The Upper Tribunal has referred a case regarding whether contract bridge is considered a sport for VAT purposes to the Court of Justice of the European Union. The Tribunal is seeking clarification on the definition of "sport" based on arguments that bridge improves mental well-being versus the definition in the European Sports Charter requiring physical activity. In a separate case, the Court of Justice ruled that "flash" sales of fuel can qualify for VAT exemption if delivered directly to ships. This may have implications for intermediaries in supply chains that do not take ownership of goods. The European Commission also reported that the EU VAT gap, the difference between expected and collected VAT, was €168 billion in 2013, with the UK gap estimated at €15.4 billion

1. © 2015 Grant Thornton UK LLP. All rights reserved.
ITU
Summary
The Upper Tribunal has decided
to refer the English Bridge
Union case to the Court of
Justice of the European Union
(CJEU). In essence, the Tribunal
considers that it needs help with
the definition of the term 'sport'
for VAT purposes. The referral
to the CJEU will help it decide
whether, for VAT purposes,
contract bridge (a card game) is a
sport.
Just like the school kids, the
CJEU is also back from its
summer break.
The Court has issued an
interesting judgment this week in
a case relating to the 'flash' sale
of fuel for use in sea going
vessels. However, the judgment
may have wider implications for
others involved in the flash sale
of goods.
09 September 2015
Upper Tribunal
The Upper Tribunal has decided to make a reference to the CJEU for a preliminary
ruling in the case of the English Bridge Union Ltd (the Union) (the body which
oversees and governs the playing of 'contract' or 'duplicate' Bridge in England.
The Union appealed against a ruling from HMRC that the playing of Bridge was not a
sport. The First-tier Tribunal (FTT) issued a decision in 2014 supporting HMRC's
view. Dismissing the Union's appeal, the FTT considered that, on the evidence before
it, Bridge was not a sport. Having dismissed the Union's appeal, the FTT then granted
it permission to appeal to the Upper Tribunal.
Before the Upper Tribunal, Counsel for the Union argued that Bridge should be
regarded as a sport. He pointed to the fact that the World Bridge Foundation had been
invited to submit an application to the International Olympic Committee for Bridge to
be included in the 2020 Tokyo Olympics and in the 2018 Asian games. On the other
hand, Counsel for the Crown argued that the definition of sport used by the Council of
Europe in the European Sports Charter clearly shows that games such as Bridge are
not sports. Article 2 of that charter defines 'sport' as “all forms of physical activity
which, through casual or organised participation, aim at expressing or improving
physical fitness and mental well-being, forming social relationships or obtaining results
in competition at all levels”.
The Union argues that the playing of contract Bridge improves mental well-being and,
as such, should be regarded as falling within that definition. Moreover, there was some
evidence from around the EU that other Member States do treat the playing of Bridge
as a sport. Based on this, the Upper Tribunal has decided to refer the matter to the
CJEU for a preliminary ruling and has ordered the parties to agree the form of the
question(s) to be referred. It will be 18 months or so before the matter comes before
the CJEU.
Comment – One can see the arguments here on both sides. However, the Council of
Europe definition seems to suggest that the improvement of a persons mental well-
being should be derived from a physical activity rather than mere mental stimulation.
Clearly, whilst mental stimulation is a good thing, the question to be answered by the
CJEU is whether it is enough for it to render an activity such as the playing of Bridge a
sport. We shall see.
Issue26/2015
A 'Bridge' too far? – VAT & Sport
Indirect Tax Update

2. © 2015 Grant Thornton UK LLP. All rights reserved.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms
provide assurance, tax and advisory services to their clients and/or refers to one or
more member firms, as the context requires.
Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL).
GTIL and the member firms are not a worldwide partnership. GTIL and each member
firm is a separate legal entity. Services are delivered by the member firms. GTIL does
not provide services to clients. GTIL and its member firms are not agents of, and do not
obligate, one another and are not liable for one another’s acts or omissions.
This publication has been prepared only as a guide. No responsibility can be accepted
by us for loss occasioned to any person acting or refraining from acting as a result of
any material in this publication.
grant-thornton.co.uk
GRT100456
Court of Justice
Fuel for thought? Flash sales & VAT
In its first week back after a long summer vacation, the CJEU has issued a very interesting judgment
in a case relating to the 'flash' sale of fuel to vessels.
A 'flash' sale occurs where one or more persons in a chain of supply acquires goods and then sells
them immediately without ever taking possession of them. In the case of Fast Bunkering, a fuel
supplier sold fuel to intermediaries but delivered the fuel directly to the tanks of a sea-going vessel.
The Lithuanian tax authorities argued that the supply of the fuel by the supplier to the intermediary
did not qualify for exemption because the intermediary was not the 'user' of the fuel. For the
exemption to apply, the supply of fuel must be to the ship's operator.
In principle, the CJEU agreed with the Lithuanian tax authority. However, in circumstances such as
'flash' sales, the intermediary never actually acquires the right to dispose of the goods as owner – a
prerequisite for there to be a supply of goods for VAT purposes – as the goods are delivered directly
to the ship's fuel tank. The right to dispose of the goods as owner in these circumstances is acquired
by the ship's operator.
In these circumstances, the sale of the goods does qualify for exemption (zero-rating in the UK).
Comment
Whilst the facts in this
case relate to the supply
of fuel on a 'flash' sale
basis, it seems that the
CJEU's judgment may
have wider application.
Businesses which sell
goods down a supply
chain but deliver them
directly to the 'end user'
such that intermediaries
along the chain do not
acquire the right to
dispose of the goods as
owner should review
their VAT position in
relation to such
supplies.European Commission
Comment
It seems abundantly
clear that something is
wrong here. Either the
estimate of expected
tax revenues is woefully
miscalculated, or the
tax collection
mechanisms in the
Member States are
equally woefully
inadequate.
In reality, a
combination of the two
is more likely.
Hard questions need to
be asked and tough
action taken to
substantially reduce the
VAT gap.
Where's the missing VAT gone?
On 4 September 2015, the European Commission published its latest report on the study of the
European Union 'VAT Gap' – defined as the difference between the amount of VAT calculated to
be due and the amount of VAT actually collected by the Member States. The report highlights that,
worryingly, the VAT Gap in the EU (26 Member States) in 2013 – the latest period of scrutiny - is
estimated at a staggering €168 billion (£118 billion).
As far as the UK is concerned, the VAT Gap in 2013 is estimated to be approximately €15.4 billion
(£10.79 billion) compared with Germany (€24.8 billion), France (€14.1 billion) and Italy (€47.5).
Romania's VAT Gap (at €8.2 billion) represents 41.1% of its total collectable VAT revenue with
Lithuania's gap at 37.7% (€1.5 billion), Slovakia’s at 34.9% (€2.5 billion) and Greece’s at 34% (€6.4
billion). The UK's VAT gap represents 9.8% of its total collectable VAT revenue.
The Commissioner for Economic and Financial Affairs, Taxation and Customs said: "This important
study highlights once again the need for further reform in VAT collection systems across the EU. I urge Member States
to take the steps needed to fight tax evasion and tax fraud at all levels. This remains a burning issue and is at the top
of this Commission's agenda."
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556
Andrea Sofield London & South East andrea.sofield@uk.gt.com (0)20 7728 3311