Appeal By The Commissioners For Her Majesty's Revenue And Customs Against A Decisoin Of The Upper Tribunal In An Appeal By Findmypast Limited
| Jurisdiction | Scotland |
| Judge | Lord Tyre,Lord Drummond Young,Lord President |
| Neutral Citation | [2017] CSIH 59 |
| Date | 08 September 2017 |
| Docket Number | XA105/16 |
| Court | Court of Session |
| Published date | 08 September 2017 |
FIRST DIVISION, INNER HOUSE, COURT OF SESSION
[2017] CSIH 59
XA105/16
Lord President
Lord Drummond Young
Lord Tyre
OPINION OF THE COURT
delivered by LORD DRUMMOND YOUNG
in an Appeal to the Court of Session
by
THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS
Appellants
against
a decision of the Upper Tribunal dated 21 January 2016
in an appeal by
FINDMYPAST LIMITED
Respondent
Appellants: S. Smith QC, R. G. Anderson; Office of the Advocate General
Respondent: Simpson QC; Balfour & Manson LLP
8 September 2017
Introduction
[1] The respondent taxpayer carries on the business of providing access to genealogical
and ancestry websites which it owns or in respect of which it holds a licence. Customers
who wish to search the historical records on the website may do so without charge. If a
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customer is to view or download most of the records on the website, however, he or she will
require to pay the respondent. This may be done by taking out a subscription for a fixed
period, which confers unlimited use of the records during that period. Alternatively, the
customer may use a system known as Pay As You Go (“PAYG”). This involves the payment
of a lump sum in return for which the customer receives a number of “credits”, sometimes
referred to as “units” or “vouchers”. The credits may be used to view records on the
website, and each time a record is viewed some of the credits are used up. The credits are
only valid for a fixed period, but unused credits may be revived if the customer purchases
further credits within two years; otherwise they are irrevocably lost.
[2] During the period between September 2008 and 10 May 2012 the taxpayer accounted
for value added tax on the price of PAYG vouchers at the time when they were sold. The
result was that tax was paid not only in respect of vouchers that were used to access
genealogical records but also in respect of vouchers that remained unredeemed. In the
present proceedings the taxpayer has claimed repayment of the value added tax accounted
for in respect of unredeemed vouchers during the period from September 2008 to 10 May
2012. With effect from the latter date the VAT legislation was changed, and the result is that
the present issue does not arise in respect of products purchased thereafter.
[3] The underlying question is whether value added tax should have been accounted for
at the time when the vouchers were sold or subsequently, at the time when the vouchers
were redeemed. It is in the latter event that the taxpayer would have a valid claim for
repayment. That claim raises three distinct issues. The first of these is the nature of the
supply made by the taxpayer to customers: whether it was the supply of genealogical
records selected by the customer and viewed or downloaded by him, or whether the supply
was a “package” of rights and services, which conferred a right to search the records on the
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various websites to which the taxpayer’s customers had access and, if so desired, to
download and print particular items from those websites. If the former is correct, the supply
only takes place if and when a particular record is viewed or downloaded; if the latter, the
supply includes a general right to search which is exercisable as soon as the credits are
purchased, with the result that the supply takes place at that point. The taxpayer contends
for the former construction and HMRC for the latter.
[4] Even if the taxpayer is correct on the characterization of the supply, however, the tax
point will still be advanced to the time when the voucher is purchased if the payment made
for the voucher is characterized as a prepayment to which section 6(4) of the Value Added
Tax Act 1994 applies. The second issue that falls for decision is accordingly whether on the
purchase of a PAYG voucher the customer made a prepayment to which section 6(4) of the
Value Added Tax Act 1994 applied. If a prepayment was made so that section 6(4) applied,
the tax point would be advanced from the time when services were provided to the time
when the prepayment was received by the taxpayer. HMRC contends that the payment
made by a customer when a voucher was purchased constituted a prepayment falling
within section 6(4); it was a payment made in advance for a particular category of service.
The taxpayer, on the other hand, contends that such a payment did not fall within the
definition in section 6(4): for a prepayment to occur all of the relevant information
concerning the chargeable event must be known and the goods or services to which the
payment relates must be identified with precision, and that was not so in the present case.
[5] The third issue is whether the credits purchased by customers were face-value
vouchers as defined in paragraph 1(1) of Schedule 10A to the Value Added Tax Act 1994, as
amended; “face-value voucher” is defined as “a token, stamp or voucher (whether in
physical or electronic form) that represents a right to receive goods or services to the value
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