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Clearly the biggest news in relation to VAT in June was the impact of Brexit, which we covered extensively in our special VAT update.

Therefore, in this VAT update we cover the other VAT news for the past month, including issues such as revised guidance on transfers of businesses to a VAT group and VAT case decisions, one of which leads to VAT claim opportunities for suppliers of pre-installed software which helps people with certain disabilities.

Court decisions
In a case involving, Iansyst Limited, it was determined that the VAT liability of pre-installed software on mobile devices, known as 'Capturatalk' which has a number of functions to include reading text aloud when navigating web pages and, therefore, assisting persons with disabilities such as visual impairments, qualified for the VAT zero rating relief. Consequently, any businesses or organisations supplying pre-installed software to disabled parties may wish to review the VAT liability of their supplies following this VAT decision.

In another case, Norseman Gold plc has applied to the Court of Appeal for permission to appeal the Upper Tribunal's decision around whether management services supplied by a holding company where, at the time of supply there is no compulsion to pay for the services and no clear prior obligation, there is no consideration for VAT purposes. HMRC contend that the services are not taxable supplies and the holding company (i.e. the supplier of the services) has no entitlement to input VAT recovery. This case further demonstrates that for a holding company to be entitled to input tax (VAT) recovery, any intention to make future taxable supplies for consideration must be established at the time when the input tax (VAT) is incurred. Further, this intention should be agreed, in writing, between the relevant parties.

The Upper Tribunal will hear Adecco UK Ltd's appeal between 5-7 December 2016. This case concerns the VAT treatment of supplies of temporary workers and is likely to have implications for businesses and organisations who supply, or engage temporary staff. In particular, VAT-averse users of temporary staff (for example, charities, universities, housing associations and organisations in the healthcare and financial and insurance services sectors).

HMRC news
On 1 June 2016, HMRC issued its Revenue and Customs Brief 12 (2016) bringing attention to recent updates to HMRC's Senior Accounting Officer guidance and this can be accessed here.

On 24 June 2016, HMRC issued its Revenue & Customs Brief 11 (2016) in relation to its revised guidance on when the transfer of a going concern ('TOGC') rules apply, following the Upper Tribunal case involving Intelligent Managed Services Ltd, which concerned the transfer of a business into a VAT group. The Brief, which can be accessed here,  also covers other TOGC issues, including where a business is transferred to a person without an establishment in the UK.

As a result of the Upper Tribunal judgment, HMRC now accepts that if a business is transferred to a company in a VAT group it is a TOGC, at the first stage, if both:

  • that company intends to continue to use the transferred assets to operate the same kind of business in providing services to other group members; and
  • those other group members use the services to make supplies outside of the group.

HMRC has also revised its policy relating to transfers out of a VAT group and its guidance at section 4.3 of its public notice 700/09: transfer of business as a going concern will be superseded by HMRC in due course. The Brief also details HMRC's policy in relation to TOGCs where a non-established person acquires a business, or part of a business, and the person is not already a taxable person at the time of the transaction (i.e. it is not registered for VAT by the time of the sale).

The above change by HMRC gives an opportunity for businesses and other organisations to make a claim for overpaid VAT as a consequence of overpaid Stamp Duty Land Tax ('SDLT'), where transactions previously treated as subject to VAT at the standard-rate should have been a TOGC and outside the scope of VAT.

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
Email This email address is being protected from spambots. You need JavaScript enabled to view it.