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This month's update considers last week's Autumn Statement 2015, together with new announcements from HMRC and the European Commission and a case involving invalid expenditure invoices for VAT recovery claims.

Autumn Statement 2015

In last week’s Autumn Statement, there were three VAT measures and we note these below.

  1. Reduced VAT rate on Energy Saving Materials: It was announced that there would be a consultation before any VAT law changes were introduced next year. For further details on the background to this change, please see a link to our website article from June 2015 here

  2. Sixth Form Colleges will be eligible to become Academies: It was announced that Sixth Form Colleges will be eligible to become Academies. Currently, such Colleges have to pay VAT on the goods and services they acquire, with no means of recovering the VAT. However, Academies have a similar status but do have a special VAT refund scheme and this will be available to Sixth Form Colleges that become Academies.

  3. Sanitary Products: It was announced that the UK would be commencing discussions with the EU in connection with attempting to agree a more favourable rate of VAT for sanitary products. In the meantime, the Government set up a fund that will make £15 million a year available to support women’s charities over the course of the current Parliament, or until the EU agrees to the proposed changes.

HMRC Consultations
HMRC is consulting until 16 December 2015 on draft legislation regarding VAT bad debt relief and insolvent businesses. This is intended to preserve the effect of the VAT extra-statutory concession which prevents insolvency practitioners becoming liable for a clawback of input tax (VAT) on bad debts for businesses they act for, where the supply took place prior to the insolvency of the business.

HMRC is also consulting until 27 January 2016 on the withdrawal of nine extra-statutory concessions to be effective from April 2017. Of these concessions, four relate to VAT and are:

  • Para 9.8 Notice 708 - Apportionment of works of approved alterations to a qualifying protected building;
  • 3.23 VAT: supplies by Financial Ombudsman Services Ltd to ombudsman authorities;
  • 3.28 VAT: supplies by Financial Services Authority to self-regulating organisations; and
  • 3.31 VAT: supplies by Financial Services Compensation Scheme Ltd to compensation scheme authorities.

HMRC Publications
HMRC's Revenue and Customs Brief 19 (2015) provides an update on HMRC's work on unjust enrichment in relation to supplies of sporting service by non-profit making bodies following the ECJ judgement in the case of Bridport and West Dorset Golf Club Ltd (C-495/12).

Following the above ECJ judgment, HMRC now accepts that supplies of sporting services to both members and non-members of non-profit-making sport clubs (for example, private member golf clubs, not proprietary clubs) are exempt from VAT. Previously, HMRC informed that it was examining the scope for restricting repayments, on the grounds of unjust enrichment, to those clubs which do not adopt arrangements to reimburse non-members who were incorrectly charged VAT. This latest HMRC Brief updates its position on unjust enrichment and explains what action non-profit-making members' golf clubs now need to take.

That is, where HMRC receives valid claims by non-profit-making sports clubs it will make interim repayments of 33% (where a golf club charges a green fee of over £100) and 50% for all other claims. There is still some disagreement with HMRC's position on unjust enrichment, together with the VAT treatment of supplies to corporate bodies and tour operators. These issues, and a number of others, were heard by the First Tier Tribunal in June 2015 and we still await the decisions. HMRC Brief can be accessed here

HMRC has re-issued its VAT Notice 700/56: insolvency, and it includes changes to paragraphs 7.5 and 20.1 which provide a new address and contact details for the submission of claims for repayment of input VAT on form VAT 426. Additionally, section 7.7 contains a clarification of the criteria for reclaiming input VAT using form VAT 427. A link to this notice can be accessed here

HMRC has updated its list of VAT appeal cases it has lost and which may have implications for other businesses. The listing can be accessed here

HMRC announced the next step in its ten-year modernisation programme to become a Tax Authority fit for the future to include fewer, more modern, regional centres. That is, HMRC is to consolidate its 170 offices across the UK into 13 large regional centres and 4 specialist sites. The first new regional centre is expected to open in 2016-17, with the others opening over the following four years. HMRC's announcement can be accessed here 

European Commission
The latest European Commission ('EC') VAT Committee guidelines relate to the VAT treatment of crowdfunding. In particular, the VAT implications of reward-based crowdfunding, crowd-investing and crowd-lending.
For VAT purposes, crowdfunding generally refers to the process of raising funds for a specific project via an open call on the internet, by way of specifically designed platforms which allow interaction between entrepreneurs (i.e. those who create a project) and contributors (i.e. those who provide financial support for that project). The expression 'crowdfunding' merely refers to the channel used for the financing, but can take different forms. Two main crowdfunding models are identified:

  • Non-financial return models, where the return may range from either nothing (donation) to goods or services (reward-based crowdfunding); and
  • Financial return models where a financial return is expected, either in the form of a participation in future project earnings or securities (crowd-investing), or interest on loans (crowd-lending).

The EC VAT Committee guidelines consider whether such crowdfunding arrangements give rise to supplies for VAT purposes. These guidelines have been prepared in response to specific questions raised by the EC, or an EU Member State, concerning the application of the EU VAT provisions. The guidelines are merely views of an EC Advisory Committee and, therefore, do not constitute an official interpretation of EU VAT law and do not necessarily have the agreement of the EC. That is, they do not bind the EC, or any EU Member State, who are free not to follow them.

Recent case law
An appellant, Ambrosia Bakes Ltd, has had its appeal dismissed. In this case, HMRC disallowed the appellant's claim for input tax (VAT) recovery on the basis that the retained supporting invoices were invalid. The appellant accepted that the invoices were invalid but contended that, as it was not disputed that there was a supply, the input tax (VAT) recovery should be allowed. Here, HMRC has a discretion to accept other evidence for allowing recovery, as an alternative to a proper and valid VAT invoice. However, due to concerns over both the identity and VAT registration status of the supplier, HMRC considered that the appellant failed to provide sufficient alternative evidence to allow its claim for input tax (VAT) recovery.

It is important that all businesses and organisations hold proper VAT invoices to support their claims, including fuel receipts for VAT on business mileage claims. Where a business receives a non-compliant invoice, it should regularise the position without delay, in particular if the business has operations in other overseas jurisdictions since attempts to rectify the position post Tax Authority audit may be ineffective, resulting in disallowed input tax (VAT) and creating an unnecessary financial exposure (i.e. Petroma Transports SA, case C-271/12).

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
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