VAT implications of multi-purpose vouchers: The Go City Ltd case

In the recent case of Go City Ltd v. The Commissioners for His Majesty’s Revenue and Customs (HMRC), the First-Tier Tribunal examined the VAT implications surrounding multi-purpose vouchers, with a particular focus on popular tourist passes such as the "London Pass" and "London Explorer Pass". These passes offer tourists a convenient and often discounted way to experience various attractions and services in London, raising significant questions about their VAT treatment.

The Issue

At the heart of the case was the issue of whether these passes should be classified as standard-rated supplies of "sightseeing packages" or as multi-purpose vouchers, which would fall outside the scope of VAT until they were redeemed. The distinction is crucial because it determines when and how VAT is charged, with single-purpose vouchers being taxed at the point of sale and multi-purpose vouchers only taxed when they are used.

The Tribunal's Decision

The Tribunal ruled in favour of Go City Ltd, determining that these passes are indeed multi-purpose vouchers. This decision was based on the fact that passes did not serve as tickets for specific, predetermined services at the time of purchase. Instead, they offered the purchaser flexibility in choosing which attractions to visit, some of which were subject to different VAT rates (e.g., standard-rated; VAT exempt museum admissions and zero-rated transportation services like the iconic London hop-on, hop-off bus tours).

HMRC's Power of Assessment

An additional layer of complexity arose from HMRC's approach to issuing "protective assessments" - essentially, tax assessments made on a precautionary basis as the statutory time limit approached, without a firm belief that the taxpayer's returns were incorrect. The Tribunal found this practice to be inappropriate in this context, emphasising that HMRC must have a reasonable basis for believing that returns are incorrect before issuing assessments.

Implications

This case highlights the importance for businesses dealing with vouchers to carefully consider their design and the VAT implications. The distinction between single-purpose and multi-purpose vouchers can have significant financial consequences and getting it right from the outset can save substantial costs and legal challenges later on. For businesses like Go City Ltd, the victory not only affirmed their approach but also highlighted the evolving nature of VAT law in the post-Brexit era.