ECJ rejects HMRC’s claim to be entitled to VAT claim on RCI’s subscription fees

10 Nov 2009

The ECJ upheld RCI’s claim that it should not pay UK VAT in connection with RCI’s scheme for swapping time-share accommodation.  The case centred on the interpretation of Article 9 of the Sixth Directive concerning supplies in connection with property.  HMRC considered that: (i) UK VAT was applicable to the enrolment and subscription fees (pursuant to Art. 9(1)); and further, (ii) that, where the holiday home which the member acquired the right to use was situated within the EU, UK VAT also had to be paid on exchange fees.

The ECJ rejected the United Kingdom’s submission that RCI’s activities were analogous to those of a travel agency.  When using RCI’s service to effect an exchange, the member was paying not for the supply of a holiday, but for the service provided by RCI that facilitated the exchange of the member’s existing usage rights relating to a particular property.  It followed that the property with which RCI’s services were connected was the property in which the timeshare owner’s timeshare was held.

It is only the second time the ECJ has ever looked at the place of supply of transactions connected with property.

Melanie Hall QC represented RCI

Raymond Hill represented the UK government.

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Melanie Hall QC
Raymond Hill