Update Dec 22, 2020:
HMRC have agreed not to introduce the changes outlined in Revenue and Customs Brief 12/20 with retrospective effect !
The September 2020 RCB announced a VAT charge on early termination and compensation payments with retrospective effect over the last four years. Transactions affected included settlement of disputes, delay and expense claims, liquidated damages, break clauses in leases and dilapidation payments.
HMRC now say the changes will take effect from 1 February 2021. Revised guidance is being developed, which will hopefully address the many questions thrown up by RCB 12/20 and in which the implications for real estate and construction will be set out more clearly.
Source Isobel d’Inverno
This brief gives as update on the VAT treatment of compensation and similar payments following recent judgments of the Court of Justice of the European Union (CJEU) Following the CJEU judgments in Meo (C-295/17) and most recently in Vodafone Portugal (C-43/19)
Source HMRC
See also
- ECJ Case C-295/17 (MEO – Serviços de Comunicações e Multimédia) – Judgment – VAT on early termination of broadband deal
- ECJ case C-43/19 (Vodafone Portugal) – Judgment – Termination fees subject to VAT
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