A VAT summary document for busy accountants in general practice
In this June 2023 edition, I have looked to cover two most recent VAT cases decided last month:
Yorkshire Agricultural Society – Admission fees – VAT exempt?
Sports Invest UK Ltd – Place of Supply rules?
I also make mention of two recent changes at HMRC:
HMRC VAT Registration Helpline – Closure
Revenue and Customs Brief 5/23 – Pharmacist supervision
Yorkshire Agricultural Society (“YAS”)
At YAS, a registered charity, the question arose as to whether the entrance fee to The Great Yorkshire Show was VATable or VAT exempt. The event’s raison d’être, was both for educational and fundraising purposes. As is usually the case, HMRC was of the opinion that this was a VATable supply. The conditions necessary for VAT exemption, for charitable fund-raising events, appeared not to have been met. Therefore, it raised an assessment on YAS.
For VAT exemption to apply, the show’s primary purpose must be to raise money. The fact that the event took place was for two reasons rather than one, should in the opinion of HMRC, have resulted in the admission tickets being VATable. However, in the opinion of the First Tier Tribunal, fund-raising activities had to be “a” primary (i.e., an important) objective, rather than “the” primary (i.e., almost exclusive) purpose. There is a subtle, but very significant difference, between the two. This appeal by YAS was therefore allowed.
A further element to this case concerned the validity of the HMRC assessment which was raised, being out of time. It had been made outside of the one-year time limit for evidence of facts It was not valid and should have been withdrawn.
As mentioned in the April VAT Insights edition, this was HMRC “at its best” yet again, receiving a slap on the wrists, for getting it so wrong. Time and again we see basic errors being made by HMRC, resulting from its misunderstanding of the facts and the VAT position.
If any of these issues, or any VAT assessment is raised by HMRC on any of your clients, please call me to have a chat. We can see whether HMRC has got it wrong, yet again!
Sports Invest UK Ltd (“Sports Invest”)
The Place of Supply rules are often complex and depend upon the Place of Belonging of both the supplier and the recipient. In this case, the supplier was Sports Invest, a UK business and the recipient was a Portuguese football player / an Italian football club.
Sports Invest signed both a representation contract with the player, and a separate contract with the club, in the event of a transfer taking place.
The questions that required answering were:
Did Sports Invest make a supply to the club or the player?
Were there one or two supplies made?
Where was the supply made?
In the pre-Brexit world, had the supply been partly made to the Portuguese player, it would have been a supply between a UK business and an individual situated in another member-state. The supply would have been B2C and subject to UK VAT. HMRC would therefore have been entitled to its VAT cut.
It was held that there was only one supply by Sports Invest to Inter-Milan, the club. The supply took place where the recipient belonged i.e., Italy, and therefore fell outside the UK. HMRC lost out, as the supply was not subject to UK VAT.
VAT is a tax on supplies made. Supplies are made by a supplier, to a customer. The correct approach is to seek to understand the commercial and economic relationships, in addition to the contractual relationships.
If this may be relevant to any of your clients or you have a complex scenario involving VAT / Place of Supply issues, please call me to discuss.
HMRC VAT registration helpline
As you will no doubt be aware, HMRC’s VAT registration helpline has been shut down from 22nd May 2023. The helpline dealt with queries from taxpayers concerning the application process for VAT registration. There was very little advance notice of this provided by HMRC.
HMRC explained that over 85% of calls dealt with concerns regarding updates being requested on an individual’s VAT registration process. It appears to me that had the VAT registration process been turned around in an efficient manner, these calls would not have been necessary.
HMRC also advised that taxpayers can once again expect a reply to their VAT registration application within a 40-day period. However, as much as one tries not to be sinical, will this merely be a holding letter which is provided?
Where the 40-day period has been exceeded by HMRC, it recommends that an email is sent to firstname.lastname@example.org. A reply should be received by the taxpayer from HMRC, within 5 working days. Let’s wait and see whether this happens, and whether this arrangement works…to be continued at a later stage.
Revenue and Customs Brief (“RCB”) 5/23
As reported in Spring Budget 2023, the VAT exemption for healthcare has been extended to include medical services that are carried out by staff who are directly supervised by registered pharmacists. HMRC have issued RCB 5/23 on the change to the VAT treatment of medical services carried out by non-registered staff directly supervised by pharmacists, which is to apply from 1 May 2023. This brief does not provide any additional details, but does note that VAT Notice 701/57 will be updated in due course.
This extension was not there, pre-1 May 2023. This brings the VAT treatment of pharmacists in line with other registered health professionals, providing medical services to the public. This change is designed to improve the competitiveness of services offered by community pharmacies.
You are welcome to call me any time to get my opinion on any VAT issues, challenges or potential opportunities faced by your clients.
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