VAT and salary sacrifice

HMRC has issued Revenue & Customs Brief 28/11 explaining the changes to the treatment of certain supplies made by employers under salary sacrifice arrangements following the CJEU Judgement in the case of Astra Zeneca.

Astra Zeneca operated a flexible remuneration package scheme under which employees could opt to take part of their remuneration in the form of goods and/or services rather than as salary. The Court found that the provision of vouchers amounted to a supply of services for a consideration. As a consequence, whilst Astra Zeneca was able to recover VAT incurred on acquiring the vouchers, output tax was due on the consideration received from its employees.

HMRC considers that the rationale used by the CJEU goes wider than deductions from salary, and as a consequence of this there is no longer a distinction between deductions from salary and salary sacrifice. The Brief clarifies how HMRC considers this judgement will impact on certain arrangements such as Cycle to Work scheme, childcare vouchers, catering  provided by employers, motor cars etc.

Read more VAT news at http://www.ukvatadvice.com/images/stories/newsletters/110815cvcnews.pdf

Can supplies of water to tenants be zero-rated?

HMRC’s public notice 742 explains that where a landlord charges a tenant for unmetered supplies of utilities that charge is seen as further payment for the main supply of rent, which will be standard-rated if the landlord has opted to tax the property.

The First Tier Tribunal has now considered this point in the case of The Honourable Society of Middle Temple (TC01245). In this case HMRC had argued that the unmetered supply of water by the appellant was indivisible, being supplied under a single contract, from the rent. The Tribunal rejected HMRC’s arguments, pointing out that the water could be supplied separately by a third party (i.e. the water company) to the individual tenants. The fact that the water was not separately metered to each of the Chambers in the Middle Temple was an “accident of history”. 

This case potentially challenges HMRC’s view on supplies of utilities, particularly in relation to the supply of water which would ordinarily be zero-rated when supplied directly to tenants who are not engaged in industrial activities. 

For more news see our latest newsletter at http://www.ukvatadvice.com/news

VAT Initiative Campaign

HMRC has announced details of the VAT Initiative Campaign – Your guide to taking part. This is an initiative to crack down on individuals and businesses who are trading above the VAT registration threshold but who have not yet registered for VAT. The VAT Initiative gives businesses the opportunity to come forward and tell HMRC they should be registered if they have failed to notify the liability. Approaching HMRC under this Initiative gives an opportunity to reduce penalties. However, we would recommend that any late registration should be notified after discussion with CVC to ensure maximum penalty mitigation is achieved. Read more news at http://www.ukvatadvice.com/images/stories/newsletters/110707cvcnews.pdf

HMRC issue Information Sheet regarding VAT recovery by academies

HMRC has issued an Information Sheet detailing how the VAT refund scheme for academies, free school, 16 to 19 academies, alternative provision academies and university technology colleges for 14 to 19 year olds will operate and which bodies will benefit from it.

The scheme will be effective from 1 April although no claims can made until the Finance Bill is given Royal Assent.

CVC would be happy to advise any academies needing assistance with putting these rules into operation. The Information Sheet can be read in full via our website at http://www.ukvatadvice.com/news.

VAT Cost Sharing Exemption Consultation

HMRC has published a consultation document examining how the VAT Cost Sharing Exemption might be introduced into UK legislation.

The VAT Cost Sharing Exemption is a provision in European law that allows businesses and organisations making VAT exempt and/or non-business supplies to form groups to achieve cost savings and economies of scale. Once formed the groups are relieved of a VAT charge on their supplies if all the conditions of the exemption are met.

This consultation invites comments on a possible model for a cost sharing exemption that could be introduced in the UK. It also asks specific questions to enable HMRC to assess the impacts of implementing the exemption.

Interested parties such as banks, charities, housing associations, insurance companies, residential care homes, universities and further education colleges should read the consultation, available on our website at http://www.ukvatadvice.com/news. CVC will be responding to the consultation and would be happy to incorporate any comments from interested parties into that response.

HMRC successful on appeal in take-over costs case

In early 2010 the courts considered a case where BAA was aquired via a bid vehicle ‘ADIL’. ADIL incurred significant fees in the acquisition process in spring/summer 2006 but did not join the BAA VAT group until September 2006 at which point VAT was claimed on the acquisition costs.

HMRC disallowed the input tax recovered, which was in the region of £6.7M, on the basis that there was ‘no direct and immediate link between the supplies on which this VAT was incurred and any taxable supplies made (or to be made)’ by the VAT group. BAA (as representative member of the group) appealed the decision and the Tribunal allowed that appeal on the basis that:

• ADIL did carry on an economic activity from its inception, although it never made a taxable supply in its own right,
• Applying the principles established in Faxworld that ‘the taxable supplies of the BAA VAT Group should be imputed to ADIL’, HMRC have now  successfully appealed this judgement at the Upper-tier Tribunal and that decision was published on 24 June 2011

The input tax should be linked with the outputs of the representative member of the BAA VAT group when considering recovery and as such should be part of the general overheads of that representative member.

• If you have been assessed by HMRC for VAT recovered on acquisition fees or have not recovered this input tax then please speak with your usual CVC contact who will consider the extent to which this case will support a claim.

 

HMRC appealed on the grounds that the First-tier Tribunal erred in law in holding that ADIL was entitled to recover the VAT as input tax. The Upper-tier Tribunal allowed HMRC’s appeal holding that ADIL had no intention to make onward taxable supplies at the time when ADIL incurred the VAT. The Tribunal also did not consider that BAA’s taxable supplies could be attributed to ADIL by reason of the VAT grouping provisions.

The Chairman said that while it is true that the VAT grouping provisions treat all supplies made by group members as being made by the representative member, it is only from the time at which all of the relevant companies are members of a single VAT group. At the time at which ADIL incurred the relevant VAT, ADIL was not a member of the BAA group (and was found to have no intention of joining the VAT group prior to completion of the BAA takeover). The VAT grouping provisions are not in any sense retrospective.

If you have incurred VAT in similar circumstances and are concerned about VAT recovery please contact us.

Supplies in connection with consumer IVAs can be exempt from VAT

Paymex Ltd is the representative member of a group of companies including Blair Endesby Ltd (BEL) a company who assisted individuals referred to them by an associated debt management business, Baines & Ernst (BE). Where BE felt, after analysing an individual’s financial situation, that an Individual Voluntary Arrangement (IVA) was the most appropriate way forward, they took details and referred the person to BEL who then assisted the debtor through the IVA process. This included collecting information from the debtor as regards his financial circumstances, making proposals to creditors, supervising the IVA, collecting payments from the debtor and accounting to the creditors.
BEL treated its services to its client, the debtor, as a VAT exempt service of negotiation concerning debts, rather than, as HMRC proposed, a taxable supply of professional services.
The Tribunal accepted that BEL’s service was the supply of a VAT exempt supply of negotiation. Any businesses carrying out similar activities who have been charging VAT under HMRC’s instruction should consider whether this case could provide an opportunity for VAT recovery.

Read more news in our latest newsletter at http://www.ukvatadvice.com/images/stories/newsletters/110622%20cvcnews.pdf

Non-members green fees can be exempt from VAT

The Tribunal has recently released its decision in the case of Bridport and West Dorset Golf Club. The case considered whether ‘green fees’ paid by non-members should be exempt from VAT (as the club proposed) or subject to VAT (as HMRC argued).

In the opinion of the Tribunal, EU law does not discriminate between supplies to members and non-members. Where exemption is available, because of the non-profit making status of the club, it should be available to all people taking part in a sport whether or not they are members of the club.

Any ‘non-profit making’ members clubs who have not already made a claim in respect of VAT paid on non-members green fees should consider doing so now.

Read more VAT news at http://www.ukvatadvice.com/images/stories/newsletters/110615cvcnews.pdf

VAT Liability of Storage Facilities

Hanbridge Storage Services (HSS) provides storage facilities to third parties by providing containers which are located upon open land which HSS owns.  The containers are arranged in such a way as to allow vehicular access to each container so that goods may be loaded into or taken from any container with comparative ease. People who hire or rent a storage facility can have unrestricted access during normal working hours but outside such hours, can secure access by arrangement with the onsite security team. The agreement between HSS and the customer states that the customer will have use of the numbered storage container occupying a defined area of land identified on a plan that forms part of the agreement with the customer.

HMRC were of the opinion that the storage units were not ‘immovable property’ and that the letting of the units should be subject to VAT.

The Tribunal found that the supplies made by HSS were exempt from VAT holding that each customer does have exclusive use of a defined space or parcel of land within the curtilage of the HSS’ yard, pursuant to a contractual license. Without that licence no storage could take place on the land.

More VAT news can be found on our recent newsletter at http://www.ukvatadvice.com/images/stories/newsletters/110504cvcnews.pdf

Change of approach to inaccuracy penalties

HMRC is changing its approach  to innaccuracy penalties for cases where HMRC intervened to correct an inaccuracy before the next return was received, preventing the inaccuracy from being reversed. When HMRC are satisfied that, but for their intervention, the inaccuracy would have been automatically corrected in a subsequent return, customers will receive a reduced penalty. 

 

If you have been penalised because HMRC picked up an error on a visit before you were able to correct it on the next return you should review the position.

 

More information is available in HMRC's Brief at http://www.hmrc.gov.uk/briefs/vat/brief1511.htm

Should you be submitting a claim?

Following the recent ECJ decision in the case of Manfred Bog and others (reported in CVC VAT Alert 23 March 2011), HMRC has issued Revenue & Customs Brief 19/11. HMRC considers that the ECJ judgment has no implications for the UK treatment of supplies of hot food and businesses should continue to treat their supplies in accordance with published guidance.  Despite this Brief we believe that businesses should consider submitting refund claims to protect their position. Any business  that would like to submit a claim or discuss this further should contact us on 020 7830 9669.

Read more recent VAT news in our latest newsletter at http://www.ukvatadvice.com/images/stories/newsletters/110406cvcnews.pdf

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Important information re VAT Online Service

HMRC's VAT online service will be unavailable from 7am on Monday 4th April to 6am on Wednesday 6 April and taxpayers will be unable to submit VAT returns, set up direct debits or view their accounts online during this period.

HMRC has advised that if a return is filed a day or two late due to an inability to access online systems they will adopt a 'light touch' approach with regard to penalties. However, we would strongly advise that where an online VAT return has a due date of 7 April, the returns should be submitted before 4 April to ensure that the due date is met.

2011 Budget

There were no major announcements regarding VAT in this week's Budget. However, there were some changes and these are detailed in our Budget Focus newsletter at http://www.ukvatadvice.com/images/stories/newsletters/110323cvcbudgetfocus.pdf

Change to Low Value Consignment Relief may be imminent

The government has signalled that it may be about to announce a change to the VAT low-value consignment relief in the forthcoming Budget. The LVCR relieves goods up to a value of £18 from import VAT.

The Commercial Secretary to the Treasury, Lord Sassoon said in the House of Lords that his ministerial colleagues and HMRC officials are now examining what can be done to reduce tax loss in this difficult and technical area. He went on to say:

‘…we are actively reviewing the operation of this relief. Ministers hope to be in a position to announce any possible changes to the operation of LVCR flowing from the review in the Budget on 23 March’

Read more in our latest newsletter at http://www.ukvatadvice.com/images/stories/newsletters/110317cvcnews.pdf

Hot food case-successful appeal

Deliverance Ltd is a catering company. Amongst the foods they deliver to customers are items such as spring rolls and samosas, which are freshly cooked and leave the premises above ambient air temperature. HMRC argued successfully before the First Tier Tribunal that because the food was supplied hot it should be standard rated. Deliverance appealed to the Upper Tribunal, who agreed that the earlier Tribunal had not applied the hot food test correctly and that the purpose of demonstrating that the food was freshly cooked and the purpose of enabling the food to be consumed hot were conceptually different. The taxpayer’s appeal was therefore allowed.

Read about this and more in our latest newsletter at http://www.ukvatadvice.com/images/stories/newsletters/110303cvcnews.pdf

Latest CVC newsletter

The latest CVC newsletter is now available on our website and can be viewed here.

This newsletter includes items on:

1. VAT treatment of commercially operated sports' leagues.
2. HMRC consultation on business record checks.
3. New agents' toolkits on partial exemption and output tax.
4. Changes to payments on account thresholds.
5. Postal services reminder.

Please contact us if you need further information on any of these items.

New HMRC Brief on HMRC's treatment of commercially operated sports leagues

HMRC confirm that supplies made by commercial sports league providers are liable to the standard rate of VAT. If sports league providers feel they have been mislead by previous advice from HMRC officers, and they fulfil certain criteria, they should contact HMRC's Complaints Team.

More details can be found in HMRC's brief at http://www.hmrc.gov.uk/briefs/vat/brief0411.htm

Newsletter now available

The latest CVC newsletter is now available at http://www.ukvatadvice.com/images/stories/newsletters/110209cvcnews.pdf

This newsletter contains items on:

1. The latest HMRC briefs.
2. Tribunal case re zero-rating a charitable building constructed in 2 phases.
3. Case re bank interest and Flat Rate Scheme.
4. Alternative Dispute Resolution trial.

Latest newsletter

The latest CVC newsletter is now available at http://www.ukvatadvice.com/images/stories/newsletters/110121cvcnews.pdf

VAT reclaim opportunity

CVC has issued a VAT alert regarding a possible reclaim opportunity where businesses have contributed cash to fund a sale of goods. The alert can be viewed via our website at http://www.ukvatadvice.com/images/stories/cvcvatalerts/110117%20vat%20alert%20cashback%20promotion%20general.pdf 

Latest CVC Newsletter

The latest CVC newsletter is now available on our website at http://www.ukvatadvice.com/images/stories/newsletters/110112cvcnews.pdf.

The newsletter includes items on:

1. Weald Leasing ECJ decision.
2. John Price DIY builder Tribunal case
3. Williams Grand Prix Engineering Ltd case-sporting services or advertising?
4. HMRC on Twitter

New Year brings VAT changes

As well as the increase to the standard rate of VAT to 20% on 4 January 2011, the following changes took place with effect from 1 January 2011.

• Changes to Lennartz accounting-this will affect taxpayers buying land, property, boats or aircraft on or after 1 January.
• Changes to Capital Goods Scheme (CGS)-these will affect partly exempt businesses, taxpayers with non-business use of assets in the CGS, taxpayers acquiring CGS assets before they register for VAT, taxpayers using or intending to use Lennartz accounting.

The place of supply rules for cultural, sporting, scientific, educational and entertainment services supplied to relevant business customers also changed on 1 January 2011. From that date most business to business (B2B) supplies of these services will be taxed where the customer us established under the B2B general place of supply rule. However, admissions to cultural, artistic, sporting, scientific, educational and entertainment events and services ancillary to admissions (such as cloakrooms) will remain taxable where the event takes place.

More details on all these changes can be found in our 6 January 2011 newsletter and on HMRC's website.