In every update, our VAT team brings you a brief summary of news from the world of VAT. This month we focus on items which will be of interest to anyone who…
Is part of a VAT group
The Court of Appeal has released its judgment in the Prudential Assurance Company Limited case. The case concerned a supply of continuous investment services provided between members of the same VAT group that was billed after the supplier had left the group. The taxpayer argued that the supply was outside the scope of VAT as it was made between members of the same VAT group. This view was upheld by the First-tier Tribunal. HMRC argued that the tax point was created after the supplier had left the group (by invoicing or paying for the services) and therefore VAT was chargeable, which was the finding of the Upper Tribunal (UT). In a split decision, the Court of Appeal has now upheld the UT’s decision and found for HMRC.
Incurs fees in connection with selling shares
The Court of Appeal has found for HMRC in the ongoing case of Hotel La Tour. The Court overturned the earlier Tribunal decisions, which had agreed that the VAT on the professional fees related to a sale of shares could be recovered. Although the sale of shares is exempt from VAT, the tribunal decisions had agreed that the costs were attributable to downstream taxable supplies. The reasoning behind this was that the shares had been sold in order to raise funds to develop a new hotel. The Tribunals found that the professional fees were not a cost component of the share sale as they did not factor into the sale price. The fees could therefore be linked to the downstream taxable hotel income. However, the Court of Appeal has held that the professional fees had a direct link to the exempt share sale and the VAT was therefore irrecoverable. It is not yet known whether the decision will be appealed to the Supreme Court.
Raises invoices
The First-tier Tribunal has found against HMRC in Fount Construction Limited. The taxpayer had appealed HMRC’s decision to refuse it input tax recovery on the basis that the corresponding invoices did not contain an adequate description of the services provided. The invoices referred to ‘building works at the above’ and cited the address. HMRC felt this description was insufficient to enable them to confirm the correct VAT liability and therefore the invoices did not meet the legislative requirements.. However, the Tribunal stated that such a description was unnecessary; the invoice ‘is the gateway to any enquiries by HMRC rather than a repository for the answers.’
Is a tour operator
HMRC has released Revenue & Customs brief 5/24 setting out a technical change to the application of the Tour Operators’ Margin Scheme (TOMS). Previously, wholesale supplies of travel services to be sold on by the customer were considered to be outside of the scheme, although the supplier had the option of opting in. Now, HMRC has confirmed that the supplies are within TOMS, although a supplier may opt out by concession.
If you have any questions on how to prepare for the year end, please contact us.
This article was correct at time of publication.
