In this October 2023 edition, I have looked to cover two most recent VAT cases recently decided:
All Answers Ltd – Agency vs Principal – VAT
Heartlands House Ltd – HMRC Resist Repayment
I also make mention of two recent changes at HMRC:
HMRC / “NETPU” – VAT registered at High-Volume Address
VAT Registration form – Withdrawal mid-November 2023
All Answers Ltd (“AAL”)
AAL runs websites which allow students to commission answers to their essays etc. AAL sub-contracts these works out to various writers. In 2016 HMRC assessed AAL for VAT on the total charges made, seeing it as acting in a “principal” rather than in an “agency” role. AAL argued that it was acting as an “agent” of the writer.
In 2020, the courts ruled that it was acting in a “principal” role, resulting in VAT being due on the payment received from the parent / guardian.
AAL went back to the drawing board.
New agreements were drafted such that the copyright in the work remained with the writer. The contract explicitly stated that one was in place “between yourself [the writer] and the Customer [student]”. However, the “core” obligation being to the customers to deliver the product, in the specified timescale, and to the requisite standard, remained with AAL.
The commercial and economic reality was therefore that AAL made the supply and received the payment. VAT was due on the entirety of the payment received from the parent / guardian.
The First Tier Tribunal (“FTT”) explained that nothing significant had changed since 2016 and the appeal was dismissed.
In the event of you having similar issues to those raised above, please call me. I have experience in looking into these matters for client. I may be able to advise you on what is necessary to ensure your structure is watertight.
Heartlands House Ltd (“Heartlands”)
This decision of the FTT concerns the necessary evidence to be provided by a taxpayer to justify HMRC making a repayment of the VAT incurred.
Heartlands, operating in the construction sector, VAT registered in October 2018. The first VAT return ran from the date of registration until 30 September 2019.
Throughout this period, Heartlands undertook a number of ventures and dealt with a number of sub-contractors. In relation to a couple of projects, the customers had become dissatisfied with the works undertaken and resulted in them being abandoned.
HMRC agreed that the purchases had been made and that the VAT was incurred. The question was whether the purchases had been made in connection with actual or intended taxable supplies.
The FTT judge held that:
“We consider that a failure to undertake rigorous due diligence is not sufficient evidence of a lack of intention to make taxable supplies. Any such failure is consistent with the general poor management of the appellant business but does not mean that the appellant’s evidence should be discounted…”. Accordingly, the appeal was successful.
I had a very recent case whereby the VAT First Period Repayment Claims Team, were querying a first VAT claim for my client. It was in connection with an Option to Tax having been exercised over a building. We provided everything HMRC required to allow the repayment to be made. HMRC subsequently authorised payment.
In the event that you have this team looking at your clients first repayment claim, and have any questions, please get in touch as we have experience in dealing with such matters.
HMRC – UK Establishment Evidence
From January 2021, online marketplaces are liable for the VAT, from sales on their platforms by overseas traders. To ensure such businesses are no longer registered as Non-Established Taxable Persons (“NETPU”), they provide a UK address. Result is that the NETPU no longer has to declare VAT and the marketplace does not become liable.
A “High-Volume Address” is where a single address is listed as the principal place of business for many UK businesses. Businesses VAT registered at a High-Volume Address, will now be asked by HMRC to prove they are UK established.
Failure to respond to the HMRC request, may result in the VAT registration being cancelled.
Should you have any questions in connection with this, please give me a call.
Withdrawal of VAT Registration form
With effect from mid-November 2023, businesses will no longer be able to access the paper VAT registration form online and will have to either register online or call HMRC to request a form. In light of the delays recently seen when calling HMRC, this second alternative is not really an option!
Businesses which are either exempt or who can only register using this form, will now have to however call the VAT helpline.
Call me
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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