VAT Connect – December 2015

It’s Christmas party-time, which can mean only one thing…

…you can claim the input tax back on staff entertainment!

As long as the costs have been used for your staff, input tax incurred on entertaining them during the festive season can be recovered, subject to the normal rules. The down side is that the recovery doesn’t extend to non-staff, so remember to apportion and exclude the input tax for any non-employees.

Tribunal agrees to 90% repayment of golf claims

The First Tier Tribunal has ruled on the issue of ‘unjust enrichment’ in relation to the retrospective claims made by non-profit making golf clubs.

The Tribunal concluded that there was unjust enrichment, but based on the economic calculations from expert witnesses, the extent of it was 10%; about 40% less than HMRC had estimated.

The Tribunal also considered the link between course maintenance costs and other income streams (such as tee advertising, buggy hire, and corporate day packages). It concluded that there was a sufficient direct and immediate link between the course costs and the other income, and as such the input tax on the course maintenance should be treated as residual. If there is no additional taxable income through tee advertising, equipment hire, or corporate packages, then the course costs would remain wholly attributable to the exempt golf fees (membership subs and green fees).

You can read the full decision here.

Given the history of this case, don’t rule out a further appeal on this decision by HMRC.

Check your flat rate!

If you are operating the Flat Rate Scheme for a diverse business, you should regularly check whether the rate is still appropriate.

In a recent tribunal case, a VAT Registered business’s appeal against an HMRC assessment was dismissed on the basis that they used the wrong FRS percentage.  When they first applied for their shop and Post Office business, the taxpayer used the FRS rate applicable to Post Offices.  During a subsequent VAT inspection however, HMRC disagreed, establishing that the shop income exceeded the Post Office, and therefore the FRS rate used was wrong, and they assessed the difference.

VAT due on ‘temp worker’ supplies

In a hearing which was almost identical to the lead case law of Reed Employment Ltd regarding temporary personnel, the First Tier Tribunal (FTT) held that output tax is due on all receipts, not just commission.

The Tribunal considered whether Adecco should account for VAT on the whole of the supply to a bank of self-employed workers, or just account for output tax on their commission. The Tribunal relied on the ‘economic reality’ regarding who supplied services and who consumed them, and came to the conclusion that there was no difference between employed and self-employed temps, and that VAT was due on the whole of the bank’s payment to Adecco as a supplier of staff.

You can view the full decision here, but it is worth noting that the case may be further appealed so businesses who provide staff should review their VAT accounting.

United Grand Lodge of England Subscriptions Not Exempt

The Upper Tribunal has upheld the decision of the First Tier Tribunal (FTT) that the membership subscriptions of the United Grand Lodge of England do not qualify for exemption.

The Upper Tribunal agreed with the FTT’s approach in which they reviewed the whole of the activities and aims of the Lodge to establish whether they were of a philosophical, philanthropic or civic nature.  The FTT had concluded that as there were “other aims” of sufficient magnitude that were aims in their own right (and not ancillary to the qualifying aims) and as they fell out with the defined categories, the subscriptions could not be exempt.

Saving Money on Your Grand Designs

Did you know that you don’t always have to be VAT registered to get VAT back? HMRC’s DIY Housebuilder’s Scheme allows you to recover the VAT on the goods and services that you buy when you build (or convert a commercial property) into your dwelling.

The Scheme applies to most (but not all) costs that you consume in the build. It includes the completion of a detailed application and scheduling of invoices, and it is also subject to HMRC’s penalty provisions if you get it wrong.  But don’t let that put you off!  We can help you in the process to ensure that you receive 100% of what you are entitled to reclaim.

Is it time for HMRC to revise the car lease VAT restrictions?

The British Vehicle Rental and Leasing Association (BVRLA) has called on the Government to decrease the blocking of VAT on lease charges from 50% to 40%.

The industry leader recently surveyed a wide variety of companies, seeking details on their mileage records, and in particular the split between private and business.  The survey covered 61,000 leased vehicles that are used for both business and private.  With this new information, the Association have asked HMRC to review its methodology to reflect the reality of private use.  BVLRA’s announcement can be read here.

HMRC announce the changes to ‘energy saving materials’

HMRC have released a policy paper outlining the specific changes to the 5% reduced rate on energy saving materials.

In the paper VAT: changes to the reduced rate for energy saving materials, HMRC have confirmed that from 1 August 2016, the 5% reduced rate will be restricted to installation services only of qualifying energy saving materials; the supply and fit of qualifying materials when the customer’s cost of the materials is less than the cost of the services; and the supply and fit of energy saving materials in the residential accommodation for customers who are over 60 years of age or on certain benefits, and also when the building is used solely for certain long-term accommodation and housing associations. It has also been confirmed that solar panels, wind turbines, and water turbines will no longer be eligible for the reduction of VAT, and the standard 20% rate of VAT will apply.

The current rules will continue to apply until 31 July 2016, which includes installations that have taken place (bar the invoicing), contracts that have been signed but the work yet to be undertaken, and installations where payment has been received.

If any of these articles raise further questions for you, please contact any member of the VAT team.

Best wishes for the festive season from the VAT team.