© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
D1. Consideration
FORM OF CONSIDERATION​
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- Right to payment is consideration
"[34] Next, it should be noted, with regard to the concept of ‘remuneration’, that, according to the case-law cited in paragraph 33 above, the total absence of payment of the sums due does not constitute an obstacle to the finding of reciprocity of rights and obligations resulting from the economic transaction in question (see, to that effect, judgments of 20 January 2022, Apcoa Parking Danmark, C‑90/20, EU:C:2022:37, paragraphs 39 to 43, and of 27 April 2023, Fluvius Antwerpen, C‑677/21, EU:C:2023:348, paragraphs 30 and 32)." (Cristian General Serv T-643/24)
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- Right to 50% of future winnings by horse was consideration
"[47] Indeed, this transfer, which constitutes remuneration and occurs upon conclusion of the aforementioned contracts, has economic value in itself. The actual amount transferred to the applicant in the main proceedings for each race was certainly linked to the result obtained by a given owner's horse in a given competition. However, as the referring court specifies, the transfer as such was not linked to that result, nor, consequently, to any potential outcome of the service provided by the applicant in the main proceedings, but simply to the fact that the latter provided a set of services stipulated in the contract.
[48] This conclusion also applies in the event of the absence of a victory or useful ranking of a horse in a given competition, since the absence of obtaining a prize cannot call into question the existence of the transfer provided for by the aforementioned contracts.
[49] Indeed, the consideration for all the services provided by the applicant in the main proceedings was constituted by this assignment, irrespective of whether or not it resulted in winnings from a prize at a given competition. The owners of the horses thus remunerated all the services provided by the applicant in the main proceedings by means of that assignment, which enabled him to benefit from 50% of the claim corresponding to any winnings from prizes obtained. Therefore, the existence of the aforementioned direct link is not affected by the fact that the applicant, as a rider, did not succeed in having a horse win or in placing it in a useful position at a given competition (see, to that effect, judgment of 22 November 2018, MEO – Serviços de Comunicações e Multimédia, C-295/17, EU:C:2018:942, paragraph 40 and the case law cited therein)."(HAS C-713/21)
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- Debit note can be consideration
"[64] Next, the fact that the value given in exchange for that supply of services took the form of debit notes does not prevent that value being regarded as consideration within the meaning of Article 2(1)(c) of Directive 2006/112. The Court has already had occasion to observe that it is irrelevant, for the purposes of determining whether a supply of services is effected for consideration, that the remuneration does not take the form of a payment of a commission or specific fees (judgment of 22 October 2015, Hedqvist, C‑264/14, EU:C:2015:718, paragraph 29 and the case-law cited)." (Suzlon Wind Energy Portugal C-605/20)
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- Margin on currency exchange is consideration
"[28] In the case in the main proceedings, it is clear from the material in the case file submitted to the Court that there would be a synallagmatic legal relationship between Mr Hedqvist’s company and the other party to the contract in which the parties to the transaction would agree, reciprocally, to transfer amounts of a certain currency and receive the corresponding value in a virtual currency with bidirectional flow, or vice versa. It is also clear that Mr Hedqvist’s company would be remunerated for supplying the service by a consideration equal to the margin that it would include in the calculation of the exchange rate at which it would be willing to sell and purchase the currencies concerned.
[29] The Court has already held that it is irrelevant, for the purposes of determining whether a supply of services is effected for consideration, that the remuneration does not take the form of a payment of a commission or specific fees (judgment in First National Bank of Chicago, C‑172/96, EU:C:1998:354, paragraph 33)." (Hedqvist C-264/14)
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- Purchase of debts at below face value does not constitute provision of consideration by purchaser where it reflects the economic value
"[26] In those circumstances, the answer to the first question is that Articles 2(1) and 4 of the Sixth Directive must be interpreted as meaning that an operator who, at his own risk, purchases defaulted debts at a price below their face value does not effect a supply of services for consideration within the meaning of Article 2(1) and does not carry out an economic activity falling within the scope of that directive when the difference between the face value of those debts and their purchase price reflects the actual economic value of the debts at the time of their assignment." (GFKL Financial Services C-93/10)
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NON-MONETARY CONSIDERATION​
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- Purchase of debts at below face value does constitute provision of consideration by purchaser where it reflects a factoring commission
"[20] In its judgment in MKG-Kraftfahrzeuge-Factoring, the Court held that a factor’s guaranteeing to a client of payment of the debts by assuming the risk of the debtors’ default must be considered to be exploitation of the property in question for the purpose of obtaining income therefrom on a continuing basis, within the meaning of Article 4(2) of the Sixth Directive, where that operation is carried out, in return for payment, for a given period (see MKG-Kraftfahrzeuge-Factoring, paragraph 50).
[21] It is to be observed that, in the context of the assignment of debts that was at issue in the case giving rise to that judgment, the assignee of the debts undertook to provide factoring services to the assignor, in return for which it received payment, namely factoring commission and a del credere fee.
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[24] However, unlike the factoring commission and the del credere fee which, in the dispute that gave rise to the judgment in MKG-Kraftfahrzeuge-Factoring, were retained by the factor, this difference does not constitute, in the main proceedings, a payment intended to provide direct remuneration for a service supplied by the purchaser of the assigned debts." (GFKL Financial Services C-93/10)
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- Must have a subjective value that is actually received and capable of expression in money
"[27]...Such a direct link exists only if there is a legal relationship between the supplier and the purchaser entailing reciprocal performance, the price received by the supplier constituting the value actually given in return for the goods supplied. Further, that consideration must have a subjective value that is actually received and is capable of being expressed in monetary terms (judgment of 13 June 2018, Gmina Wrocław, C‑665/16, EU:C:2018:431, paragraph 43 and the case-law cited)." (WEG C-449/19)
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"[9] VAT is charged on a "supply", which may be of goods or services (Article 2). Supplies must be effected "for consideration" (Article 2), which has an autonomous meaning in EU law. Non-monetary consideration must be capable of being expressed in a monetary form. The value of the consideration is based on its value to the supplier, to be determined on a subjective basis." ​(ING Intermediate Holdings Limited v. HMRC [2017] EWC Civ 2111, Arden, Kitchin, Floyd LJJ)
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- Courts used to finding value of matters which have no ready market
"[54] [The taxpayer's] case is that, if there was consideration for the banking services, it could not be expressed in a monetary form. I reject that submission. The court would have to value what the depositor by implication forwent in terms of interest rate in order to get IDUK's banking services. The courts are accustomed to finding the value of matters which have no ready market. It would be surprising if the courts could not find a monetary value in this situation, which is essentially a financial transaction." (ING Intermediate Holdings Limited v. HMRC [2017] EWC Civ 2111, Arden, Kitchin, Floyd LJJ)
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- Does not need to be a benchmark
"[58] By contrast, in this case there is no benchmark available to the parties as there was in Naturally Yours (in the form of the wholesaler's price) which could be used as a point of reference. But the CJEU has made it clear that even where there is no benchmark of that kind the non-monetary consideration can be monetised for VAT purposes. This was the case in FNBC, where the CJEU had to find the non-monetary value of foreign currency services provided by a bank, which did not charge fees but offered different exchange rates to buyers and sellers and so obtained a spread. The CJEU made it clear that the absence of what I have called a benchmark did not prevent the court from establishing a non-monetary value: [31].The CJEU held that the consideration was the amount, net of expenses, which the bank could use for its purposes ([32])." (ING Intermediate Holdings Limited v. HMRC [2017] EWC Civ 2111, Arden, Kitchin, Floyd LJJ)
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Barter transactions​
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- Value of customer deposit with bank could be valued based on net return to bank after deducting costs of providing banking service
"[59] If the approach in FNBC were applied in this case, it would mean that the consideration should be valued at the net amount of the return which the bank could earn on the funds after payment of the costs of providing the banking services. The circumstances of the two cases are different, and it may be that the return would be taken by reference to a market rate available to IDUK, such as LIBOR. In this case, as opposed to transactions in foreign currency, the depositors would not necessarily have expected IDUK alternatively to raise funds in any other way. There is also the possibility that in the present case there were further benefits to the bank from raising money in the way which it did which are not reflected by the approach to valuation in FNBC.
[60] As I have said, I do not propose to select any of the methods put to us. As explained I consider it unnecessary to do so. I am, however, satisfied that an appropriate method of the non-monetary element of the consideration in this case could be found." (ING Intermediate Holdings Limited v. HMRC [2017] EWC Civ 2111, Arden, Kitchin, Floyd LJJ)
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- Barter transactions economically identical to transactions for money
"Furthermore, the Court has held previously that barter contracts, under which the consideration is by definition in kind, and transactions for which the consideration is in money are, economically and commercially speaking, two identical situations (see, to that effect, Case C‑330/95 Goldsmiths [1997] ECR I‑3801, paragraphs 23 and 25)." (Orfey Balgaria EOOD C-549/11)
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- Apartment fit out service in return for rent free occupation is barter transaction
"[40] It follows that if, under a contract concluded with the owner of an apartment, a supplier of services to fit out and furnish that apartment, first, undertakes to carry out that supply of services at its own expense and, secondly, obtains the right to have that apartment at its disposal in order to use it for its business activities during the term of that contract, without being required to pay rent, whereas the owner recovers the improved apartment at the end of that contract, that supply of fitting-out and furnishing services falls within the category of a supply of services for consideration within the meaning of Article 2(1)(c) of the VAT Directive. There is thus a direct link between that supply and the consideration actually received in exchange by the supplier thereof, namely the right to use the apartment in question for its business activities during the term of the contract." (Serebryannay C-283/12)
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- Right to apartment improvements and right to rent free occupation are the consideration
"[41] The fact that the supply of services in question will benefit the owner of the apartment at issue only after the contract has expired does not alter anything in that regard, seeing that, as from the conclusion of that contract, the parties to such a bilateral contract undertake to perform reciprocal services for each other (see, by analogy, Case C-174/00 Kennemer Golf [2002] ECR I-3293, paragraph 40, and RCI Europe, paragraphs 31 and 33)." (Serebryannay C-283/12)
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PAYMENTS EXCLUDED FROM CONSIDERATION
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- Currency exchange is a supply of currency exchange not a supply of currency
"[20] In Customs and Excise Commissioners v First National Bank of Chicago (Case C-172/96) [1998] STC 850, the taxpayer FNBC dealt in foreign exchange transactions, earning its profit by the spread between bid and offer price for different currencies, rather than by taking commission. On the basis that currencies are legal tender and not tangible property, (as the ECJ held), the exchange had to be analysed as involving the supply of services rather than goods. A rigorous application of Article 6 on a turnover basis might have suggested that FNBC and its customer each made a supply to the other of a different currency, the consideration being in each case the value of the currency moving in the opposite direction. But the Court held that consideration for the supply made by FNBC was only the value of the spread, rejecting the turnover based argument of the bank. Although the case was treated as turning on the proper interpretation of Article 11 (which identifies the taxable amount by reference to the consideration for the supply), the key to the Court's conclusion lay in identifying the relevant supply as the provision of a currency exchange service by FNBC, rather then the supply by way of sale of a particular form of legal tender to the customer." (MBNA Europe Bank Limited v. HMRC [2006] EWHC 2326 (Ch), Briggs J)
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Mandatory requirement to apply part of price in particular way
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- Assignment of debts to factor/as security not a supply
"[21] In Finanzamt Gross Gerau v MKG Kraftfahrzeuge Factory GmbH (Case C-305/01) [2003] STC 951, the ECJ had to analyse a factoring agreement so as to identify the factor's VAT output profile. The agreement required the factor to assume without recourse the risk of default on the debts assigned, and the burden of their recovery. A rigorous turnover-based application of Article 6 might have led to the conclusion that the trader made an outright supply of the debts to the factor for a consideration consisting of the face value of the debt less the commission and del credere fee charged by the factor. The Court held however that the true VAT analysis of the transaction was that the factor provided a supply to the trader consisting of a factoring service, for a consideration consisting of the aggregate of the commission and the del credere fee. Although the VAT output profile of the trader was not in issue, I cannot conceive that the Court would have accepted an argument that the same transaction also constituted a supply of the debts assigned by the trader to the factor. The assignment of the debts was merely the necessary step which the trader had to take in order to obtain the benefit of the factoring service. It was not a supply at all." (MBNA Europe Bank Limited v. HMRC [2006] EWHC 2326 (Ch), Briggs J)
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- Sum to be paid as winnings on gambling which is fixed in advance and mandatory does not form part of consideration
"[44] In that regard, the Court held, in paragraph 28 of the judgment of 19 July 2012, International Bingo Technology (C‑377/11, EU:C:2012:503), concerning a legal requirement for the payment of winnings in a bingo game, that since the part of the sale price of the cards which is distributed as winnings to players is fixed in advance and is mandatory, it cannot be regarded as forming part of the consideration received by the organiser of the game for the supply of the service provided to players." (Boehringer C-462/16)​
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"[19]...In H J Glawe Spiel und Unterhaltungsgeraete Aufstellungsgesellschaft mbH & Co KG v Finanzamt Hamburg (Case C-38/93) [1994] STC 543, the ECJ held that where a trader offered the use of a gaming machine to customers, the consideration passing to the trader was not the aggregate of the customers' bets, but the trader's gross takings after netting of the customers' winnings against their bets: i.e. the trader's gross profit from the operation of the machine." (MBNA Europe Bank Limited v. HMRC [2006] EWHC 2326 (Ch), Briggs J)
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- Entry fees for competition without mandatory use of sum to provide prizes consideration in full
"[28] In the case of the organisation of a competition such as that at issue in the main proceedings, the consideration actually received by the organiser for the service he supplies to the competitors is represented by the entry fees paid by them. He receives those fees in full and they enable him to cover the costs of his activity. It follows that it is the amount represented by those entry fees that constitutes the taxable amount, within the meaning of Article 11A(1)(a) of the Sixth Directive, of the transaction in question.
[29] It should be observed, finally, that that interpretation of Article 11A(1)(a) of the Sixth Directive does not call into question the Court's interpretation in Glawe, inasmuch as the operation of the gaming machines concerned by that judgment and the organisation of the competition at issue in the main proceedings differ in essential points.
[30] While those gaming machines were characterised by the fact that, in accordance with mandatory statutory provisions, they were set in such a way that at least a certain percentage, in fact 60%, of the players' stakes was paid out to them as winnings and those stakes were kept technically and physically separate from the stakes which the operator could actually take for himself, the competition at issue in the main proceedings does not display any of those features, so that the organiser of the competition has freely at his disposal the full amount of the entry fees received." (Town & County Factors Ltd C-498/99)
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- Sums payable by drug manufacturer to state health insurance agency
"[37] Next, it must be stated that, since the portion of the sale price of the subsidised medicinal products which is paid by Novo Nordisk, through the tax authority, to the NEAK is fixed in advance and is mandatory, it cannot be regarded as part of the financial consideration for the supply of those medicinal products actually received by Novo Nordisk (see, to that effect, judgment of 19 July 2012, International Bingo Technology, C‑377/11, EU:C:2012:503, paragraph 28)."
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- Query whether statutory 'reimbursement' to paying insurers by supplier means consideration not received or is reduction
"[43] Moreover, as regards the discount at issue in the main proceedings, it must be held that that discount is fixed by the law and that the pharmaceutical company is obliged to grant it to private health insurance companies which have reimbursed the persons they insure for the expenses incurred by those persons when purchasing medicinal products. As has been stated in paragraph 35 above, in those circumstances, the pharmaceutical company was not able freely to dispose of the full amount of the price received on the sale of its products to pharmacies or to wholesalers (see, to that effect, the judgment of 19 July 2012, International Bingo Technology, C‑377/11, EU:C:2012:503, paragraph 31)." (Boehringer C-462/16)​
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