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Court of Justice of the European Union gives its judgment on the VAT treatment of service charges

Nick Beecham
04/10/2012
The CJEU has given its judgment in the case of Field Fisher Waterhouse LLP v Commissioners for Her Majesty's Revenue & Customs Case C-392/11 concerning the VAT treatment of service charges. The The CJEU has given its judgment in the case of Field Fisher Waterhouse LLP v Commissioners for Her Majesty's Revenue & Customs Case C-392/11 concerning the VAT treatment of service charges. The principal question asked of the CJEU was whether services provided by a landlord to a tenant should be regarded as an element of a single supply of a lease of land (and so an element of an exempt supply where the landlord has not exercised its option to tax) or a separate supply (which would be subject to VAT regardless of whether the landlord had opted to tax). We were relying upon the case of RLRE Tellmer Property sro v Finanèní øeditelství v Ústí nad Labem, ECJ Case C-572/07 in which the Court had held, in similar circumstances, that the provision of services by a landlord gives rise to a separate supply.

In a remarkably unhelpful judgment, the CJEU made no reference to Tellmer and ruled that in determining this question, all circumstances must be taken into consideration and that it is a matter for the referring [UK] court to determine.

In the meantime, the First Tier Tax Tribunal has decided, in the case of The Honourable Society of Middle Temple v HMRC, [2011] UKFTT 390, that the service charge gave rise to a separate supply, specifically relying on Tellmer. HM Revenue & Customs has appealed to the Upper Tribunal against this decision. It seems inevitable that the Upper Tribunal will have to consider the judgment of the CJEU in our case, in reaching its decision.

In such circumstances, there did not seem much point in having our case heard by the First Tier Tax Tribunal. We have therefore sought the agreement of HM Revenue & Customs for our case to be stood over pending the decision of the Upper Tribunal in Middle Temple.

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