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Card handling services go to Europe

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The VAT People - Expert Author

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12th September 2014

The long running dispute between HMRC and Bookit Limited has been referred to the ECJ for guidance. Bookit provides a card processing service for Odeon Cinemas, a company that it is a subsidiary of, and receives a handling fee where cinema tickets are booked online or by phone. In order to accept a payment Bookit undertakes various actions including verifying and processing credit or debit card transactions and acting between the card holder and the card provider. Bookit then passes the payment for the booking less any bank charges and its own processing fee to Odeon.

The source of the dispute is that HMRC state that this is a VATable supply whereas Bookit are arguing that it is providing payment services that are VAT exempt. Given the complexity of the process undertaken by Bookit and the fact that HMRC have been able to provide arguments that are at least reasonable (as opposed to irrefutable), the UK tribunal system has referred the case to Europe to decide.

The tribunal chair also made some interesting comments that support the fact that businesses are allowed to structure their business operations as they choose, and confirmed that in Bookitís case it was not artificial to separate out the card handling activities from the main Odeon business. This is a useful point to remember where HMRC seek to argue that creating a favourable VAT outcome from the way groupís structure transactions is abusive, this is often not the case.

Tax payers are entitled to structure activities in the most tax efficient manner and case law has supported this fact, this can of course be differentiated from VAT avoidance which is always abusive. It can often be worth giving our firm a call if your client is entering into new transactions or business activities to discuss the best way to structure these from a VAT view point, or simply to better understand the VAT implications.


About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.



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Article Published/Sorted/Amended on Scopulus 2014-09-30 09:03:48 in Tax Articles

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