Sale of Land Was TOGC

Highlights

• Sale of land was TOGC
• Weight Watchers
• Party to fraud loses VAT claim
• By the way

April 2008Issue 80

This material is intended only as a guide, professional advice must always be obtained in specific cases.

VATMANAR NEWS

VATMANAR NEWS APRIL 2008

This newsletter is aimed primarily at professional advisors to highlight new developments hidden in the mountain of VAT paperwork. We are not able to provide full answers and comments, but will refer you to more detailed articles etc., in professional publications.

Sale of land was TOGC

The Tribunal decided (in the case of Dartford Borough Council) that the sale of development land with the benefit of a formal agreement to lease amounted as a TOGC. During the hearing, it became clear that the Reviewing Officer had no idea what an agreement to lease was, and thought that it was no more than a statement of intent to lease.

Comment. HMRC were criticised by the Tribunal for the lack of understanding of what was a perfectly normal commercial transaction, and because of the lack of understanding the Appellant was put to a great deal of unnecessary trouble and expense. They expressed the hope that HMRC will give legal advice to their officers, and whoever in the Solicitor’s Office was responsible for the Statement of Case. The Solicitor’s Office would argue that they only act on instructions from officers, it is a not uncommon occurrence for the preparer of a Statement of Case (now often a barrister) not to question legal misunderstanding that are clearly not in the interest of HMRC. All lawyers have a responsibility to the Judicial System, which sometimes they seen to forget.

Weight Watchers

This case in the High Court [2008]EWHC 53(Ch), was concerned with whether the supply of goods and services was a single or a multiple supply. The supplies made by Weight Watchers were in providing services & products for weight management & loss. Customers received a handbook & other literature on registration, with weighing & talks at a meeting for a registration fee and a meeting fee. The appeal was allowed in part on the basis (of the agreed) “artificial to split” test.

The appeal held that, for VAT purposes, it was necessary to apportion the consideration received from customers attending their first meeting. However it would be artificial to differentiate between those supplies at subsequent weekly meetings where the taxpayer was in fact making a single supply of weight loss services.

Comment. This interesting case highlights the difficulty for taxpayers & HMRC in determining the VAT liability of supplies where a number of different elements are present and that Card Protection Plan does not provide a panacea to ensure absolute certainty

Party to fraud loses VAT Claim

Hargreaves (UK) plc sought to recover VAT input tax on the purchase for its vehicles of laundered, rebated fuel, which could not lawfully be used in road vehicles. The VAT involved was £170,927 for which a VAT invoice had been issued, the Tribunal in its decision gives a very thorough and logical ruling, and the input tax charged was not deductible.

Comment. Hargreaves, according to the Tribunal was a person who knew or should have known that the transaction was connected with the fraudulent evasion of VAT (and road fuel duty) –no doubt because the price paid was considerably below that which would be payable in respect of genuine transactions. The illegal business of removing chemical markers and dyes from rebated fuel in fairly common and has been perpetrated over at least 40 years. The profits in undertaking such activities are huge, generally being carried out in road tankers and even small oil tankers at sea. The methodology of removing the markers and dyes is a matter of simple chemistry, the raw materials are easily available & cheap, the process (if done properly) is virtually undetectable to normal forensic investigations. The “VAT loss” will not cover the lost road fuel duty!

Further reading. news@cch .co.uk

By the way

VAT & Trusts.The Association of Investment Companies are calling on HMRC to allow Venture Capital Trusts to be afforded the same treatment as investment trusts, and allow exemption from VAT on management expenses.

Three year capping. Business Brief 07/08 deals with how taxpayers can make claims under the Fleming/Conde Nast rulings, following the HofL judgment. It also details the claims which are covered and the appropriate effective dates.

Weald Leasing. HMRC have sought permission to appeal to the Court of Appeal against the decision in the High Court.

Job losses force debt collection to be curtailed. HMRC are in the process of cutting 25,000 jobs, as a result debts up to £20,000 are not being “chased”, although it is hoped that this may be reduced to debts of £10,000 over a period of time. Collectors are being seconded to other parts of the country in an effort to “shore-up” specific areas of difficulty!

Animal Rescue Charities. Following the Tribunal decision in the case of Gables Farm Dogs & Cats Home, HMRC have issued Brief 14/08 to explain the revised liability of sales of lost, unwanted & homeless cats & dogs by charities. They are now considered to be “donated” and therefore the sale of such animals will be zero-rated for VAT purposes. Charities making such supplies may not recover VAT output tax accounted for and paid on such sales – these are subject to the normal time limits and unjust enrichment regulations.

Hairdresser’s facilities. HMRC have successfully appealed the case of Denyer [2007]EWHC2750 (Ch), the appeals rested on the overall “package” of facilities provided in hairdressing salons, and should be examined in the context of the whole of the establishment and not solely in respect of a specific area. The use of wash basins and the waiting area the HC determined was particularly important.

Taxpayer’s safeguards. HMRC has published a summary of the responses to last year’s consultation. It has announced that it will be working with interested parties on the development of a Taxpayers Charter, which will set out the rights & responsibilities in a single accessible document! It will be interesting to see if the responsibilities of HMRC are similarly documented!

No repayment of tobacco duty. The ECJ has determined in the case of Batig Gesellschaft ECJ C-374/06. !3 Dec 2007, that duty was no refundable where the tobacco products were stolen before the tax markings were affixed.

Manchester VAT & Duties Tribunal Centre has now moved to Alexandra House, 14 -22 The Parsonage, Manchester M3 2JA (tel 0161 833 5110 fax 0191 833 5151). The new centre is behind Kendal’s, off Deansgate. Parking is lousy and expensive in the area! There is a free bus on a circular city centre route which includes both Victoria & Piccadilly train stations.

Don’t forget we can organise your course for you, in any VAT subject! And the bonus is that it will be specifically tailored to your requirements and will be cheaper!

For the benefit of subscribers and clients, we run a free telephone helpline service on 01625 850642.

For further Information on any of the points raised above, or any other VAT matter, contact

Alan Rashleigh, Alan Rashleigh & Co. 37-39 Park Lane, Poynton, Cheshire, SK12 1RD

Tel: 01625 850642 Fax: 01625 879280 Email: