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Flashback on ECJ cases C-353/00 (Keeping Newcastle Warm) – Price subsidy part of consideration for service and in taxable amount

On June 13, 2002, the ECJ issued its decision in the case C-353/00 (Keeping Newcastle Warm).

Context: Sixth VAT Directive – Article 11A(1)(a) – Taxable amount – Consideration for goods or services – Subsidy.


Article in the EU VAT Directive

Article 11A(1)(a) of the Sixth VAT Directive (Article 73 of the EU VAT Directive 2006/112/EC)

Article 73 (Taxable amount)
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.


Facts

  • KNW has for several years carried out work in the context of the grant scheme established by the Regulations, including the provision of energy advice. It has declared and paid VAT on the amounts paid to it by the EAGA in the form of energy advice grants, in the amount of GBP 10 per piece of advice.
  • KNW brought proceedings before the VAT and Duties Tribunal for a refund of the VAT so paid by it between 1 April 1991 and 31 August 1996. KNW submitted that the grant for energy advice was not directly linked to the price of the supply, within the meaning of Article 11A(1)(a) of the Sixth Directive, and accordingly did not form part of the taxable amount for that supply. It claimed that the grant of GBP 10 was paid without reference to the price which would have been charged for the energy advice if it had not been provided to the consumer for free.
  • The Commissioners submitted that the amount of GBP 10 was not a standard sum but was linked to the amount properly charged for the energy advice and that in any event it constituted the consideration for the supply.
  • The main proceedings related to a preliminary issue submitted for determination to the VAT and Duties Tribunal by the parties to those proceedings; the Tribunal, by interim decision of 17 December 1998, determined that the payments of GBP 10 were part of the taxable amount as being consideration for the supplies, whether or not those payments were also subsidies within the meaning of Article 11 of the Sixth Directive.
  • KNW appealed against that decision to the High Court of Justice of England and Wales, Queen’s Bench Division (Crown Office).
  • KNW acknowledged before the High Court that the GBP 10 received by it from the EAGA for each piece of energy advice it provided constituted consideration, as the Commissioners contended. It none the less argued that the words ‘including subsidies directly linked to the price of such supplies’ in Article 11A(1)(a) of the Sixth Directive could only have force if, apart from them, all other subsidies were excluded from the taxable amount. All subsidies directly linked to the price of such supplies are payments made in return for the supplies and so normally form part of the consideration.
  • The Commissioners claimed that, since it was plain that the grants in question were part of the consideration, they must form part of the taxable amount.

Questions

  • (1)    Is a payment made by the Energy Action Grants Agency to the Appellant, which receives it in respect of energy advice given to an eligible householder, a subsidy within the meaning of that word in Article 11A(1)(a) of the EC Sixth Council Directive (77/388/EEC)?
  • (2)    If the answer to the first Question is yes, is that payment also directly linked to the price of the supply of energy advice, so as to form part of the taxable amount of that supply by reason of the concluding words of Article 11A(1)(a)?
  • (3)    If the answer to Question (2) is no, is that payment none the less part of the taxable amount by reason of constituting the consideration (or part of the consideration) for a supply?

AG Opinion

Payment of a subsidy such as that in the main proceedings constitutes consideration for a transaction, and is to be included in the taxable basis for calculating turnover tax under Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment.


Decision 

Article 11A(1)(a) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment is to be interpreted as meaning that a sum such as that paid in the case in the main proceedings constitutes part of the consideration for the supply of services and forms part of the taxable amount in respect of that supply for the purposes of value added tax.


Summary

An amount as paid in the main proceedings forms part of the consideration for a service and, in terms of VAT, falls within the taxable amount for that transaction.


Source


Similar ECJ cases

  • C-184/00

Reference to the case in the other EU MS


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