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Recent cases involving land and property transactions feature prominently in our latest VAT update.

We have highlighted a number of court hearings in this field, along with HMRC announcements and reports on other VAT issues affecting businesses and organisations. These include the right to VAT recovery involving agents and corporate restructuring fees.

VAT CASE LAW
There have been many VAT cases surround land and property recently and it continues to be an area of high scrutiny and challenges by HMRC. The recent cases include:

York University Property Company Ltd (formerly known as York Science Park (Innovation Centre) Ltd) - This case concerned a university building constructed in two phases and the Tribunal held that the second phase of construction was an enlargement of, or extension, to the first phase, rather than a continuation of the first phase of construction. Consequently, HMRC was successful and the works were held to be standard-rated for VAT purposes.

C Jenkin & Son Ltd - The key issue here was whether the leasing of residential caravans was zero-rated (as argued by the Appellant) or exempt from VAT (as argued by HMRC), when the occupier concluded a separate pitch agreement with the owner . The Tribunal concluded that the supplies at issue were neither zero-rated nor exempt from VAT and, in fact, were properly standard-rated. It just shows how complicated land and property transactions can be for VAT purposes.

Longridge on Thames – It has been announced that the Court of Appeal will hear this appeal on 19-20 April 2016. This case concerns whether construction services supplied to a charity in relation to the construction of a new building qualified for zero-rating. In particular, whether the construction qualified for zero-rating as the building was intended for use solely for a relevant charitable purpose (i.e. a non-business activity), even though the charity charged fees for the facilities.

M Lennon & Co Ltd – The question here was whether the sale of residential property was zero-rated or exempt from VAT and involved the retention of the front half facade, which was not a condition of statutory planning consent. The Tribunal held that the sale of the residential property was exempt from VAT, with the result that input tax (VAT) to that supply could not be recovered.

Additionally, there was a case involving the right to deduction of input tax (VAT) on retail and wholesale purchases of mobile phones and involved the use of agents in the supply chain. In relation to the retail supplies/invoices, the Appellant (i.e. Global Cellular Ltd) lost as it failed to establish to the Tribunal's satisfaction that the goods were supplied to it in accordance with the receipts. In relation to the wholesale supplies/invoices, the Appellant was successful as valid VAT invoices were received from its suppliers. This highlights the importance of receiving and retaining proper VAT invoices and ensuring that the invoicing is made to the correct parties.

Further, the Supreme Court ruled that a demonstrator car VAT scheme to enable car sales group, Pendragon, to recover VAT on demonstrator cars was 'abusive' and, therefore, did not achieve the VAT savings intended.

A final case worth mentioning involves whether input tax (VAT) is recoverable on corporate restructuring fees. In a case that will provide HMRC more encouragement in this area, the Appellant (i.e. Danesmoor Ltd) lost its argument as the Tribunal held that it was not entitled to recover input tax (VAT) incurred on professional fees in connection with a corporate restructuring exercise were supplied to the individual shareholders involved, rather than to the Appellant.

HMRC news
Updated Public Notices and Briefs
VAT Notices 700/24: postage, delivery charges and direct marketing and 701/10 zero-rating of books and other forms of printed matter
HMRC has updated these notices and can be accessed here and here

These notices explain how VAT should now be applied to charges made for postage, delivery charges and direct marketing. In particular, it clarifies that the 'Package Test' now refers to direct mailing / marketing businesses, together with those involved in the distribution of printed matter to recipients on behalf of the charities' customers. HMRC has also further extended the deadline for charities to comply with the new regulations regarding bulk mailings handled under a single contract, combining both printing and posting, to 31 July 2015.

VAT Notice 700/21: keeping VAT records
HMRC has also updated this notice which provides guidance on the records that must be kept by a VAT registered business or organisation and it can be accessed here 

Revenue & Customs Brief 9 (2015)
On 23 June 2015, HMRC issued its brief explaining its position on claims for compound interest payments following the Court of Appeal in the Littlewoods Retail Ltd case. The brief can be accessed here 

As you will note, HMRC is maintaining that the judgment on the availability of compound interest is neither clear enough nor sufficiently general to be applied to other claims for compound interest. HMRC notes in the Brief that it does not agree with the Court of Appeal's judgment and that it is seeking permission to appeal to the Supreme Court. On this basis, HMRC will apply for any existing claims for compound interest to continue to be stayed pending the final determination of the Littlewoods litigation. Therefore, HMRC will not be making any payments to other VAT compound interest claimants at this stage.

European Commission
VAT registration thresholds applied by EU Member States
The European Commission has published an updated table reflecting the various different VAT registration thresholds applied by EU Member States as of April 2015. This table also includes the regular registration threshold for small locally established businesses, together with the thresholds for intra-Community acquisitions and distance sales. The table can be accessed by clicking here 

 

Contact us

Should you wish further information on the above, please do not hesitate to contact Gary using the details outlined below.

 

Gary Moore
Direct line 0141 636 9353
Mobile 07812 061 582
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