Monthly Newsletter - September 2006

In this issue:

• Partial Exemption - Higher Education Sector Variable Tuition Fees
  
• Implications of the result in Compass Contract Services
  
• Zero-rating baked savoury prodcuts
  
• Implications of the result in Fleming and Conde Nast
  
• Application of the flat rate scheme for Pubs serving food
  
• Intention to Waive Exemption (Opt to Tax)
• Updated Public Notices 701/49 Finance and 700/64 Motoring Expenses

Partial Exemption - Higher Education Sector Variable Tuition Fees

Due to the introduction of Variable Tuition Fees (VTF) increasing the amount of exempt income received by the Education Sector, Customs have invited those who feel their PE special method is now unfair to re-apply with a revised method.

For further information see Business Brief 11/06.

Implications of the result in Compass Contract Services

As a result of the Court of Appeal judgment in this case, businesses which provide food within restricted access premises, such as secure office buildings, sports stadium, amusement parks and cinemas may now be able to apply for a refund of output tax on supplies previously considered as standard rated catering, which should have been treated as zero-rated cold takeaway.

Based on the judgment, HMRC has now issued revised policy on the meaning of ‘premises’ and will be issuing an updated version of public notice 709/1.

Zero-rating baked savoury products

In another case concerning takeaway food, Ainsley of Leeds Ltd appealed Customs decision to deny the company a Voluntary Disclosure payment of overpaid output tax on the sale of Ciabatta Melts.

Customs decision was based on the fact that prior to sale the products were kept on a hotbed and were therefore hot takeaway food.

The Appellant stated that the products were kept on hotbeds to maintain quality and freshness and to provide a pleasant aroma to customers of the shop, not to sell hot takeaway food.

The Tribunal found for the Appellant, accepting that the purpose of the hotbeds was to sell a tasty product, rather than a hot one.

Implications of the result in Fleming and Conde Nast

As reported in last months update, Customs suffered a double defeat in relation to the three year capping provisions and is now facing a significant number of claims for repayment of VAT going beyond the three years.  The Department has now set up a dedicated team in Queens Dock, Liverpool to deal with these repayment claims.

If you have any clients that wish to make such a claim please contact us.

Application of the flat rate scheme for Pubs serving food

A recent tribunal case has demonstrated that Customs are prepared to challenge a taxpayer’s choice of flat rate percentage where they consider this not to be reasonable in the circumstances. 

The Tribunal agreed with Customs that a pub owner should not have applied to be classed as such under the Flat Rate Scheme (FRS) using the rate of 5.5%. This was due to the level of food sales consistently exceeding those of wet sales, which caused the pub to more accurately be classed as a ‘Restaurant’ under the FRS and pay 12%.  Customs have assessed for under-declared VAT.

Intention to Waive Exemption (Opt to Tax)

A Tribunal case was brought by Windsor House Investments Ltd as the company maintained that its election to waive exemption was not valid. 

The company’s Director, providing evidence, stated that although he had signed the VAT 1614 he was not aware of its implications and that he relied solely on professional advisors to deal with all VAT related matters.

The tribunal found for HMRC as the evidence documented by the Appellant’s advisors, the Director and HMRC confirmed that the company had intended to make taxable supplies of the building in question and could only do so by making an election.

Updated Public Notices 701/49 Finance and 700/64 Motoring Expenses

New editions of the above public notices have been issued by Customs.  The majority of changes have occurred within the Finance Notice (outline of changes found on first page of each notice).

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