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Letter from Getty's solicitors re. Getty settlement demand (London, uk)

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Couch_Potato:
Again, why is VAT being charged when HMRC guidance is clear. I'd call them out on it. I've reviewed the HMRC website and it is clear VAT should not be charged on a settlement where there is no supply of taxable goods.

http://www.lawgazette.co.uk/news/vat-settlement-disputes-0

This website sums it up quite well, it is dated 1992 but I have reviewed the HMRC website and this is still currently valid. If there has been a change in law then I cannot find it and I'd ask Simons Muirhead & Burton to clarify.

I would post the HMRC link but their website breaks up that summary into various pages.

Here is what is states:

"Press notice 82/87
The press notice had been issued with the object of restricting its application to genuine disputes only. If a settlement agreement was worded in terms that the plaintiff was giving up rights to sue the defendant in exchange for a sum of money, this was not a supply."

Don't the Getty letters state that in return for payment they are giving up their right to sue?

It goes on to state:

"Payment by way of compensation in respect of a past transgression was outside the scope but payment in consideration of allowing the future use of the copyright material was in respect of a taxable supply."

The bottom line is there should be no VAT payable on these settlements and the only reason they would want to charge VAT is to balance off against their VAT expenditure in the hope of claiming it back.

If they are trying to agree a price for past use so that it becomes a sale they should not be threatening any legal action if you don't pay. Imagine walking into a shop, picking up a pair of shoes to look at and then being told if you didn't buy them they'd sue you.

If they confirm that it's not a settlement but a debt, then normal debt laws apply (not that a debt exists) which they've breached several times already and you can complain to the OFT.

Nodge:
Re. the VAT issue, Getty's letter states the settlement is for " the use of the image in question. Payment of the attached demand will settle your company's unlicensed use of the referenced image". The letter from Simons Muirhead & Burton states the payment "represents the licence fee, costs and legal fees". Getty's letters say that if payment is not made then the case will be escalated to their legal department with the likelihood of increased costs. As the payment is partly towards the license fee for the image concerned then I suppose that would constitute a supply of goods? The letters don't say that in return for payment they are giving up their right to sue.

John

Couch_Potato:
Are you sure? The wording usually states that in return for payment it guarantees they will not pursue any further action for that infringement. Without that you'd be crazy to pay (it's crazy to pay anyway.)

If they aren't claiming it's for a settlement then they can't be claiming an infringement and you can simply decline their offer.

Nodge:
Having looked at Getty's letter again it does say "The payment of this settlement demand will release you from any legal claims by Getty Images relating solely to this identified past infringement". This would appear to fall within the terms or your press notice 82/87 stating that this is not deemed to be a supply. I suppose it wouldn't hurt to raise this question with Simons Muirhead & Burton.
John

Couch_Potato:
Well as pointed out on a different thread the FAQs on the letters now state VAT is payable because legal settlements in Ireland are subject to VAT.

However I don't see why it should apply when the letter comes from their UK office and the letter from their lawyer states you should pay them and not Getty. There is no service whatsoever being supplied from Ireland.

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