The First Tier Tax Tribunal has referred certain questions regarding the liability for VAT of card handling charges to the Court of Justice of the European Union ("CJEU") in the case of Bookit Ltd v The Commissioners For Her Majesty's Revenue & Customs.
Bookit had previously litigated the VAT treatment of card handling charges in 2006. At that time, the Court of Appeal held that the card handling charges were exempt from VAT and fell within the exclusion for transactions concerning deposit and current account payments, checks, and other negotiable instruments in the Council Directive 2006/112/EC.
The Tribunal found that there were sufficient grounds on which to refer a question to CJEU on whether the card handling fees were exempt or not. In particular, the Tribunal found that it was unclear what factors distinguish the provision of financial information without which a payment would not be made. In a previous CJEU case, those factors had been held not to fall within the exemption, but data handling services, which functionally have the effect of transferring funds, CJEU had accepted were within the exemption. The tribunal dismissed an argument based on abuse of rights raised by the UK tax authorities in relation to the arrangements in the Bookit case.
As is sometimes the case, successive CJEU decisions on card handling charges have created some confusion as to whether the supply concerned is exempt. This is especially the case here because the decision turns on the exact nature of the services provided and the technical aspects of the process of transferring funds. As card handling charges have become extremely common, the reference to CJEU should provide much-needed clarity on the scope of the exemption.
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