In this case, the taxpayer provides users with access to ancestry type websites. Customers can subscribe for a certain period. However, this appeal concerns pay as you go (PAYG) access under which sums are paid in return for credits. The taxpayer argued these were vouchers for the purposes of VATA 1994, Schedule 10A and submitted a £400k plus claim for unredeemed credits. The earlier First-tier Tribunal (FTT) found against the taxpayer on the basis that the receipt issued on purchase did not constitute a face value voucher, highlighting the lack of value on the face of the voucher and the difficulty in pricing the balance of unexpired units as the rationale for its decision. The Upper Tribunal (UT) disagreed with the FTT and allowed the taxpayer’s appeal. The taxpayer’s claim ran up to May 2012, when the new Single Purpose Vouchers rules were introduced.
The UT considered that there were three key issues:
The nature of the supply? The earlier FTT had agreed with HMRC that by purchasing PAYG credits users purchased a ‘package’, including the right to search, view and download documents (if desired). The UT disagreed, noting that the search facility was free. In its view, what the customer buys is the right to access individual documents, as and when he chooses to do so, up to the limit of the credits purchased by him. Therefore, the service is only provided or supplied when the individual documents are accessed.
Was the credit a face value voucher? The earlier FTT concluded that the document issued on purchase was no more than a receipt and was not a face value voucher. The UT agreed with the FTT that the credits met the first two requirements in Sch 10A, para 1 that they were a token, stamp or voucher (in electronic form); and represented a right to receive goods or services.
The FTT found, however, that the voucher did not represent the right to receive services ‘to the value of the amount stated on or in it’. The UT believed the FTT’s reasoning was based on the fact that a customer could not readily ascertain the monetary value of the credits in his account and if the credits were a gift the customer would not know the monetary value at all. The UT disagreed, finding the fact that the website recorded a balance in terms of credits rather than money, does not affect this. In reaching the conclusion that the credit was a face value voucher, the UT also added that it had no issue with the condition that the amount is ‘stated on it or recorded on it.’
Was the purchase of the credit a prepayment for the services? Having found for the taxpayer on issues 1 and 2, the taxpayer’s appeal was allowed. However, the UT addressed this third issue in the event that its conclusions above are overturned on appeal. The earlier FTT had concluded that the amounts paid to purchase credits were prepayments. The UT again disagreed with the FTT. The UT observed that at the time the credits were purchased the goods or services to which the customer is entitled and which he will use the credits to pay for are not fixed or clearly identified. The UT noted that different documents or categories of documents have different prices and prices can change. Therefore, the UT concluded that there was not a prepayment and the taxpayer would have still succeeded even if it had lost on the face value voucher point. To access the decision click here.
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