Card handling services go to Europe

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 Bookit’s 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 group’s 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.


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