David Duffy highlights the latest VAT cases and discusses recent VAT developments.

Irish VAT updates

eBrief 48/19 contains links to several new and chapters of Revenue’s Tax and Duty Manual (TDM) concerning VAT. The new chapters primarily concern the VAT treatment of activities of public bodies, and the VAT treatment of certain types of vouchers (see below). Also, there have been updates to several chapters of the TDM to reflect the increase in the VAT rate for certain supplies from 9% to 13.5%, which took effect on 1 January 2019.

Public bodies

This guidance does not appear to reflect any particular change in Revenue practice in respect of the VAT position of public bodies, but instead seeks to summarise the current position.

A public body’s activities are generally outside the scope of VAT where they are undertaken under a power conferred on the public body by any enactment, and the public body is not in competition with private operators in respect of that activity. However, where not applying VAT on the public body’s activities would give rise to significant distortions of competition with private operators, those activities will generally be subject to VAT in the same manner as for private operators. In addition, VAT legislation specifies certain activities that are automatically within the scope of VAT (unless VAT exempt) when carried out by a public body. This includes, but is not limited to, telecommunication services, supplies of water, gas, electricity and thermal energy and transportation of goods.

Vouchers

New VAT rules in respect of certain types of vouchers, known as single purpose vouchers (SPVs) and multi-purpose vouchers (MPVs) have been in place since 1 January 2019. In eBrief 48/19, Revenue released guidance on the VAT treatment applicable to other types of “vouchers” that do not fall within the meaning of an SPV or MPV. This includes instruments such as stamps (but not postage stamps), coupons, telephone cards, tokens and book tokens (collectively referred to as “vouchers” in the TDM). The guidance sets out the rules that apply to such vouchers in several scenarios, which broadly follow the VAT rules that were already in place before 1 January 2019.

In the normal course, no VAT is due on the sale of such vouchers at face value to private customers, and VAT only becomes due when the customer redeems the voucher. However, where the price charged for the voucher exceeds the face value of the voucher, VAT is chargeable at the standard rate (currently 23%) on the difference between the face value and the consideration paid.

The sale of vouchers to a VAT-registered person for resale to private consumers (e.g. an intermediary) is liable to VAT at the standard rate (currently 23%) on the payment received. Any future sales of these vouchers by the intermediary, or subsequent intermediaries, is also liable to VAT. No VAT is due on the redemption of the voucher in these circumstances.

The sale of a voucher at a discount to its face value is not subject to VAT until the voucher is redeemed. Provided detailed records are kept, the issuer may account for VAT on the discounted sales price received rather than the face value of the voucher.

Mandatory e-filing

eBrief 068/19 confirms that electronic filing of VAT returns and electronic payments of VAT on Revenue Online Service (ROS) are mandatory for all taxpayers, including new registrations. This has been the case for many years following a phased implementation.

EU VAT updates

Place of supply on training courses

SRF is a company established in Sweden, which provides educational and vocational training to businesses mainly established in Sweden. The courses take place both in Sweden and other EU member states. 

The question referred to the CJEU in the SRF case (C-647/17) was whether the place of supply of these training courses was where the business customer was established (i.e. Sweden) or where the course took place. The latter treatment would apply if the service should be classified as ‘admission’ to an educational event, which is an exception to the general place of supply rules for business-to-business services.

The CJEU confirmed that the “place of supply” should, in as far as possible, be the place of consumption. Therefore, the CJEU concluded in this case that admission to, and the right to participate in, these training courses should be subject to VAT at the place the courses took place.

VAT treatment of  driving lessons

In the A&G case (C-449/17), a German driving school sought to treat their driving tuition services in respect of cars and vans as VAT-exempt “school or university education”.

However, the CJEU did not agree that VAT exemption could apply in these circumstances and in the CJEU’s view, “school and university education requires the following features:

• An integrated system for the provision of knowledge and skills relating to a wide and varied range of matters; and
• The deepening and development of such knowledge and skills by pupils and students according to their progress and their specialisation at the various levels constituting the system.

Based on this, the CJEU concluded that driving lessons in a driving school do not fall within the scope of “school and university education”. The CJEU did not consider whether the tuition services could have been treated as “vocational training”, which is a separate heading within the same exemption.

The judgment, therefore, largely supports the current Irish VAT position, which treats driving lessons as subject to VAT, except where they are in respect of vehicles assigned to carry at least 1.5 tonnes of goods or at least nine persons (including the driver).

David Duffy FCA, AITI Chartered Tax Advisor, is a VAT Partner at KPMG.