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Macdonald Resorts Ltd v HMRC

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In Macdonald Resorts Ltd v HMRC (ECJ Case C-270/09), a Scottish company (M) sold ‘timeshare’ interests in properties in Spain. The Tribunal held that the company was making standard-rated supplies of services and that the place of supply was in the UK. The company appealed to the CS, which referred the case to the CJEC for rulings on the interpretation of the EC Sixth Directive. Advocate-General Trstenjak expressed the Opinion that ‘a supply, such as that performed by (M), in the form of the grant of contractual rights (points rights) which entitle the purchaser to points redeemable annually for the occupation and use of timeshare accommodation in (M’s) resorts’, was a ‘service connected with immovable property’ within Article 9(2)(a) of the EC Sixth Directive.

With regard to ‘enhancement fees’ (fees paid by customers for additional points rights), Advocate-General Trstenjak expressed the Opinion that ‘the place of supply is the place where the property in which the member concerned has a timeshare usage right is situated. With regard to purchase fees, the place of supply is determined by reference to the Member States in which the service provider has properties at the time when the points rights are acquired by the customer. VAT is chargeable on the basis of the respective share of available properties in the Member States concerned.’

Why it matters: This case follows from the earlier decision in RCI Europe v HMRC [2009] STC 2407. Advocate-General Trstenjak specifically rejected some of the contentions put forward by HMRC. If the service provider has significant accommodation outside the EU, the effect of the Advocate-General’s Opinion will be that some supplies will escape EU VAT even if the customer normally exercises his ‘points rights’ within the EU.

Some suppliers may seek a VAT planning advantage by having an initial portfolio in which most of the accommodation is outside the EU, and subsequently acquiring further accommodation within the EU after they have built up a base of customers.

Issue: 1046
Categories: Cases