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“It pays to challenge HMRC!”

One of our recent cases has highlighted that it is always worthwhile taking advice and challenging HMRC when they indicate they will assess.

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VAT on carrier bags in Scotland

From 20 October 2014, the Scottish Parliament is to introduce a compulsory charge on single use carrier bags set at a minimum of 5 pence. This charge will apply on single use carrier bags supplied with goods, supplied in or delivered from Scotland. Where such a charge is made by a VAT registered retailer/supplier there will be an obligation to charge VAT on the income received at the standard rate of VAT.

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Donations – VATable or not?

In the case of Serpentine Trust Ltd the First Tier Tribunal (Tax) considered the VAT treatment of 'donations' made by four friends schemes to the gallery, which provided the donors with benefits from the gallery.

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Intention versus Contract terms - an important VAT decision especially for high value contracts

The recent decision in the Court of Appeal case for CLP Holding Company v Singh and others challenges the generally accepted position for contracts where the price is stated to be exclusive of VAT and means that anyone dealing with contracts should be extra vigilant in respect of VAT.

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Snowballs or return of the Jaffa Cake debate

Many of you will recall that the VAT treatment of Jaffa cakes was a contentious subject a number of years ago and served to highlight how difficult it can sometimes be to determine the VAT liability of an item. A recent case for two businesses that sold marshmallow chocolate snow balls has resurrected some of the arguments used in the great Jaffa Cake debate. The manufactures sought to argue that the products were standard rated confectionary and instead were zero rated cakes and submitted a claim for VAT over declared, where as HMRC’s view was that the products were confectionary and correctly standard rated.

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Businesses supplying digital services to Consumers across the EU

Businesses that supply digital services to consumers across the EU will be able to register for the mini one-stop-shop from 20 October 2014. This means they will not have to register for VAT separately in each country where they do business. From 1 January 2015, the place of taxation of digital services to non-business customers will be where the consumer is located, rather than the supplier.

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The VAT rate of books to change?

The ECJ has delivered its judgment in the Finnish case of K OY in respect of the VAT liability of books supplied on an electronic format. The Court has decided that EU law permits different VAT treatments for paper books and e-books as long as the differing treatments does not breach the EU law principle of fiscal neutrality (goods that are “similar” from the point of the “average consumer” must be taxed at the same rate). The CJEU suggested that "if what matters for that consumer is essentially the similar content of all books, regardless of their physical support or characteristics, the selective application of a reduced rate of VAT is not justified." This suggests that differing VAT rates for e-books and paper books cannot be maintained if the key consideration for the consumer is the content and not the method in which that content is delivered.

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VAT on cross border services

The European Court of Justice (ECJ) has ruled that Swedish insurer Skandia is liable to pay VAT on cross-border services. The decision may potentially mean financial institutions would be subject to VAT for operations supplied between a group’s headquarters and its branches.

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Card handling services go to Europe

The long running dispute between HMRC and Bookit Limited has been referred to the ECJ for guidance. Bookit provides a card processing service for Odeon Cinemas, a company that it is a subsidiary of, and receives a handling fee where cinema tickets are booked online or by phone. In order to accept a payment Bookit undertakes various actions including verifying and processing credit or debit card transactions and acting between the card holder and the card provider. Bookit then passes the payment for the booking less any bank charges and its own processing fee to Odeon.

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Default Surcharges - Inability to pay is not always a reason for HMRC to impose the penalty

Where a business submits more than one late VAT return (or pays one VAT return late) it will incur a financial penalty on a sliding scale rising from 2% of the VAT for the second late return to 15% for the fourth late return and any subsequent ones in the following four quarters. Unfortunately as many businesses find HMRC are unsympathetic to arguments that lack of ability to pay should be taken into account, and in fact the VAT law states that inability to pay is not an excuse.

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