A strict test for economic reality: The concept of VAT supply in Airtours

In this article, the author discusses the UK Supreme Court decision in the Airtours case and the two-step test done by Judge Lord Neuberger focusing on identifying a contractual obligation to make a supply to the payor and only departing from this requirement if it would be in accordance with “econo...

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Bibliographic Details
Main Author: OOI, Vincent
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2024
Subjects:
Online Access:https://ink.library.smu.edu.sg/sol_research/4435
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Institution: Singapore Management University
Language: English
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Summary:In this article, the author discusses the UK Supreme Court decision in the Airtours case and the two-step test done by Judge Lord Neuberger focusing on identifying a contractual obligation to make a supply to the payor and only departing from this requirement if it would be in accordance with “economic reality”. The author submits that contract law can serve as a starting point, but that the focus on the existence of a contractual obligation in Airtours makes the test excessively restrictive. In the author’s view, “economic reality” in a multiple-party situation should not require the taxable person to prove “artificiality” or “sham”; and contract law and the contractual terms should not serve as a “strait-jacket” for VAT law.