Coinstar Limited
In the Upper Tribunal (UT) case of Coinstar Limited the issue was whether the services Coinstar provided were exempt supply of financial services via Value Added Tax Act 1994, Schedule 9, Group 5, item 1 – “The issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money.”
Background
I’ve no doubt that you’ve seen those kiosks with machines in supermarkets into you which you tip your bag full of loose change in return for a voucher. The voucher can then be redeemed at the checkout against the supermarket bill. Coinstar provides this service and charges 9.9% of the value of the coins inserted into the machine. HMRC considered this to be a table service of “coin counting”, while Coinstar claimed that it was an exempt supply under the above legislation.
Decision
The UT affirmed the decision of the First Tier Tribunal and dismissed HMRC’s appeal, ruling that Coinstar was providing an exempt financial service. The Transaction was not a coin counting service, but a service of exchanging a less convenient means of exchange into a more convenient one which was provided in return for the 9.9% fee. This involved a change in the legal and financial status of the parties such that the exemption applied.
Commentary
Another case which demonstrates the fine line between exemption and taxable treatment of “financial” services. HMRC’s argument here was that this was a single supply of coin counting (which is outside the exemption) but clearly, a person emptying their big pots of change into the machine did not want it to be simply counted, the aim was to obtain a voucher in return for the shrapnel (or, if feeling philanthropic, there is an option to donate the coins to charity – for which Coinstar made no charge). It is fair to observe that just because a supply may be “financial” in nature it is not automatically exempt. It pays to check the liability of such services because, as may be seen, HMRC often attack exempt treatment. I have recently had to untangle a position where there was doubt about whether an online service amounted to exempt intermediary service. HMRC ultimately agreed that exemption applied in this case, but that was not their starting point.