJEU also made reference to the objectives of the VAT exemption for certain financial transactions, and concluded that Bookits activities did not fall within those objectives.
The judgements must be considered in light of the respective fact patterns of the cases. Irish and EUVAT law continues to provide for VAT exemption for a number of types of services in the payment and credit card processing chain. However, these judgements provide further guidance on the scope of the VAT exemption for transactions in payments and distinguishing the types of activities that may not come within the scope of the VAT exemption.
David Duffy ACA, AITI Chartered Tax Advisor, is a VAT Director at KPMG
This article originally appeared in the August 2016 edition of Accountancy Ireland and is reproduced here with their kind permission.