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Steve Allen of VAT Advisers Ltd highlights a further selection of recent VAT cases.

ECJ says VAT was Due on Boat when Title was Transferred, Not when it Arrived in the Member State of Destination

An interesting case if only because it involves the ever-contentious issue of VAT incurred on purchases of yachts and sail boats by private individuals. 

The Appellant, the purchaser, intends to take possession of the boat in the UK. The sailing boat will be used in the UK and other Member States for 3 to 5 months before being taken to the Appellant’s place of residence in Sweden. The Appellant argued that the place of supply should be in the state of origin (i.e., the UK) whilst the Swedish Tax authorities argue that this constitutes an acquisition in Sweden.

The EU VAT Directive provides for the supply of the new means of transport to individuals or exempt/non-taxable persons to be taxed in the Member State of destination. The reasoning for this is that, because of the high value and easy transportability of such goods, there would be an incentive for private individuals to seek out low VAT rate countries – in contrast, taxation in the Member State of acquisition [i.e., in this case, Sweden] means the individual pays the same amount of tax irrespective of the Member State from which it was purchased.

Article 2.2 of the Directive defines a vessel as being 'new’ where the supply takes place within 3 months of the date of first entry into service, or where the vessel has sailed for no more than 100 hours. The Appellant argued that the boat will have been used in excess of both 3 months and 100 hours before being transported to Sweden, and as such, does not fall to be treated as an intra-Community acquisition. In order to provide legal certainty, a time limit is required.

The Court began by considering whether the transportation to Member State of acquisition was required within a certain time period. It noted that such a time limit would, in fact, help purchasers choose where the supply would be subject to VAT. The Court then dismissed the Appellant’s argument that, due to the UK’s three month time limit, UK VAT would become due, with subsequent taxation in Sweden resulting in double taxation. It said the remedy for this was for the UK to refund this VAT should the conditions subsequently be met.

In order to provide some guidance to the referring court, the Judgment agreed with the AG’s Opinion that it was necessary to conduct “an overall assessment of all the relevant objective evidence in order to determine whether the goods purchased have actually left the territory of the Member State of supply and, if so, in which Member State the final consumption will take place”. The Judgment goes on to refer to some of the general factors that could be considered, such as the amount of time spent on transporting the goods in question, the place of registration and usual use of the goods, the place of residence of the purchaser, and the presence or absence of links between the purchaser and the Member State of supply or another Member State. On the specific issue of acquiring a sail boat, relevance may also be attached to the flag Member State, and the place where the sailing boat will usually be moored and anchored and where it will be stored in the winter.
 
The final question to be considered was the time at which a determination is to be made on whether the means of transport was ‘new’.

The Court stated that the time of supply of an intra-Community supply of goods is the same as when similar goods are effected within the territory. Under Article 14, this is when title of the goods is transferred, and not, as argued by the Appellant, upon arrival in the Member State of destination. The Court found for the Swedish Tax authorities that tax was due in Sweden as an intra-Community acquisition.

‘X’, ECJ (C-84/09) 18 November 2010

Tribunal says Supplies made to Grand Prix Constructor were 'Sporting Services'

This case considered whether the Appellant’s supplies were sporting services (supplied where carried out) or advertising (supplied where recipient belongs).  HMRC issued an assessment on the basis that the supplies were sporting services, and VAT was due to the extent they took place in the UK (N.B the supplies took place before the recent place of supply changes for sporting services, etc).

The relevant services were provided under what was called a ‘Formula One Driver Development Agreement’. The Tribunal noted that there were elements of both types of services. The development and improvement of the constructor’s drivers was a supply of sporting services, whilst promoting the driver’s success was an advertising service.

The Tribunal acknowledged the case was finely balanced, but concluded the economic reality was that the predominant supply was that of sporting services. It noted that whilst a sporting service is normally something provided for in return for an entry payment, the absence of such payment cannot prevent it being a supply of sporting services (here the payment by the public to watch a Grand Prix has nothing to do with the supply to the constructor). This decision does seem to expand the definition of sporting services beyond what the ordinary man might think of as being the normal definition.

Williams Grand Prix Engineering (TC00848)