Lunar Missions Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 October 2019 |
| Neutral Citation | [2019] UKUT 298 (TCC) |
| Date | 08 October 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 298 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Sir Gerald Barling, Judge Ashley Greenbank
Nigel Gibbon, of Nigel Gibbon & Co, appeared for the appellant
Richard Chapman QC, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Time of supply – Issue of voucher – Single purpose voucher – Application of VATA 1994, s. 6 – Appeal dismissed.
The Upper Tribunal dismissed an appeal against the First Tier Tribunal's decision that the tax point of payments made during a crowdfunding campaign to finance a mission to the moon was the date of payment. The mission's aim was scientific research and, to finance it, the crowd-funders paid to have their material (mainly in the form of digital records) buried in a “time capsule” on the moon. The appellant had argued that, in return for payment, the crowd-funders received a voucher and that VAT was not due until this voucher was redeemed.
Lunar Mission Ltd intended to launch a spacecraft to the moon in order to undertake scientific research. To finance this activity the spacecraft would also take a capsule to be buried on the moon. Project supporters could pay to have their own material (mainly digital records but some physical items, such as hair etc) placed in the capsule. Supporters made pledges via a crowd funding website and, when the total amount pledged reached a financial target, the supporters made the pledged payment.
It was accepted by both parties that Lunar Mission was making a taxable supply and that VAT should be accounted for on the payments made. The parties also both accepted that, in return for payment, supporters received a face value voucher. The dispute concerned the time of supply.
When, instead of supplying goods and services a face-value voucher bearing an entitlement to goods and services is sold, the tax point rules set out in Sch. 10A, VATA 1994 apply. However, para. 7A of Sch. 10A excludes “single purpose vouchers” from these rules. When single purpose vouchers are sold (as occurred in this case) the tax point rules contained in s. 6, VATA 1994 apply.
Section 6 states that the time of supply of a service is the earlier of when the service is performed and the receipt of payment. The UT followed the principles described by the ECJ in the Lebara case (Case C-520/10) [2012] BVC 219 which involved the taxation of pre-paid phone cards sold to consumers via a series of distributors. It concluded that Lunar Mission supplied the service when it issued the voucher to the supporters and, therefore, VAT was due at this point.
Para. 69 of the decision states “When Lunar issued the vouchers to the supporters, it must be regarded as having provided them with all the information necessary to obtain the supply of the service; it provided the supporter who made the pledge – the only person with whom there was the requisite degree of reciprocal performance – with the wherewithal to obtain the digital or physical space on the capsule. At that point, it made the supply”.
The UT reached a sensible conclusion. This case involved the taxation of vouchers which were issued before the law concerning the VAT treatment of vouchers changed on 1 January 2019 and, as a result, its impact on other businesses using crowd funding to finance their projects will be limited.
[1] This appeal concerns the correct VAT treatment of rewards offered by the appellant, Lunar Missions Limited (“Lunar”), to supporters who pledged funds through a crowd-funding platform, known as “Kickstarter” to fund a project to send an unmanned spacecraft to the moon to undertake scientific research. The respondents are the Commissioners for Her Majesty's Revenue & Customs (“HMRC”).
[2] A supporter who pledged funds to support the project was offered rewards in the form of digital and/or physical space in a capsule that would be buried on the moon by the unmanned spacecraft. HMRC decided, in a decision dated 25 May 2016, that Lunar made a supply to its supporters at the time at which the pledges made by supporters became unconditional and Lunar received payment. The effect of this decision, if correct, was that Lunar should have been registered for VAT on or before 16 December 2014. Lunar was not registered for VAT by this date.
[3] Lunar appealed against this decision to the First-tier Tribunal (“FTT”). The question before the FTT concerned the timing for VAT purposes of any supply that was made by Lunar to its supporters. We will discuss the decision of the FTT (the “FTT Decision”) in more detail below, but, in summary, the FTT (Judge Jonathan Cannan and Mrs Mary Ainsworth) dismissed Lunar's appeal on the grounds that the rights offered to supporters constituted “single purpose vouchers” within paragraph 7A of Schedule 10A to the Value Added Tax Act 1994 (“VATA”) and that any supply made to Lunar's supporters was made when the vouchers were issued (FTT Decision [5] and [81]).
[4] Lunar now appeals, with the permission of the FTT, to this Tribunal.
[5] This appeal concerns the interaction of the rules which determine the time at which a supply is made for VAT purposes and the special provisions which apply to supplies which involve the issue of vouchers.
[6] The rules which govern the time of a supply are set out in s6 VATA. The relevant provisions in the case of a supply of services are in sub-sections (3) and (4). They provide, so far as relevant, as follows:
(3) Subject to subsections (4) to (14) below, a supply of services shall be treated as taking place at the time when the services are performed.
(4) If, before the time applicable under subsection … (3) above, the person making the supply issues a VAT invoice in respect of it or if, before the time applicable under subsection … (3) above, he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received.
[7] At the time of the transactions which are the subject of this appeal, there were no specific provisions in EU law governing the VAT treatment of supplies of goods or services involving the provision of vouchers. In particular, Council Directive 2006/112/EC (the “Principal VAT Directive”) contained no specific rules. EU member states were entitled to make their own provisions regarding the VAT treatment of vouchers provided that they were consistent with EU law.
[8] UK legislation included specific provisions which applied to determine the VAT treatment of certain types of vouchers (referred to as “face-value vouchers”). These provisions were contained in Schedule 10A VATA.
[9] Paragraph 1 Schedule 10A VATA contained a definition of “face-value voucher”:
1
(1) In this Schedule “face-value voucher” means a token, stamp or voucher (whether in physical or electronic form) that represents a right to receive goods or services to the value of an amount stated on it or recorded in it.
(2) References in this Schedule to the “face-value” of a voucher are to the amount referred to in sub-paragraph (1) above.
[10] Paragraph 2 provided that the issue of a face-value voucher was to be treated as a supply of services. It was in the following terms:
2
The issue of a face-value voucher, or any subsequent supply of it, is a supply of services for the purposes of this Act.
[11] Schedule 10A VATA proceeded to set out specific rules for different types of face-value voucher. Paragraph 4 dealt with the treatment of face-value vouchers issued by a person from whom goods or services could be obtained by the use of the voucher. These vouchers are referred to as “retailer vouchers”. Paragraph 4 provided as follows:
4
(1) This paragraph applies to a face-value voucher issued by a person who–
- is a person from whom goods or services may be obtained by the use of the voucher, and
- if there are other such persons, undertakes to give complete or partial reimbursement to those from whom goods or services are so obtained.
Such a voucher is referred to in this Schedule as a “retailer voucher”.
(2) The consideration for the issue of a retailer voucher shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face-value of the voucher.
(3) Sub-paragraph (2) above does not apply if–
- the voucher is used to obtain goods or services from a person other than the issuer, and
- that person fails to account for any of the VAT due on the supply of those goods or services to the person using the voucher to obtain them.
(4) Any supply of a retailer voucher subsequent to the issue of it shall be treated in the same way as the supply of a voucher to which paragraph 6 below applies.
[12] Following the decision of the Court of Justice of the European Union (“ECJ”) in Lebara Ltd v R & C Commrs (Case C-520/10) [2012] BVC 219 (“Lebara”), to which we refer later in this decision notice, Schedule 10A was amended by s201 Finance Act 2012 to include a new paragraph 7A.
[13] Paragraph 7A provided that certain provisions of Schedule 10A would not apply to certain face-value vouchers, which are commonly referred to as “single purpose vouchers”. It was in the following form:
7A
Paragraphs 2 to 4, 6 and 7 do not apply in relation to the issue, or any subsequent supply, of a face-value voucher that represents a right to receive goods or services of one type which are subject to a single rate of VAT.
Paragraph 7A therefore excluded single purpose vouchers from most of the operative provisions of Schedule 10A, with the exception of paragraph 5, which relates to postage stamps and is not relevant to this appeal.
[14] By virtue of Council Directive 2016/1065, the Principal VAT Directive was amended to require EU member states to include provisions in their domestic laws regarding the treatment of...
To continue reading
Request your trial
-
Lunar Missions Ltd v The Commissioners for HM Revenue and Customs
...[2019] UKUT 0298 (TCC) VALUE ADDED TAX – time of supply – issue of voucher – single purpose voucher – application of s6 Value Added Tax Act 1994 – appeal dismissed UPPER TRIBUNAL TAX AND CHANCERY CHAMBER Appeal number: UT/2018/0052 BETWEEN LUNAR MISSIONS LIMITED Appellant -and- THE COMMISSI......
-
Romima Ltd and Others
...redemption of the voucher is known at the time of purchase (see the discussion of the Upper Tribunal in Lunar Missions Ltd v R & C Commrs [2019] BVC 519). [120] The appellants contend that Chips are not single purpose vouchers because at the time of issue it cannot be known what goods and s......