Monthly Newsletter - June 2007

In this issue:

• HM Revenue & Customs Brief 36/2007
• VAT Reverse Charge for Purchases and Sales of Mobile Phones and Computer Chips
• Cultural Exhibitions and Events
• Replica Dutch Barge Case
• School Construction Costs on Study Centre
• Toasted Sandwiches Too Hot for the VAT Man!

HM Revenue & Customs Brief 36/2007

This Brief deals with the “VAT input tax deduction without a valid VAT invoice” rules and provides a revised Statement of Practice which should be read by all tax payers dealing in computers, telephones, alcohol and fuel oils.

The guidance does not apply to situations where HMRC may deny recovery of input tax for other reasons such as “abuse” or the right to deduct.

Businesses affected should review their invoicing process to ensure that they fully comply with the revised Statement of Practice and we will be pleased to provide any assistance or guidance as required.

VAT Reverse Charge for Purchases and Sales of Mobile Phones and Computer Chips

HMRC have produced VAT Information Sheet 06/2007 which sets out in detail the new VAT accounting mechanism (the reverse charge) for supplies of mobile phones and/or computer chips.

A subsequent Information Sheet 08/07 has been produced which provides further clarification of the new accounting mechanism and adds guidance for further discussions with businesses. 

Businesses that deal in handsets which have a mobile phone function, such as Blackberrys, mobile phones supplied with accessories and pre-pay mobile phones, will be affected.

Again we will be happy to provide advice to businesses who will be required to operate the reverse charge including completion of the Reverse Charge Sales Lists.  The charges come into force on 1st June 2007.

Cultural Exhibitions and Events

Customs have introduced a new Notice 701/47, which explains when admission charges for certain cultural exhibitions and events can be exempt from VAT and by whom.  It also covers the exemption of associated fund raising activities by certain cultural bodies.

There has been substantial recent case law on these issues and the notice incorporates Customs’ new policy on the qualification of a cultural body for the purposes of exempting admission charges.

Replica Dutch Barge Case

This is a case to determine whether zero rating applied to a replica Dutch barge with no cargo hold but with the interior arranged for residential use.  The Tribunal was asked to consider whether it was “either designed or adapted for use for recreational pleasure” as the law required.

The Tribunal ruled against the tax payer, stating that the word “pleasure” has to be interpreted within the context in which it appears and one possible interpretation is “as the opposite of business or commercial”.  They therefore determined that the barge attracted VAT, being a vessel designed or adapted for recreational pleasure.

School Construction Costs on Study Centre

This is a case involving a school that makes exempt supplies but wanted to reclaim VAT on the build of a new study centre.  It entered into an arrangement with its school shop company and the school’s charitable trust to enable it to recover input tax for the construction costs of the new study centre.

The case was challenged on the Halifax principles preventing “abuse of practice”.

The Tribunal ruled in favour of HMRC.  The morale of the story is that schools and other exempt bodies need to be very careful in planning the VAT recovery of any construction projects that they may be considering.  Any arrangements put in place must withstand critical examination from HMRC.  We would be pleased to review any proposed plans.

And finally....

Toasted Sandwiches Too Hot for the VAT Man!

Here the issue was whether the supply of hot toasties and grilled panini was a supply in the course of catering and the intention was that the items were to be consumed hot.

The appellants claimed that the supply of hot paninis and toasted sandwiches was zero rated and that there was no intention for them to be served hot. 

The Tribunal accepted that the appellants’ purpose was to provide a crisp fresh toasted product to be consumed but that to be consumed hot was the dominant purpose in heating it so therefore, on this basis, the product was standard rated.

For further information regarding any of these articles or any other VAT issue, please phone us on 01962 735350 or e-mail us at: vat@thevatconsultancy.com