Spanish timeshare

The taxpayer company was established in the UK and was in the business of organising the exchange of timeshare usage rights. Scheme members paid an enrolment fee and annual subscription fees.

In addition a returnable exchange fee was payable on the date of the request for an exchange.

Until the end of 2003 the company paid VAT in the UK on all enrolment fees received from new members and on all annual subscriptions.

After 1 January 2004 it stopped accounting for VAT in the UK on enrolment fees and subscriptions from members whose holiday usage rights related to timeshare properties in Spain.

It also ceased to account for VAT in the UK on exchange income relating to Spanish properties.

In March 2005 HMRC raised an assessment to recover the VAT they considered the company should have accounted for in respect of Spanish properties.

The company appealed claiming...