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EU-UK content sharing intermediary platforms liable for VAT

ECJ confirms 2011 implementing regulation of the European Council specifying that the operator of a platform, such as OnlyFans, is presumed to be the supplier of the services provided – £11 million liability

The Court of Justice of the European Union (ECJ) has confirmed on 28 February 2023 the September 2022 Advocate General of the Court of Justice opinion that Fenix International, owner of ‘Only Fans’ content sharing platform, is liable to collect UK VAT on the entirety of payments made to content ‘creators’ by their ‘fans’. The Court ruled that the EU Council did not exceed the limits of its implementing power in specifying that the operator of an online platform, such as Online Fans, is presumed to be the supplier of the services provided. 

This is the last ruling the ECJ will make in relation to the UK following Brexit, unless in relation to the Withdrawal Agreement.

HMRC is estimating (per Court documents) VAT owed by Only Fans for the four years under consideration could be £11 million.

The owner of Only Fans, Fenix International, was VAT registered in the UK. The Only Fans platform allowed fans to pay for access to content creators’ content – often adult themed.  Fenix withheld 20% intermediary fee before passing on the net amount to the creator. It only charged VAT on this deduction as the tax base, and paid this over to HMRC. It considered the creator being responsible for the VAT on the balance.

HMRC challenged this taking the view that Fenix had to be deemed to be acting in its own name pursuant to Article 9a(1) of Implementing Regulation No 282/2011. Consequently, HMRC took the view that Fenix had to pay VAT on all of the sum received from a fan and not only on the 20% of that sum which it levied by way of remuneration. Fenix claims that Article 9a of Implementing Regulation No 282/2011 has the effect of amending and/or supplementing Article 28 of the VAT Directive by adding new rules to it. Article 9a(1) of Implementing Regulation No 282/2011 goes beyond Article 28 of the VAT Directive by providing that an agent who takes part in a supply of services by electronic means is to be deemed to have received and supplied those services, even though the identity of the provider, who is the principal, is known. Such a provision deprives the parties of their contractual autonomy and disregards commercial and economic reality. It fundamentally alters the liability of the agent in the field of VAT by transferring the tax burden on platforms operated on the internet, since it proves impossible, in practice, to rebut the presumption laid down in the third subparagraph of Article 9a(1) of Implementing Regulation No 282/2011. Consequently, according to Fenix, Article 9a goes beyond the limits of the implementing powers conferred on the Council under Article 397 of the VAT Directive.

HMRC referred this to First-tier Tribunal in the UK as to whether Fenix was responsible for collecting VAT on the full payment. The Tribunal asked the Advocate General of the CJEU to rule since the UK at the time was still within the EU VAT regime.

The ECJ ruled that no element of the service of electronically supplied services provided by online platforms is excluded from the VAT Directive rules. As to Fenix’s argument that that provision transfers the liability for payment of VAT to the intermediary, in breach of the VAT Directive, the Advocate General observes that it is precisely that directive which effected such a transfer, the detailed rules of which are merely determined by the provision in question as regards services supplied electronically.

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