Latest News

VAT recovery on white goods?

The First-tier Tribunal has delivered a further decision in the appeal of Taylor Wimpey Plc in respect of a refund of VAT paid on white goods and other items included when new homes were sold. In the first decision in the case, the Tribunal was asked to consider the validity of the blocking order, which prevents developers constructing new dwellings for zero-rated sale from reclaiming input tax on the purchase of things like fridges, freezers, carpets etc. HMRC refused the claim on the basis that the input tax had to be offset by the output tax on the claim items. Agreeing with HMRC, the tribunal decided that the Appellant was not entitled to recover input tax on the claim items without offsetting the output tax. As the items were sold at a profit, the offset reduced the claim to nil and the appeal was dismissed.

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Staff Hire Concession

The Upper Tribunal has released its decision in a judicial review case brought by ELS Group Limited in respect of the extra statutory concession for staff supplies that was outlined in HMRC’s Business Brief 10/04 (which has now been withdrawn). The Appellant provided teachers to colleges and HMRC concluded that since it was not an “eligible body”, it could not supply VAT exempt “education” and that it was making supplies of staff, meaning that its supplies were taxable at their full value, including the teachers’ salaries. The Upper Tribunal refused permission for a judicial review and therefore the Appellant is required to account for VAT on the full value of its supplies.

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Floor Space Based Partial exemption Special Method

The tribunal has dismissed an appeal by the Hurlingham Club (“H”) against HMRC’s refusal to allow it to use a “floor space based” partial exemption special method to work out how much input VAT it could reclaim. The tribunal decided that H’s special method predicated on floor space was flawed and did not provide a more precise determination of the deductible proportion of the input VAT than that arising from application of the turnover-based method.

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VAT Free Transfer of a going concern - but for unexpected reasons

The recent decision in a case involving the Royal College of Paediatrics and Child Health and Coleridge (Theobolds) Limited highlights how easy it is for VAT planning to go slightly awry with potentially costly consequences, and that it always pays to check that HMRC are correct and in time to assess for VAT that apparently has not been declared.

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Great VAT Savings Opportunity for Hospices

Hospices have a really great opportunity to recover more VAT on their costs once changes announced in the pre-budget speech are implemented. Although the details of the new rules are yet to be published, the new VAT refund mechanism will be effective from 1 April 2015. This is fantastic news for Hospices as VAT is currently 1/5th of the costs incurred on most purchases of goods and services and much of it cannot be recovered, so VAT represents a substantial cost.

At the moment it is not clear how the recovery method will operate, as there are a number of options that could be introduced. This is a concern as it will allow Hospices very little time to make what could be radical changes to their accounting systems to ensure that they maximise VAT recovery without also claiming VAT they are not entitled to and thus creating an exposure to an assessment for VAT, interest and penalties.

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To VAT group or Not? ECJ Decision in the Case of Skandia

HMRC have announced that changes will be implemented to VAT accounting for VAT groups in light of the European Court of Justice decision in the case of Skandia America Corporation (Skandia). This case is interesting as it highlights the differences in how VAT law has been interpreted and introduced in each member state of the EU. It also highlights the potential cost to businesses who assume that the same rules apply when accounting for VAT in each member state. This is very often not the case.

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Luxembourg VAT rate changes

From 1 January 2015, Luxembourg has increased its standard rate of VAT to 17%. The reduced rate is now 14% and 8%. The super reduced rate remains unchanged at 3%.

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Upper Tribunal confirms that the creation of a nursing home qualifies for zero-rating

The Upper Tribunal has released its decision in the case of Astral Construction Ltd, in respect of the construction of a nursing home on the site of an old church, which was retained as part of the much larger structure on the site that comprised of a new nursing home. The First-tier Tribunal agreed with Astral that this amounted to the construction of a new building that qualified for zero rating. However, in the Upper Tribunal, HMRC tried to argue that the fact that the old church remained meant that the work could not qualify for zero rating and that rather than being subject to the zero or reduced rate of VAT it should have been standard-rated. All of HMRC's contentions were rejected by the Upper Tribunal, which agreed that the First –tier Tribunal had directed itself properly and reached a conclusion that was open to it on the facts it found.

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Non-profit making Members Sports Clubs – VAT refund

HMRC have released a VAT Information Sheet following the decision of the Court of Justice for European Union in Bridport and West Dorset Golf Club. HMRC accepts that supplies of sporting services made to both members and non-members by non-profit making members sports clubs can be regarded as an exempt supply for VAT purposes.

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The End of tax Returns and Start of VAT Issues

The end of tax return season generally sees an increase in VAT queries being referred to our firm by client’s and their accountants. So, how do you know if a tax payer has a VAT issue or not? Aside from the obvious points such as checking the client’s VAT accounts and VAT control ledgers all reconcile and sense checking VAT codes set on the accounting system, it pays to keep abreast of developments in the world of VAT by checking for any changes that may affect your clients each time our Network News is issued.

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