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Scope of VAT on payments for unused supplies

Key points

  • Difference between compensation and consideration.
  • In Société thermale, the CJEU found there was no link between the deposit paid and service to the customer.
  • A right to benefit from services can be a supply of services.
  • HMRC changed its policy on the treatment of hotel deposits.
  • Case law and the contract are important when deciding whether a payment is consideration or compensation.

Source: taxation.co.uk (subscription needed)

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