Would you like to ride in my beautiful balloon? Skyview Ballooning v HMRC

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Would you like to ride in my beautiful balloon? It is a truth universally acknowledged that the passenger of a hot air balloon that is rapidly losing altitude is best advised to throw out as much luggage as possible if only to soften his crash landing. This appears to have been the thought of HM Revenue & Customs (HMRC) in the litigation against Skyview Ballooning (PC03173), although it would have been more dignified for them to have stopped after the first piece of luggage and endure the crash landing with dignified fortitude.

The Skyview Ballooning case is about ‘face-value vouchers’. We are all familiar with these vouchers, cards or other forms of token that can be purchased, by us or for us, and that entitles us to a particular value of some kind of product. The sale of such vouchers is not subject to VAT, but the redemption of the value on the voucher for a product is subject to VAT to the extent of that redemption at the time it is redeemed. Advantages of this are both that the VAT liability is delayed and that in many cases the full value of the voucher is not redeemed, which means VAT is not paid on the full value of the cash received. This rule is overridden when the voucher is a ‘single purpose voucher’ that gives access only to one product. The law says that this is taxed at the time that the voucher is sold, because it is no more than a down payment against the future supply. If the supply does not take place, then the law deems VAT to remain applicable, because the opportunity to take the supply had been sold instead of the supply itself. This is obviously disadvantageous both as regards cashflow and the ultimate burden of VAT (because not all vouchers are fully redeemed)…

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