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