With the fate of cheques as a method of payment under review, and with a plethora of payment alternatives ranging from cash to internet banking, via credit card etc., some suppliers of goods and services are trying to stear customers onto the methods that suit the supplier best. Unless they refuse to accept certain methods, the alternative is to charge extra to accept them. An example has been T-Mobile (or "Everything Everywhere Limited" as they are now called). They set up an extra charge for "handling" the less attractive payment methods. They then argued that this charge was for a financial supply which was exempt from VAT, as a kind of bank charge.
Needless to say, HMRC disagreed, and the case has found its way to the European Court of Justice (case ref: C-276/09). Haven't we been here before in subtly different guises? Has it not been held that differential prices for accepting credit card payments did not denote a supply of credit and that the charge was entirely for the actual goods or services the customer wanted? Wasn't Debenhams defeated in a case concerning imputed credit charges where there was no difference in prices charged for credit and non-credit purchases. Didn't the Plantiflor case tell us that, as a general rule, postage charges for delivering goods are simply extra consideration for the goods themselves?
Yes we have. So, in what way does this differ except in the detailed matter that the ostensible separate service was one concerning payment processing rather than provision of credit or providing a postal service?
It doesn't according to the European Court. If a supplier prices its supply differently depending on how the customer chooses to effect payment, this does not change the fact that there is one supply and the VAT is chargeable at the relevant rate for that one supply, on the entire consideration received. Simply creating an extra charge (rather than a different price as such) and describing the extra charge as a payment for a separate activity does not change the commercial reality that the customer is interested solely in the supply to him of the goods or services he sought to purchase.
We should not be surprised about this decision. If the decision had gone in favour of the tax payer, that would have been a surprise.
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