Selfridges Retail Limited v Her Majesty's Revenue & Customs

Facts

Selfridges Retail Limited accepted cheques from customers at the point of sale under a bespoke retail scheme agreed with Customs under regulation 67 of the VAT Regulations 1995, output tax being calculated on aggregate daily gross takings. Since 1991 it had operated a "Contract for the provision of Cheque Authorisation Services" with Certegy Ltd, trading as Transax, under which a sales assistant would telephone Transax for a Code 1 (accepted) or Code 4 (not accepted) response on cheques exceeding the guarantee card limit — around half of one per cent of sales. In return for a monthly fee of £15 plus VAT and 1.79 per cent plus VAT of the value of cheques given a response, Transax undertook to pay the full amount of any Code 1 cheque the bank refused to pay, and the retailer's rights against the drawer transferred to Transax. On 23 July 2004 the Appellant claimed repayment of £25,371.11 under section 80 of the VAT Act 1994 for periods 08/01 to 02/04, contending that the Transax payments were compensation, alternatively exempt consideration for the assignment of debts, and not consideration for supplies to customers. Customs refused the claim, saying the receipts were third party consideration for the Appellant's supplies, and the Appellant appealed to the Tribunal.