Bookit Ltd. v Revenue and Customs

For VAT purposes, services connected with a payment or transfer may be exempt even though the supplier does not itself effect the debit and credit. The relevant question is whether the services form an essential and distinct part of the payment transaction, rather than amounting only to technical or electronic assistance.

A service may qualify where it is separately remunerated, changes or enables a change in the legal and financial position, and is performed independently of the parties’ contractual obligations. Under Article 13(B)(d)(3) of the Sixth Directive, transactions concerning payments and transfers are wider than the act of effecting the transfer itself. Domestic intermediary-service provisions must be interpreted consistently with that provision.

Bookit Ltd operated a cinema-booking call centre for the Odeon group. It charged customers a card-handling fee when obtaining card details, obtaining authorisations and transmitting transaction information through Girobank and the relevant card issuers.

The Commissioners treated the fee as consideration for a standard-rated booking service. The VAT and Duties Tribunal rejected Bookit’s claim that the service was exempt under Group 5 of Schedule 9 to the Value Added Tax Act 1994, both in its First Decision and, after receiving further evidence, in its Second Decision.

On an appeal limited to a point of law, the central issue was whether Bookit’s services were exempt financial services under Article 13(B)(d)(3) of the Sixth Directive and the corresponding domestic provisions.

1. Appeal allowed. The Tribunal had reached the wrong conclusion in treating the issue as whether Bookit itself effected the payments.

2. A payment or transfer for Article 13(B)(d)(3) is the execution of an order transferring money between accounts so as to alter the legal or financial situation. The relevant transactions included the transfer of the ticket price and handling fee to Bookit’s Girobank account, and the subsequent transfer of the ticket price to Odeon.

3. The principles in Sparekasernes Datacenter v Skatteministeriet [1997] STC 932 and Commissioners for Customs & Excise v FDR [2000] STC 672 showed that the service need not itself effect the debit and credit. It must, however, be more than technical assistance and must perform specific and essential functions of the exempt transaction.

4. The second payment, from Bookit to Odeon, resulted from Bookit’s agency for Odeon and did not support exemption. The first payment was made to Bookit for its own account and was made by or on behalf of the customer. Bookit’s services were essential preliminaries to remote payment, separately remunerated, and were not supplied as agent or subcontractor of the customer, Odeon or Girobank.

5. The court doubted whether the services were strictly acts of negotiation or mediation under CSC Financial Services v Commissioners of Customs & Excise [2002] STC 57. That did not matter. They were properly transactions concerning payments or transfers within Article 13(B)(d)(3).

6. The corresponding provisions in Items 1 and 5 of Group 5 of Schedule 9 to the Value Added Tax Act 1994, read with Note 5, produced the same result. The services were exempt. The arguments under Article 13(B)(d)(1) and Item 2 were unnecessary to decide.

The judgment records an appeal from the VAT and Duties Tribunal under section 11 of the Tribunals and Inquiries Act 1992.

• VAT and Duties Tribunal: The First Decision dated 28 May 2004 rejected Bookit’s exemption claim. The Second Decision dated 7 December 2004 added facts and modified some conclusions but maintained the result.
• High Court (Chancery Division): The appeal was allowed and the Tribunal’s conclusion was reversed.