© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
D2. Amount liable to VAT
INCLUSIVE AND EXCLUSIVE OF VAT
- Reconstructed sums in relation to fraudulent transaction taken to include VAT
"[34] That is why the result of a transaction concealed from the tax authority by taxable persons for VAT purposes, when it should have given rise to invoices pursuant to Article 220 of Directive 2006/112 bearing the details required by Article 226 of that directive and been declared to that authority, must be deemed, where, as in the case in the main proceedings, it stems from a reconstitution by the tax authority concerned performed in the context of an inspection of direct taxes, to include the VAT charged on that transaction.
[35] The situation would be otherwise, in the present case, were the referring court to consider that, at the end of the verification referred to in paragraph 30 of the present judgment, under the applicable national law, VAT correction is possible (see, to that effect, judgment of 7 November 2013, Tulică and Plavoşin, C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 37)." (CB C-521/19)
CONSIDERATION
Taxable amount includes everything which constitutes consideration
"In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply." (PVD Article 73)
- Unlicensed user of copyrighted works required to pay triple cost of licence: full sum is consideration
"[49] Consequently, the price to be taken into consideration and subject to VAT in circumstances such as those in the main proceedings is the price determined by law in the case of unlicensed communication of works such as the protected works in question, that is to say, three times the price that the user would have been required to pay in the case of licensed communication to the public." (Cristian General Serv T-643/24)
- Unauthorised use of parking space/overstaying - penalty charge is consideration
"[32] Accordingly, the total amount of the sums which the motorists have undertaken to pay as consideration for the parking service provided by Apcoa, including, where appropriate, the control fees for parking in breach of the regulations, represents the terms and conditions under which they actually benefited from a parking space, even if they chose to make excessive use of it by exceeding the permitted parking time, by failing to provide proper evidence of their right to park or by parking in a reserved space, in a space which they were not entitled to use or in an obstructive manner, contrary to the general terms and conditions for use of the car parks concerned.
...
[34] Furthermore, the amount of those control fees corresponds to the remuneration for part of the costs associated with the supply of the services provided to them by Apcoa. As observed by the Advocate General in point 61 of his Opinion, that amount necessarily takes into account the higher cost of operating car parks which is caused by parking that does not satisfy the normal terms and conditions for use of the service offered. That consideration also seeks to ensure that Apcoa receives contractual remuneration for the service carried out in circumstances attributable to the user, which are not such as to change the economic and commercial realities of their relationship." (Apcoa Parking Danmark C-90/20)
- The full amount ultimately borne by the consumer
"[47] Primback cannot therefore validly argue that the provision of interest-free credit as such reduces the counter-value of the supply of the goods. On the contrary, the option given to customers to purchase on credit not only increases the volume of the retailer's sales, but also enables the retailer to avoid having to accept payment by instalmentsand guarantees him payment for the goods sold, with the result that, in consideration of this supply of services provided by the finance house, the seller accords to the latter a commission which reduces his profit margin. That commission constitutes for Primback a charge connected with its business in the same way as, for example, its costs in respect of financing, advertising or rent.
[48] By calculating VAT on the total price advertised and invoiced by the seller, the Commissioners are not therefore charging a taxable person such as Primback an amount of tax exceeding that ultimately borne by the final consumer (see Case C-317/94 Elida Gibbs [1996] ECR I-5339, paragraphs 24 and 31). In contrast, if the tax authorities were able to charge VAT only on a fraction of the price invoiced to the purchaser and payable by him, as Primback argues, a portion of the advertised price of the goods sold to the final consumer would not be subject to tax, with the result that the principle of fiscal neutrality would be infringed."
Overpayments
- Payment in excess of the minimum necessary to obtain the service was still consideration (parking ticket machines)
"[20] This analysis may be slightly different from that of the UT, which referred to an offer by NCP to grant the right to park for up to one hour in return for paying an amount between £1.40 and £2.09. In fact the offer made by NCP is more specific, to grant the right to park for an hour in return for the coins shown by the machine as having been inserted when the green light flashes. That is the offer which the customer accepts. However, if this is a difference of analysis, it makes no practical difference in the present case.
[21] It follows that the price paid by customers for a set period of parking will vary somewhat. In the hypothetical example, some customers will pay just £1.40 for an hour's parking. In other instances, the price might be up to £2 (if, say, a customer had only two one pound coins and chose to insert those). There is no question of the price being uncertain in any individual case, however. It will be whatever sum, equal to or in excess of £1.40, that the customer has paid into the machine." (National Car Parks Limited v. HMRC [2019] EWCA Civ 854, Newey, Patten, Males LJJ)
Card fees
- Card fees required to be paid to another that do not affect total price paid are part of taxable amount
"Where a supplier of goods or services, as a condition of accepting payment by credit or debit card, requires the customer to pay an amount to himself or another undertaking, and where the total price payable by that customer is unaffected irrespective of how payment is accepted, that amount shall constitute an integral part of the taxable amount for the supply of the goods or services, under Articles 73 to 80 of Directive 2006/112/EC." (IR Article 42)
Credit transactions
- Payment through credit card does not change taxable amount
"[35] The fact that the purchaser has paid the price agreed not directly to the supplier but through the card issuer and the method of payment used in the relations between the purchaser and the supplier cannot change the taxable amount. It is not a requirement of the Sixth Directive and Directive 2006/112 that, for a supply of goods or services to be effected ‘for consideration’, the consideration for the supply must be obtained directly from the person to whom the goods or services are supplied. Under Article 11A(1)(a) of the Sixth Directive and Article 73 of Directive 2006/112, the payment of the consideration for a supply of goods may be made not only by the purchaser but also by a third party, in this instance the card issuer (see Bally, paragraphs 16 and 17, and Loyalty Management UK and Baxi Group, paragraph 56).
[36] Consequently, the fact that payment of the price of the goods supplied by Dixons within the framework of the transactions at issue in the main proceedings was made by third parties, in the case in point AmEx and Streamline, cannot lead to the conclusion that that payment does not constitute the consideration obtained by Dixons for the supply of those goods." (Dixon Retail Plc C-494/12)
- Credit company paying supplier less than agreed amount does not affect taxable amount
"[31] As the United Kingdom, German and Irish Governments, and the Commission, have correctly pointed out, the reasoning in Bally can also be applied in a situation such as that in point in the present case, since, for the purposes of charging VAT, payments made by credit card and payments made by way of interest-free credit offered by the seller and provided by a third party should be treated as equivalent. A feature common to Bally and the present case pending before the House of Lords is the fact that the customer in each case concluded a contract with a third party, a finance house, which, after deducting commission, paid directly to the seller the price of the goods purchased, thereby guaranteeing to the seller payment for those goods. Moreover, a customer who pays by credit card, like a customer who purchases goods on credit, does not have to pay for his purchase in cash at the time of sale since he benefits from a credit line opened by a specialised body.
[32] This must a fortiori be the position in the present case, where, as the national court has found, the purchaser was unaware of the existence of, and the arrangements under, the agreement concluded orally between the seller and a third-party finance company.
[33] It follows from all of the foregoing that, in a situation such as that in point in the main proceedings, the taxable amount of the transaction consisting of the sale of goods concluded between the retail trader and the final consumer is the full amount advertised by the seller, invoiced to and payable by the purchaser." (Primback Ltd C-34/99)
SUBSIDIES
Subsidies directly linked to the price of the supply are part of taxable amount
"In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply." (PVD Article 73)
- Purpose is to prevent payment of subsidy entailing lower return from VAT
"[23] As regards the question whether that compensation constitutes a subsidy directly linked to the price of the supply, within the meaning of Article 73 of the VAT Directive, it is apparent from the case-law of the Court that, by providing that the taxable amount for VAT purposes includes, in the cases which it determines, certain subsidies paid to taxable persons, Article 73 is intended to subject the full value of goods or services to VAT and hence to prevent payment of a subsidy entailing a lower return from the tax (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 30 and the case-law cited)." (PSA C-615/23)
- To be directly linked must be paid specifically to the operator to enable it to supply particular goods/services
"[24] In accordance with its terms, that provision applies where the subsidy is directly linked to the price of the supply in question. For that to be the case, the subsidy must first be paid specifically to the subsidised operator to enable it to supply particular goods or services. Only in that case can the subsidy be regarded as consideration for the supply of goods or services and therefore be taxable (see, by analogy, judgment of 9 October 2019, C and C(VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 31 and the case-law cited)." (PSA C-615/23)
"[12] However, the mere fact that a subsidy may affect the price of the goods or services supplied by the subsidised body is not enough to make that subsidy taxable. For the subsidy to be directly linked to the price of such supplies, within the meaning of Article 11A of the Sixth Directive, it is also necessary, as the Commission has rightly pointed out, that it be paid specifically to the subsidised body to enable it to provide particular goods or services. Only in that case can the subsidy be regarded as consideration for the supply of goods or services, and therefore be taxable." (Office des produits wallons ASBL C-184/00)
- Sufficient that amount of subsidy allocated to particular obligation/activity, e.g. sale of periodicals
"[15] In the main proceedings and in view of the fact that, according to the framework agreement, OPW carries out a number of activities, the referring court must verify whether each activity gives rise to a specific and identifiable payment or whether the subsidy is paid globally in order to cover the whole of OPW's running costs. In any event, it is only the part of the subsidy identifiable as being the consideration for a taxable supply that may, in appropriate cases, be subject to VAT.
[16] As the Commission has rightly pointed out, an examination of the annual accounts between OPW and the Walloon Region might enable the national court to ascertain whether the amounts of the subsidy to be allocated to each obligation imposed on OPW by that Region are determined by virtue of the framework agreement. If that were the case, a direct link might be established between that subsidy and the sale of the periodicals published by OPW." (Office des produits wallons ASBL C-184/00)
- Subsidy must constitute consideration for the supply
"[18] In the light of the above, the answer to the questions referred must be that for the purposes of Article 11A(1)(a) of the Sixth Directive subsidies directly linked to the price must be interpreted as covering only subsidies which constitute the whole or part of the consideration for a supply of goods or services and which are paid by a third party to the seller or supplier. It is for the national court to determine, on the basis of the facts before it, whether or not the subsidy constitutes such consideration." (Office des produits wallons ASBL C-184/00)
- Price must be fixed in such a way that it diminishes in proportion to subsidy granted
"[24] Moreover, it is necessary to verify that the purchasers of the goods or services benefit from the subsidy granted to the recipient. The price payable by the purchaser must be fixed in such a way that it diminishes in proportion to the subsidy granted to the seller or supplier of the goods or services, which therefore constitutes an element in determining the price demanded by the latter. Thus, it must be ascertained whether, objectively, the fact that a subsidy is paid to the seller or supplier allows the latter to sell the goods or supply the services at a price lower than he or she would have to demand in the absence of subsidy (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 32 and the case-law cited)." (PSA C-615/23)
"[14] It is therefore for the referring court to establish the existence of a direct link between the subsidy and the goods or services at issue. That makes it necessary to verify at an early stage that the purchasers of the goods or services benefit from the subsidy granted to the beneficiary. The price payable by the purchaser must be fixed in such a way that it diminishes in proportion to the subsidy granted to the seller or supplier of the goods or services, which therefore constitutes an element in determining the price demanded by the latter. The court must examine, objectively, whether the fact that a subsidy is paid to the seller or supplier allows the latter to sell the goods or supply the services at a price lower than he would have to demand in the absence of subsidy." (Office des produits wallons ASBL C-184/00)
- Reduction in price need not correspond exactly to amount of subsidy as long as effect is significant
"[17] Moreover, in order to determine whether the consideration represented by the subsidy is identifiable, the national court may either compare the price at which the goods are sold in relation to their normal cost price, or examine whether the amount of the subsidy has been reduced once those goods are no longer produced. If the factors examined are significant, it must be concluded that the part of the subsidy allocated to the production and sale of the goods in question constitutes a subsidy directly linked to the price. In that regard, it is not necessary for the subsidy to correspond exactly to the diminution in the price of the goods supplied, it being sufficient if the relationship between the diminution in price and the subsidy, which may be at a flat rate, is significant." (Office des produits wallons ASBL C-184/00)
- Consideration represented by subsidy must be identifiable
"[26] Moreover, the consideration represented by the subsidy must, at the very least, be identifiable (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 33 and the case-law cited)." (PSA C-615/23)
- Relevant to look at effect on price of withdrawal of subsidy
"[17] Moreover, in order to determine whether the consideration represented by the subsidy is identifiable, the national court may either compare the price at which the goods are sold in relation to their normal cost price, or examine whether the amount of the subsidy has been reduced once those goods are no longer produced. If the factors examined are significant, it must be concluded that the part of the subsidy allocated to the production and sale of the goods in question constitutes a subsidy directly linked to the price. In that regard, it is not necessary for the subsidy to correspond exactly to the diminution in the price of the goods supplied, it being sufficient if the relationship between the diminution in price and the subsidy, which may be at a flat rate, is significant." (Office des produits wallons ASBL C-184/00)
- Compensation that has no direct effect on price of supply is not a directly linked subsidy
"[29] As the referring court has found, such compensation has no direct effect on the price of the transport services provided, set by the organiser of those services, the purpose of that compensation being above all to cover the losses linked to that activity.
[30] In those circumstances, it must be held that compensation such as that at issue in the main proceedings is not specifically paid to the operator in order for it to carry out a transport service for a particular recipient of that service and has no influence on the price to be paid by that customer, since that price is not fixed in such a way that it diminishes in proportion to the compensation paid to the provider of that service. By contrast, as the Advocate General observed, in essence, in point 54 of her Opinion, that compensation is granted ex post and is independent of the actual use of the transport services, but depends on the number of vehicle-kilometres offered. Therefore, such compensation is not covered by the concept of ‘subsidies directly linked to the price’ within the meaning of Article 73 of the VAT Directive." (PSA C-615/23)
- Mere effect on setting prices not sufficient
"[32] As the Advocate General observed in point 58 of her Opinion, it must be held that, necessarily, any subsidy is capable of having an effect on the calculation of prices, whether that is carried out by the recipient of the subsidy or, as in the present case, by the organiser paying that subsidy. As is apparent from the case-law of the Court, the mere fact that financing may affect the price of the goods or services supplied by the body in receipt of that financing is not enough to make it taxable as a subsidy directly linked to the price, for the purposes of Article 73 of the VAT Directive (see, to that effect, judgment of 22 November 2001, Office des produits wallons, C‑184/00, EU:C:2001:629, paragraph 12)." (PSA C-615/23)
- Subsidies normally affect prices by allowing provider to offer lower prices
"[11] It should also be noted that subsidies such as those identified in the first question referred - namely operating subsidies covering a part of running costs - nearly always affect the cost price of the goods and services supplied by the subsidised body. In so far as it offers specific goods or services, that body can normally do so at prices which it would be unable to offer if were obliged at the same time both to pass on its costs and make a profit." (Office des produits wallons ASBL C-184/00)
Provider of the subsidy
- Must be a third party (does not apply to prices subsidised by the supplier)
"[29] The part of that phrase on which the Swedish Government relies relates to situations involving three parties, namely the party which grants the subsidy, the supplier of the goods or the provider of the services which benefits from it and the purchaser of the goods or services (see Case C‑184/00 Office des produits wallons [2001] ECR I‑9115, paragraph 10). In the present case, only two parties are involved, namely Scandic as the supplier of goods or provider of services and the members of its staff. Moreover, as is clear from Article 11A(1)(a) of the Sixth Directive, the consideration is always paid by ‘the purchaser, the customer or a third party’ and never by the supplier or provider itself. The cost incurred by the taxpayer itself in providing meals to its staff therefore cannot form part of the taxable amount for the transaction in question." (Hotel Scandic C-412/03)
VALUE
- Subjective value actually received
"[28] It is also settled case-law that the taxable amount for the supply of goods or services is represented by the consideration actually received for them. That consideration is thus the subjective value, that is to say, the value actually received, and not a value estimated according to objective criteria. In addition, that consideration must be capable of being expressed in money (see Fillibeck v Finanzamt Neustadt, paragraphs 13 and 14 and the case-law cited)." (Astra Zeneca UK Ltd C-40/09)
- Salary sacrifice: value is cash remuneration given up
"[29] In the case of the transaction at issue in the main proceedings, there is a direct link between the provision of retail vouchers by Astra Zeneca to its employees and the part of the cash remuneration which the employees must give up as consideration for that provision.
[30] Instead of receiving all their remuneration in cash, the Astra Zeneca employees who have chosen to receive such vouchers must give up part of that remuneration in exchange for those vouchers, that transaction resulting in a specific deduction from their Fund.
[31] Moreover, there is no doubt that Astra Zeneca actually receives consideration for the provision of the retail vouchers at issue and that that consideration is expressed in money, since it corresponds to a fraction of the cash remuneration of its employees." (Astra Zeneca UK Ltd C-40/09)
- Discount on goods: difference between retail price and discounted price
"[57] The CJEU has had to consider the question whether the non-monetary consideration can be expressed in monetary form on a number of occasions. One of those was C-230-87, Naturally Yours Cosmetics limited v HMRC [1988] STC 879, where the manufacturer sold cosmetics at wholesale prices through beauty consultants, who sold products at private parties. The consultants encouraged others ("hostesses") to organise these events. To encourage the organisation of parties, the agents gave the hostesses a pot of cream as a "dating gift". The agent received this gift from the manufacturer at a considerable discount to the normal wholesale price ("the discounted price"). The CJEU considered that this was non-monetary consideration for the services of the consultants and that the monetary value of that consideration was the difference between the normal wholesale price (which they would otherwise have paid) and the discounted price." (ING Intermediate Holdings Limited v. HMRC [2017] EWC Civ 2111, Arden, Kitchin, Floyd LJJ)
- 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)
- Forex exchange service: amount net of expenses that bank could use for its purposes
"[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)
APPORTIONMENT
Multiple supplies, different VAT rates: apportion single price
"[27] Finally, as regards the case in which the various services are supplied in return for an overall remuneration, but some of them are exempt from VAT, as the principal supply is, while others are subject to VAT as independent supplies, it is necessary in such a case to apportion between the various services the service charges relating to them in order to determine the proportion of those charges subject to VAT and the proportion exempt from VAT." (Field Fisher Waterhouse LLP C-392/11)
"[107] Accordingly, in our view, the FTT correctly decided that under the Promotion the customer paid £10 in order to receive the three food items and the wine with the result that the consideration must be allocated across the four items for VAT purposes. As the FTT observed (FTT [101]), this conclusion is supported by the consequence that it avoids untaxed consumption of wine on which M&S has claimed input tax." (Marks and Spencer Plc v. HMRC [2019] UKUT 182 (TCC), Nugee J and Judge Brannan)
SPECIAL RULES
Vouchers
- Multi-purpose vouchers: consideration paid or value indicated, less VAT relating to goods/services supplied
"Without prejudice to Article 73, the taxable amount of the supply of goods or services provided in respect of a multi-purpose voucher shall be equal to the consideration paid for the voucher or, in the absence of information on that consideration, the monetary value indicated on the multi-purpose voucher itself or in the related documentation, less the amount of VAT relating to the goods or services supplied." (PVD Article 73a)
Business entertainment supplies
- Onward supply of business entertainment limited to excess where input was blocked
"(2) Where, by reason of the operation of paragraph (1) above, a taxable person has claimed no input tax on a supply of any services, tax shall be charged on a supply by him of the services in question, as if that supply were for a consideration equal to the excess of—
(a) the consideration for which the services are supplied by him, over (b) the consideration for which the services were supplied to him,
and accordingly shall not be charged unless there is such an excess." (SI 1992/3222, Article 5)