teething problems...
On 28 October, The European Court of Justice (ECJ) issued a decision on the VAT
treatment of AXA's payment plan under the Denplan
arrangements. The ECJ overturned the decisions of the VAT
Tribunal and the High Court by ruling that the service of
collection and processing of monthly payments from patients and
transferring those to dentists (after the deduction of AXA's fee)
was a standard rated supply of 'debt collection services' and not
an exempt 'payment or transfer'.
The main element of the Denplan
service is the operation of payment plans between dentists and
their patients. Under the plan, dentists provide their
patients with a particular level of dental care against payment by
the patient of a fixed monthly charge to Denplan. Denplan
collects the payments due from the patients and, having deducted
its fee in collecting the money for the dentist, accounts to the
dentist for the payment collected.
The ECJ held that such a service
amounted to debt collection (a standard rated supply for
VAT) and not a "transaction ... concerning payments and
transfers" (which is exempt from VAT). In reaching this
conclusion, the ECJ found that the meaning of 'debt
collection' in the VAT Directive was not limited to debts in
respect of which the debtor had already defaulted and can include
debts which have not
become due, will be paid on the due date and where no coercive
measures will be taken for the effective payment of the debt
concerned.
HMRC are yet to provide any
commentary following the decision, so it is difficult to say with
certainty how far reaching the case may be. However,
businesses providing or receiving similar services to Denplan,
particularly those providing outsourced services to the financial
services sector, will need to review the VAT liability of their
supplies.
Dentists who are registered with
Denplan should review their contractual arrangements urgently to
determine whether the agreement entitles Denplan to charge
VAT. Where contracts do not allow for VAT to be charged,
dentists should review carefully the VAT provisions of any renewal
contracts. Where the contracts do allow VAT to be charged,
dentists can expect to start being charged VAT by
Denplan. Those supplying or receiving similar services should
also review the VAT provisions of their contractual
arrangements.
