Tax Cases

Too warm a ruling

The appellant, Keeping Newcastle Warm Ltd, was eligible to receive energy advice grants. It paid VAT on the grants received, and eventually appealed before the VAT tribunal for a refund of the VAT paid. It argued that the grants were not directly linked to the price of the supply within the meaning of Article 11A(1)(a) of European Community Directive 77/388. The tribunal concluded that the payments were part of the taxable amount as they were consideration for the supplies, regardless of whether the payments were subsidies. The tribunal referred to the European Court of Justice for rulings on the following questions:

The European Court of Justice ruled that the amount paid constituted part of the consideration for the supply of services and was part of the taxable amount in respect of that supply for VAT purposes. Article 11A(1)(a) dealt with situations involving three parties: the authority which granted the subsidy, the body which benefited from it and the purchaser of the goods or services delivered or supplied by the subsidised body. The amount paid by a public authority to a business in connection with the service of energy advice supplied might constitute a subsidy within the meaning of Article 11A(1)(a), but the taxable amount in respect of a supply of services was everything which made up the consideration for the service provided. The amount paid by the Energy Action Grants Agency to the appellant was received in consideration for the service supplied by it, and therefore formed part of the taxable amount within the meaning of Article 11A(1)(a).

(Keeping Newcastle Warm Ltd v Commissioners of Customs and Excise (Case C-353/00), European Court of Justice, 13 June 2002.)

Issue: 3863 / Categories: