VAT matters

Transfer of business relief: Revenue eBrief 113/15 provides a further update to the Revenue Information Leaflet on Transfer of Business (TOB) relief. This updates the previous version of the leaflet dated July 2014. The July 2014 version had indicated a broadening of Revenue’s view on scenarios in which TOB relief applies to the sale of properties that are let or were previously let. The latest version of the leaflet gives further practical examples of scenarios where TOB relief applies to property transactions and comments further on the entitlement to recover VAT on costs in connection with TOB.

Finance Act 2015 updates: the December 2015 edition of VAT Matters outlined the principal VAT measures contained in Finance Bill 2015, as initially published. Finance Act 2015 was passed into law in late December 2015 and there were no substantive changes from a VAT perspective to the initial publication. Revenue eBrief 121/15 provides Revenue’s guidance notes on the VAT measures in the Act. In addition, Revenue eBrief 120/15 provides a link to a consolidated version of the VAT Consolidation Act 2010 (taking account of Finance Act 2015 changes).

VAT reverse charge in the energy sector: Revenue eBrief 123/15 provides further guidance on the introduction of the VAT reverse-charge mechanism to supplies of gas and electricity to “taxable dealers” as well as supplies of gas and electricity certificates to business customers. These measures came into effect on 1 January 2016. A “taxable dealer” is an entity whose main business is the onward supply of gas or electricity, and whose own consumption of the gas or electricity is negligible in comparison to these onward supplies. The guidance gives examples of who would be regarded as “taxable dealers” in Ireland. Supplies of electricity and gas by Irish suppliers to Irish companies or persons who are not taxable dealers do not fall within the reverse-charge mechanism. The guidance also gives examples of the types of changes in the wholesale gas and electricity sector, which fall inside and outside the scope of the reverse-charge mechanism.

Management of property investment funds: in the Fiscale Eenheid X case (C-595/13), the Court of Justice of the European Union (CJEU) ruled on the VAT treatment of management services provided to regulated property funds. By way of background, the management of certain specified types of funds is exempt from VAT. This case considered whether, and to what extent, the management of funds that hold property assets qualifies for this exemption. The CJEU confirmed that, subject to meeting certain conditions, a regulated property fund can be a special investment fund and VAT exemption can apply to certain services provided to a regulated property fund. The judgment held that VAT exemption applies to activities related to the management of, and investment of capital raised by, the fund but not to the actual management of the property assets of the fund. The case largely supports the position in Ireland that most property holding funds such as Qualifying Investment Funds (QIFs) and Irish Collective Asset-management Vehicles (ICAVs) are treated as special investment funds under Irish law. However, the judgment highlights that the services provided to such funds must be carefully analysed to determine if they can be considered VAT-exempt.

No-show airline tickets: the joined Air France KLM and Brit Air cases [C-250/14 and C-289/14] considered whether the airlines were liable to account for VAT where the passenger buys a non–refundable ticket, but does not avail of the flight. The Court ruled that the fare paid by the customer was in consideration for making the air transport service available and was not a non-VATable compensation retained by the airline. The airline was therefore obliged to account for VAT. In addition, the VAT was due when payment was received by the airline from the customer. The judgment does not have a direct impact on air travel services taking place in Ireland or on international routes, as these services are generally VAT-exempt under Irish law. However, the principles established by the judgment may have relevance to other scenarios. The case will need to be considered in light of previous CJEU case law, which held that forfeited deposits in respect of booking a hotel room was a form of compensation that fell outside the scope of VAT and was not in consideration for taxable supplies.