Supplies of goods to customers fraudulently using a bank card are subject to VAT where the card provider pays for those goods

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By Michael Cant

The Court of Justice of the European Union (CJEU) has ruled in the case of Dixons Retail plc v Commissioners (C-494/12) that a supplier must account for output VAT on payments received from third-party card providers for supplies made to customers who bought goods using a fraudulent card.

It should be noted that this decision: turned on the specific facts of the case — in particular the fact that Dixons had agreements with card issuers under which the issuers agreed to pay Dixons for all transactions made with their cards, provided Dixons followed set procedures; means retailers will not be able to recover any output VAT already accounted for in respect of payments received from card providers for goods bought using fraudulent cards; and does not come as a big surprise given the decisions in Loyalty Management UK and Redrow Group, which held that payment by a third party to a supplier for goods or services supplied to a customer could amount to ‘third-party consideration’ for VAT purposes…

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