National Exhibition Centre Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 07 May 2013 |
| Neutral Citation | [2013] UKFTT 289 (TC) |
| Date | 07 May 2013 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 289 (TC)
Judge Peter Kempster, Mr Terence Bayliss
Mr Jonathan Peacock QC, instructed by Deloitte LLP, appeared for the Appellant
Mr Alan Bates of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
VAT - financial services - exemption - Sixth VAT directive, eu-directive 77/388 subsec-or-para B article 13art. 13(B)(d)(3) - VATA 1994, Value Added Tax Act 1994 schedule 5 group 9Grp. 9 Sch. 5 - booking fees on concert ticket purchases - identity of supplier - nature of services supplied - whether for processing of payment by credit and debit cards - whether debt collection service
The First-tier Tribunal decided that a taxpayer company which sold tickets through its box office to customers for the promoters' events, received booking fees, on its own behalf. It was clear to the customers that they were being charged not just the face value of the chosen ticket, but also other charges. The booking fees were not consideration for a single overall service of ticket booking, but were consideration for the provision of card processing services. The high amount of booking fee reflected what the ticket consumer market would bear, rather than implying that the fee covered services other that the card-processing facility.
Applying the ruling in Bookit Ltd v R & C CommrsVAT[2006] BVC 605 ("Bookit") and Scottish Exhibition Centre Ltd v R & C CommrsVAT[2007] BVC 716 ("SEC"), the Tribunal also decided that the services provided by the taxpayer for the booking fees were exempt supplies of card processing services within the Sixth Council Directive 77/388/EEC ("Sixth Directive"), eu-directive 77/388 subsec-or-para B article 13art. 13B(d)(3). Whilst unlike in Bookit, the taxpayer received the authorisation codes not from the card issuers but from its merchant acquirer, the taxpayer's booking fee transaction effected the transfer of funds because within the contractual framework established by the parties, the information transmitted by the taxpayer to its merchant acquirer was all that was needed to trigger the making of the transfer by merchant acquirer to the taxpayer. Finally, the Tribunal decided as the booking fees were properly due to the taxpayer from the customer for services it immediately performed, it could not constitute "debt collection".
The taxpayer company appealed against HMRC's decision, refusing to repay output tax it allegedly overpaid in the period 1 August 1999 to 30 April 2002. They held that the certain charges made by the taxpayer to its customers in relation to ticket booking fees were not exempt supplies under Sixth Directive, eu-directive 77/388 subsec-or-para B article 13art. 13B(d)(3).
The taxpayer owned and operated exhibition centre and other venues in Birmingham, which were used to stage trade and public exhibitions, sporting events, concerts and other events. It typically hired its venues to third party promoters and sold tickets to customers for the promoters' events, on behalf of the promoters, through its box office. In selling tickets through its box office, the taxpayer acted as a ticket-selling disclosed agent for events held at its own venues. When it acted as agent, it did not take title to the tickets, and the money from ticket sales was collected on behalf of the principal, the promoter.
The box office-related income of the taxpayer was generated by, among others, charging booking fees to the ticket-buying public. That was in relation to ticket sale transactions carried out over the telephone and the internet. The only method of payment accepted by the taxpayer for sales by telephone or internet was by credit or debit card. When a ticket was purchased over the counter, then the booking fee was only ever levied when payment was made by credit card or debit card.
The taxpayer considered that the booking fees levied in respect of credit card and debit card payments were consideration for a supply of payment processing services, which was exempt from VAT. It submitted claims for repayment of overpaid output tax in respect of the booking fees. HMRC disagreed and refused to pay those claims.
The taxpayer contended that the booking fees were consideration for a payment handling service, being the processing by the taxpayer, on behalf of the customer, of the latter's payment to the promoter for the ticket. That was an exempt supply pursuant to Sixth Directive, eu-directive 77/388 subsec-or-para B article 13art. 13B(d). The taxpayer also submitted that it was a settled law that the activity of transferring information to banks and/or merchant acquirers for onward transmission to credit card companies to call for the transfer of money fell within that exemption. That was regardless of whom the person transferring the information was acting for.
HMRC contended that the booking fees constituted part of the consideration for a supply to the customer by the promoter, not by the taxpayer. It would be artificial to split the "service of accepting payment" from the single overall supply of the ticket providing the right to attend the relevant concert. In alternative, the booking fees were consideration for a single overall service of ticket booking, by which customers were able to book tickets sold by a promoter, and to receive those tickets by a particular method. The taxpayer was supplying a single overall service and the fees charged were consideration for a standard-rated supply. The taking of payment by credit or debit card could not properly be regarded as a separate supply. Even if the booking fees were consideration for a separate service of processing payments by credit or debit card, that supply did not have the necessary characteristics to come within the exemption in Sixth Directive, eu-directive 77/388 subsec-or-para B article 13art. 13B(d)(3). Furthermore, the supply came within the express exclusion of "debt collection" from that provision.
(2) Whether the booking fees were received by taxpayer, on its own behalf, for the services it provided, and not as agent for the promoter.
(3) Whether the booking fees were consideration for booking fees were consideration for a single overall service of ticket booking and not for a card handling service.
(4) Whether the booking fees satisfied the requirements for the exemption from VAT under Sixth Directive, eu-directive 77/388 subsec-or-para B article 13art. 13B(d)(3).
(5) Whether the booking fees were consideration for "debt collection".
Held, allowing the taxpayer's appeal:
In respect of the first issue, the Tribunal held that it was certainly the case that a customer buying a ticket was unlikely to engage in a legal analysis of the contractual relationship they were entering into. They just wanted to buy a ticket. However, it would be clear to the customer that they were being charged not just the face value of the chosen ticket, but also other charges. If they chose to investigate those other charges further, then a telephone query to the ticket office would receive the answer evidenced by the phone script, "ticket agents charge per ticket booking fees for the services they provide". Similarly, an online customer could access the FAQ webpage reading, "Booking fees are charged by [the taxpayer's] Group Box Office". Thus, the monies paid by a customer comprised both a ticket price collected by the taxpayer as agent for the promoter, and other charges collected by taxpayer on its own behalf as principal.
In respect of the second issue, the Tribunal concluded from the evidence that a large part of the box office work carried out by the taxpayer was not specifically remunerated. Many of those services suggested by HMRC as being covered by the booking fee were available to (potential) customers, whether or not they proceeded to a ticket purchase. Thus, it was not correct to conclude that part of the booking fee was in consideration of some or all of those services.
Whilst the amount of the booking fee was much higher than the charge made to the taxpayer by the merchant acquirer, the high amount of booking fee reflected what the ticket consumer market would bear, rather than implying that the fee covered services other that the card processing facility. All the evidence was that the taxpayer set the level of the booking fees to what the competitive market would bear. The Tribunal then held that it should examine matters from the point of view of the typical customer (Birkdale School, Sheffield v R & C CommrsVAT[2008] BVC 397, considered). Here, the typical customer would conclude simply that the booking fee was charged if he or she chose to pay by card, but not if he or she paid in cash. The Tribunal then concluded that the service provided by taxpayer and remunerated by the booking fee related to provision of card processing services.
In respect of the third issue, the Tribunal held that the service performed by taxpayer was materially the same as that performed by the taxpayer in Bookit. It followed directly from Bookit that the booking fees were consideration for exempt supplies of card processing services. The only difference was that while the taxpayer in Bookit did obtain authorisations from the card issuers themselves, the taxpayer in this case received the authorisation codes from its merchant acquirer, not from the card issuers. However, the critical test was "whether the transaction carried out by the taxpayer had truly effected, in the sense of brought about, a transfer". In this case, the taxpayer effected the transfer because within the contractual framework established by the parties, the information transmitted by the taxpayer to its merchant acquirer was all that was needed to trigger the making of the transfer by merchant acquirer to the taxpayer. Despite the weight placed on the authorisation codes by HMRC, nothing turned on whether the codes were obtained from...
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