Target Group Ltd v Revenue and Customs [2023] UKSC 35 (11 October 2023)
Citation: Target Group Ltd v Revenue and Customs [2023] UKSC 35 (11 October 2023)
Rule of thumb: Stare-decisis: Is debt collection a financial service exempt from VAT? No, it is not. If debt collection organizations generate more than £100k per year they need to start paying VAT.
Background facts: The basic facts of this case were that Target Group were loan administrators & debt collectors. They did well financially and were turning an amount whether they had to start paying VAT.
Parties argued: HMRC & Target disputed whether loan administration & debt-collection was an exempt service which VAT did not have to be paid.
Court held: The Court held that under the proper interpretation of the Act loan administration & debt collection was not a VAT exempt service – they did not actually substantively provide the core exempt but were only ancillary to it. Target had to pay 20% VAT on all the income they generated over £100,000.
Ratio-decidendi:
‘1… The PVD exempts specified supplies from VAT and under article 135(1)(d) this includes various financial transactions. The issue on this appeal is whether loan administration services provided by the appellant (‘Target’) fall within that exemption…
76. ATP provides a useful illustration of how the exemption may apply to non-financial institutions, but it is clearly distinguishable from the present case. On the CJEU’s analysis, the account entries made in that case did change the legal and financial situation by transforming a right held by a worker against his employer into one held in relation to a pension fund. In this case the ledger entries in relation to “expected” payments could not and did not legally change anything.
77. The Momm case also does not assist. That case is an illustration of what may occur in one of the example cases cited by the CJEU at para 80 of its judgment in ATP, namely where there are “transfers between customers of a single bank”. It is not analogous to either the relationship of the parties or the account entries made in this case’.
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.