In Dixons Retail PLC v HMRC (C-494/12), the CJEU ruled that retailers’ sales are subject to VAT where a customer fraudulently uses a credit card. This was because the physical transfer of goods in these circumstances represented a supply for the purposes of VAT, and the payment made by the card issuer represented consideration for that supply. The judgment is clearly disappointing news for large retailers, but the underlying approach of the CJEU – whereby transactions are taxed in accordance with their economic consequences, instead of their legal form – could have benefits to taxpayers in two instances: first, where discounts are effectively provided to customers outside the purchase contract; and, second, where a taxable person bears the costs of supplies outside the purchase contract.
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