Identifying the supply for which consideration has been paid
Our pick of this week's cases
In HMRC v Findmypast [2017] CSIH 59 (8 September 2017), the Court of Session found that the consideration for payments made by customers to obtain vouchers, giving them access to a genealogy website, was the ability to view or download particular items, and did not extend to the general search facility that was available both to customers and to the public. This meant that Findmypast was entitled to a repayment of VAT in respect of unredeemed vouchers.
Findmypast provides access to genealogical and ancestry websites which it owns, or in respect of which it holds a licence. Searching historical records on its website is free but customers wishing to view or download most of the records on the website need to pay by either taking out a subscription for a fixed period or using a ‘pay as you go’ system (through the purchase of vouchers). The issue was whether the vouchers were paid solely for the supply of records viewed by customers or for a package of rights and services, which included the right to search the records. If the former was correct, the supply only took place when records were viewed or downloaded and Findmypast was entitled to a repayment of the VAT it had paid in relation to unused vouchers.
The court noted that the nature of the supply for VAT purposes must be determined in the light of ‘a range of factors, including both the parties’ contract and the overall economic context in which that contract operates’. It added that Findmypast provided two services: a general search function; and the viewing and downloading of specific documents. The task of the court was to apply the principle of reciprocity (Lebara (Case C-520/10)) in order to identify what the consideration paid by ‘pay as you go’ customers was for.
The court found that when the search function was used, it was impossible to know with certainty whether a particular document was in fact relevant to the customer’s search, so that the search function could not be an end in itself. The only service the customer paid for was therefore the viewing or downloading of documents, for which the search function was only ancillary. This was confirmed by the fact that the general public had access to the search function in the same way that the general public could browse the books on the shelves of a bookstore.
Finally, the court found that the uncertainty surrounding what the client was actually going to find, as a result of purchasing the vouchers, excluded the prepayment rules (VATA 1994 s 6).
Why it matters: The Court of Session distinguished this case from Esporta [2014] EWCA Civ 155. It pointed out that Esporta turned on the analysis of a member’s rights during periods of default and, in particular, the fact that a defaulting member was not in the same situation as a member of the public; the defaulting member could demand the re-instatement of his membership on payment of the arrears. In the present case, the difference between a contractual right to conduct a preliminary search, without access to the actual records, and the ability of the public to conduct a similar search, without a contractual right, was insubstantial from an economic standpoint.
Identifying the supply for which consideration has been paid
Our pick of this week's cases
In HMRC v Findmypast [2017] CSIH 59 (8 September 2017), the Court of Session found that the consideration for payments made by customers to obtain vouchers, giving them access to a genealogy website, was the ability to view or download particular items, and did not extend to the general search facility that was available both to customers and to the public. This meant that Findmypast was entitled to a repayment of VAT in respect of unredeemed vouchers.
Findmypast provides access to genealogical and ancestry websites which it owns, or in respect of which it holds a licence. Searching historical records on its website is free but customers wishing to view or download most of the records on the website need to pay by either taking out a subscription for a fixed period or using a ‘pay as you go’ system (through the purchase of vouchers). The issue was whether the vouchers were paid solely for the supply of records viewed by customers or for a package of rights and services, which included the right to search the records. If the former was correct, the supply only took place when records were viewed or downloaded and Findmypast was entitled to a repayment of the VAT it had paid in relation to unused vouchers.
The court noted that the nature of the supply for VAT purposes must be determined in the light of ‘a range of factors, including both the parties’ contract and the overall economic context in which that contract operates’. It added that Findmypast provided two services: a general search function; and the viewing and downloading of specific documents. The task of the court was to apply the principle of reciprocity (Lebara (Case C-520/10)) in order to identify what the consideration paid by ‘pay as you go’ customers was for.
The court found that when the search function was used, it was impossible to know with certainty whether a particular document was in fact relevant to the customer’s search, so that the search function could not be an end in itself. The only service the customer paid for was therefore the viewing or downloading of documents, for which the search function was only ancillary. This was confirmed by the fact that the general public had access to the search function in the same way that the general public could browse the books on the shelves of a bookstore.
Finally, the court found that the uncertainty surrounding what the client was actually going to find, as a result of purchasing the vouchers, excluded the prepayment rules (VATA 1994 s 6).
Why it matters: The Court of Session distinguished this case from Esporta [2014] EWCA Civ 155. It pointed out that Esporta turned on the analysis of a member’s rights during periods of default and, in particular, the fact that a defaulting member was not in the same situation as a member of the public; the defaulting member could demand the re-instatement of his membership on payment of the arrears. In the present case, the difference between a contractual right to conduct a preliminary search, without access to the actual records, and the ability of the public to conduct a similar search, without a contractual right, was insubstantial from an economic standpoint.
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