A VAT summary document for busy accountants in general practice
I thought you might appreciate a quick summary of some recent key VAT cases and an update on a recent change by HMRC, which may be relevant to your clients. They may be worth raising, the next time you speak with them.
In this September 2024 edition, I have covered a number of recent judgements of the VAT courts. In addition, I highlight a change made by HMRC which applies from 30th September 2024, concerning the VAT liability on the supply of residential caravans….and not forgetting a VAT tip for the upcoming budget.
- Andrew Quay Hull LLP vs HMRC [2024] TCO 9291 – Alternative Dispute Resolution (“ADR”)
- TalkTalk Telecom Limited vs HMRC [2024] UKUT – prompt payment discounts
- VAT Zero-rating – Residential Caravans
- Private Healthcare – Possible VAT Change
Andrew Quay Hull LLP vs HMRC [2024]
This case concerns the workings of the ADR process and the signing of an “ADR Exit Agreement”, which may be legally enforceable.
This case involved the appellant together with four other connected parties. They had been in dispute with HMRC over a number of VAT and penalty assessments, which had been raised. They entered an ADR, which involved shuttle mediation between all parties involved. This ADR concluded in agreement being reached and an ADR Exit Agreement being signed by all relevant parties.
The amount of VAT at stake was £750k. The penalty assessment was for £472,500 for a deliberate inaccuracy in VAT returns.
The appellant, believed that this ADR Exit Agreement had been signed confirming that no VAT was due and in light of this, no payment was due to HMRC. HMRC on the other hand, had believed that as no mention of the penalty was made, this penalty remained.
The First-tier Tribunal (“FTT”) had to decide whether a legally binding agreement had been signed and the words of the Exit Agreement should be enforced.
The FTT judge ruled that even though the appellant had signed the Exit Agreement under a misapprehension, with that misapprehension not being apparent to HMRC, the wording of it “was clear and explicit”. The penalty remained payable.
Firstly, ADR is not a “review process”. It is there to advance a dispute through to resolution. Where this does not happen, normal rights of review and appeal remain available. Where it does result in a resolution, an ADR Exit Agreement is signed, which is legally binding on all parties involved. Therefore, prior to signing anything at the end of the process, it should be fully understood.
In the event of being in such an ADR procedure or wanting to find out more information on it, please give me a call.
TalkTalk Telecom Limited (“TTL”) vs HMRC [2024]
A FTT decision had been reached in 2023. A decision of the Upper Tribunal (“UT”) was required as to whether it agreed with the earlier FTT or not i.e., whether TTL had not supplied telecoms services on terms which permitted a prompt payment discount (“PPD”).
Firstly, it should be noted that this case concerns the application of a provision which was changed a number of years ago. Accordingly, this should have very limited application other than to the parties involved.
This case concerned the application of a PPD between January – April 2014. TTL offered its customers a “speedy payment discount”. The value of the supply was reduced by the PPD, regardless of whether it was taken up or not. With effect from May 2014, this discount was only afforded to those customers, where the customer paid promptly.
The UT agreed with the earlier ruling of the FTT. In order for the valuation provisions relating to PPDs to apply, customers had to enter into a contract which contained terms covering a PPD before the underlying supplies were made. Accordingly, TTL’s appeal was dismissed.
VAT Zero-rating – Residential Caravans
HMRC have issued revised guidance in relation to The Value Added Tax (Caravans) Order 2024, coming into force on 30th September 2024.
From 2013, caravans manufactured which meet certain size criteria and BSI standard 3632 are considered “residential” caravans. They qualify for the VAT zero-rate. In subsequent years, updating of this standard was made, requiring the VAT zero-rate to be amended.
This revised guidance, is to apply to any version of the BS3632 in future, such that the VAT zero-rate will apply.
Private Healthcare
In the upcoming budget next month, the Chancellor could look to raise additional VAT receipts from other items being classed as “luxury items”. She has already decided that private education is to be classed as a “luxury”, which may result in her decision to place Private Healthcare and Dentists, within the same pot.
Currently, the supply of healthcare and dentist services are VAT exempt. Pre Brexit, the VAT rules were determined by European directives. However, with effect from 1 January 2021, when we left the EU, the VAT rules may be altered, where the UK government so wishes.
Years ago, private healthcare etc was a niche service, only being used a very small percentage of the population. Nowadays, with the NHS waiting lists being at record highs, it has become more of a necessity. Therefore, taxing this service, may be a way of generating additional revenue for the government. However, doing this, may frighten away people from using this “private” service, thereby creating additional problems for the NHS.
Something for the government to think about….
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