© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
- Non-payment does not affect initial liability
"[53] It is clear from the wording of the first question, which also refers to Article 73 of the VAT Directive, that the national court has doubts as to the possible effect on the chargeability of VAT of the absence of actual recovery of the amount payable in the case of early termination of the contract.
[54] According to that article, the taxable amount is to include everything which constitutes consideration obtained or to be obtained by the supplier from the customer.
[55] Furthermore, given that VAT is intended to tax only the final consumer, the taxable amount of VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer which is the basis for calculating the VAT ultimately borne by him (see, to that effect, judgment of 24 October 1996, Elida Gibbs, C‑317/94, EU:C:1996:400, paragraph 19).
[56] Accordingly, it must be added, for the sake of completeness and as the Advocate General observed in point 55 of her Opinion, that, where necessary, it will be for the competent national authorities to carry out, under the conditions determined by national law, an adjustment of the corresponding VAT, as provided for in Article 90 of the VAT Directive, so that the VAT is deducted from the amount actually received by the service provider from his customer." (MEO C-295/17)
- Reverse charge customer losing entitlement to input credit entitled to output tax adjustment
"(1) This section applies if—
(a) a person is, as a result of section 26A, taken not to have been entitled to any credit for input tax in respect of any supply, and
(b) the supply is one in respect of which the person is required under section 55A(6) to account for and pay VAT.
(2) The person is entitled to make an adjustment to the amount of VAT which he is so required to account for and pay.
(3) The amount of the adjustment is to be equal to the amount of the credit for the input tax to which the person is taken not to be entitled." (VATA s.26AB)