Monthly Newsletter - May 2007

In this issue:

• Boat Charters
• MoT Fees
• TOGC - carrying on the same business
• Zero Rating of Books
• HMRC's spider web catch tax dodgers

Boat Charters

A recent Tribunal Appeal failed because the tax payer was unable to provide sufficient evidence that they were carrying on an economic business.

The evidence provided, such as the advertising costs, were disproportionate to the level of personal tax savings the appellant made from the losses the business incurred.  Combined with minimal charters arranged, the Tribunal was of the opinion the business was not being run as an economic business and thus the case was won in HMRC’s favour.  They viewed the arrangements as a mechanism for reducing personal tax.

The Charter of boats is at the forefront of HMRC's enquiries. Anybody considering buying a power boat or yacht and reclaiming the input VAT should speak to us with regards to the level of evidence HMRC require before they register such businesses or obtain input VAT on the purchase of any boat.

MoT Fees

A recent Tribunal Case has confirmed that where an unapproved garage charges a customer for an MoT test (where the customer’s car is taken to an independent testing station), the amount charged on to the customer may be treated as outside the scope (as a VAT disbursement).  However, any amount charged to the customer over and above the statutory maximum should be treated as a standard rated supply.   

Please contact us for further details on what constitutes a true disbursement for VAT.

TOGC - carrying on the same business

The appeal of Morton Hotels Limited was recently found in favour of the appellant. 

The case concerned the purchase of a hotel by Swallow who immediately upon purchase entered into a sale and leaseback agreement before continuing the hotel business.  HMRC’s argument was based on the fact that Swallow had initially purchased the hotel business for the purpose of raising finance (the sale) and was in the business of running the hotel after this first transfer has occurred (leaseback).

The Tribunal confirmed that they felt that Reg (5) TOGC did not require the proprietor interest acquired to be retained in the same form.

Please do contact one for our consultants if you require any further advice regarding Transfer of Going Concerns.

Zero Rating of Books

Public Notice 701/10 has been updated to include further advice with regards to single and multiple supplies.  Sections 6 now refer to general indicators of single or multiple supplies, as well as detailing the three possible outcomes where zero rated printed matter is supplied with other items.

Common problem areas include children’s activity packs where, although the components could be separately identified, the omission of one of those components would not diminish the pack as a whole.

Do contact one of the team for further assistance when deciding on the correct VAT treatment of printed matter ‘packages’.

HMRC's spider web to catch tax dodgers

HMRC have introduced a new software “Web Robot” to its armoury to combat evasion of all taxes.  The software acts as a ‘spider’, downloading web pages with relevant details within hours rather than the months it used to take.  A recent search was used to find English people letting property in Florida, such a search was estimated to take four months, yet the new software searched over 20,000 pages within 4 hours!  VAT dodgers be warned!

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