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Monthly Newsletter - May 2008
VAT & Property - new option to tax rules Business Brief 24/08 has been published outlining the new Schedule 10 to the VAT Act 1994 which covers the option to tax for land and buildings. The Schedule has been rewritten in order to simplify the existing law whilst introducing a number of new definitions. If you are involved in property transactions you need to know about the new rules. We will be presenting a series of seminars in Southampton, Bristol & London in the summer providing the essential information you need to be aware of. The seminars will be announced later this month. To ensure you receive details Businesses seeking clearance Business Brief 20/08 has been issued outlining the process for businesses seeking clearance to HMRC’s views on a particular transaction. However VAT Notice 700/6, covers the clearance procedure for non-business customers, but at paragraph 2.3 HMRC ask for the business name and VAT number! Yacht News The Association of Brokers and Yacht Agents have been able to introduce a VAT Customs Warehousing Scheme for non-EU boats which simplifies the situation so that VAT is no longer paid upon entry into EU waters. Interim Payments HMRC have issued new guidance for their staff when considering requests for interim payments of VAT refund claims whilst verification of the return is continuing. It is directly aimed at MITC suspects. An appeal to the VAT Tribunals does not give much support to the taxpayer’s case especially when HMRC consider that “mere feelings of sympathy are not sufficient to justify a discretionary payment”. It would appear that their policy has not identified any casework where it would be appropriate to make a payment in circumstances where a decision to refuse a credit has already been taken. Also HMRC acknowledge exceptional circumstances may be applied to the appellant but in practice it is not possible to identify what those exceptional circumstances might be. Inward Processing Relief HMRC have been issuing demands for the payment of duty for goods imported under inward processing relief being re-exported without the appropriate Customs’ procedure code being notified. The Tribunal has criticised HMRC, however they have referred the matter to the ECJ. New VAT Notices HMRC have issued the following Notices:
News from the Tribunals Institute of Biomedical Science – reference 20609. This covers an appeal in which the Tribunal was asked to adjudicate on the proportion of the Institute’s subscription fee income which should be treated as representing vatable supplies made by it. The interest in this case is that the subscription could be apportioned to reflect a taxable supply but had to determine the “cost” of that taxable supply when no cash expense was made.
This was an appeal by the University against the decision of HMRC who refused to allow them to issue a certificate to receive reduced rated supplies of electricity. The appeal was dismissed on the basis that even if they are a body governed by public law under the EC directive, it does not engage as a public authority providing higher education and therefore was not entitled to issue a certificate. Sunrise Trading Limited, reference 20628. This case concerns an assessment of over £38,000 and concerned recovery of VAT on expenditure which had been claimed by the appellant in providing VAT exempt vocational training. It highlights the need for tax payers to ensure that they understand their VAT status as the appeal was dismissed. Chamelon Mirrors Limited, reference 20640. This is a case revolving round the supply and fitting of slab mirrors to a protected property being converted into a dwelling. HMRC tried to argue that there was either a single supply of services or separate supply of the goods, namely the mirrors, together with one of the service of the fitting of the mirrors. As the supplies were not approved alterations they were not eligible for zero rating. The Tribunal dismissed their appeal considering that HMRC’s arguments were flawed as they were viewing the supplies in isolation rather than as a whole.
News from the European Court of Justice This case covers the ability for a holding company to recover input tax relating to its corporate transactions and investment activity. There has always been the argument about exempt activities and this case reinforces the fact that businesses should identify the total of the VAT incurred on expenditure first. They should then identify the amount of input tax directly relating to their business activity expenditure before applying any partial exemption calculations.
This is an opinion by the Advocate General Sharpston. It covers the position where a fully taxable business fails to account for VAT under the reverse charge procedure but is not given the right to deduct the reverse charge output tax as input tax on the same return. In his opinion the AG said that the reverse charge mechanism seeks to avoid double taxation and to ensure fiscal neutrality. Therefore when there is a clear liability under the reverse charge, it also gives the right to deduct and fiscal neutrality requires a deduction be allowed.
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
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