VAT Insights – May 2024

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A VAT summary document for busy accountants in general practice

In this May 2024 edition, I have looked to cover two most recent VAT cases decided last month:

Gillian Graham (t/a Skin Science)                                       – Cosmetic skin treatments – VAT exempt?
Fount Construction Ltd                                                           – Requirements of a VAT invoice met?

I also make mention of two recent changes at HMRC:

HMRC guidance                                                                        – Managing import duties
Revenue and Customs Brief 1/24                                       – Streaming of funeral services – VAT exempt

Gillian Graham (t/a Skin Science) (“GG”)
This concerns the ongoing debate over what constitutes medical care. In the event of the services proving to be VATable, it was argued that the VAT assessment was made out of time. Just as a quick reminder, the provision of medical care is covered off by the Health and Welfare VAT exemption. These are services for the primary purpose of protecting, restoring or maintaining health. Anything which falls outside of this, falls to be VAT registerable where the registration limits are met, where no other VAT exemption or zero rating is available.

This case concerned a Harley Street clinic where GG was registered as a registered general nurse. GG provided a range of treatments. GG understood the services provided were of a medical nature. Therefore, her thinking was that VAT registration was not required.

In this FTT decision, it was held that the services provided by GG were not VAT exempt, as not having a medical aim. Accordingly, it was liable to be VAT registered for the period November 2007 to February 2018. The assessment was to be £212,897.

On the subsequent issue, it was held that the VAT assessment had been made out of time. This time limit extends to one year “after” evidence of facts sufficient in the opinion of HMRC to justify the making of the assessment comes to its knowledge. Accordingly, albeit that there may have been a VAT registration necessary, the fact that the assessment was made out of time, resulted in GG quashing the assessment.

The point to learn from this decision does not wholly revolve around when VAT exemption is, or is not, applicable. It is always useful to properly examine the circumstances and procedures applied by HMRC in raising VAT assessments, as it can result, as in this case, to a potential way out.

As always, if you have any VAT assessments which you are currently looking at, by all means pick up the phone to me and examine whether there is any solution.

Fount Construction Ltd (“Fount”)
This FTT decision concerned an input tax claim made by Fount from HMRC, in respect of three invoices issued by a building contractor, Landcore Limited, for £15,218.59. The invoices each contained the single description “building works at the above”. The invoices contained a box entitled “job address” containing the address for the building site in question.

HMRC were of the opinion that these were not legitimate as they did not meet the requirements of a VAT invoice, as detailed in the VAT regulations.

It was argued by HMRC that it needed to be able to verify that the details on the invoices were correct, that the VAT had a business purpose and was charged at the correct rate. In its view, the description “…was insufficient as it did not allow HMRC to assess the liability or determine the rate of VAT due”.

Counsel for Fount, understood that an invoice may have only a simple description and that it “…did not need a novel” in order for it to be valid.

The FTT disagreed with HMRC and allowed the appeal stating that HMRC have wide ranging powers to seek further information in relation to the supplies made. The FTT judge concluded that:

“The invoice is the gateway into any enquiries by HMRC, rather than a repository for the answers to any questions that might be asked”.

This demonstrates that HMRC may go to extraordinary lengths, even resorting to taking a case to the FTT, to prove a point. HMRC is using taxpayers’ money to do this and time and time again, are finding out that the point they were looking at, is incorrect.

If you have a decision taken by HMRC which you do not necessarily agree with, pick up the phone and we can have a chat. “David and Goliath” comes to mind…

HMRC – Guidance to manage your import duties and VAT accounts
HMRC have recently released guidance for a new online service to assist businesses with their import duties and VAT accounts.

If your business is involved in importing goods, you can use the new service which brings everything needed into one place. It can help to:

  •  Download duty deferment statements;
  •  Obtain import, and postponed import, VAT certificates;
  •  Manage payment and guarantee accounts; and
  •  Manage and view authorities.

The website can only be accessed via the Government Gateway. In addition, you must be subscribed to the Customs Declaration service, to use this service.

Revenue and Customs Brief (“RCB”) 1/24
HMRC have recently issued this RCB on the live streaming of funeral, burial and cremation services. VAT exemption applies to the disposal of the remains of the dead and to making arrangements for, or in connection with, the disposal of the remains of the dead. The provision of goods and services not directly connected with the making of such arrangements do not fall within the exemption.

HMRC have confirmed that the supply of live web streaming of funeral, burial, or cremation services provided by an undertaker, cemetery, or crematorium operator is to be treated as VAT exempt. Live web streaming services supplied by a third party for a separate consideration is not within the scope of the exemption. The relevant Public Notice on this has been updated.

It should also be noted, that HMRC makes the point that if VAT has been charged in the past, then an adjustment may be made on future VAT returns.

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