Abstract

The cases of Trinity Mirror Plc (formerly Mirror Group Newspapers Ltd) v Customs and Excise Commissioners and Customs and Excise Commissioners v Cantor Fitzgerald International, which have recently completed their protracted progress through the courts, have settled the VAT treatment of reverse premiums on leases. In doing so the European Court of Justice not only rejected its Advocate General's opinion, and the expectations of many commentators, but also practically rejected its earlier decision in Lubbock Fine v Customs and Excise Commissioners. Whilst important for the property industry, the cases have a wider role in illustrating the changing approach to the interpretation of VAT exemptions. The Lubbock Fine case had suggested an "economic equivalence" approach, under which transactions with similar economic consequences would be taxed the same regardless of their legal nature. This has now been rejected, with a return to a simpler, more literal approach based on the transactional nature of VAT. In this sense the cases reflect other recent decisions by the European Court on the VAT treatment of the financial services sector, where a literal interpretation has been followed despite discussion of potential economic distortions.