Fraudulent payments

The taxpayer retail company believed it should not have accounted for VAT in instances when customers had used credit and debit cards fraudulently to pay for goods.

Agreements with card companies obliged the taxpayer to accept payment by card the providers of which reimbursed the retailer after the deduction of a charge.

The companies had recourse against the taxpayer when a card had been used in a fraudulent manner but never exercised the right.

The retailer claimed a refund of tax paid but HMRC refused. The taxpayer appealed to the First-tier Tribunal which referred the matter to the Court of Justice of the European Union.

The issue was whether or not the taxpayer had made a taxable supply when selling an item to a purchaser who used a card fraudulently. If so what was the amount of the consideration?

The court decided the transfers of goods...