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Steve Allen, Director of VAT Solutions (UK) Ltd, offers a VAT tip and a selection of recent VAT cases.

Steve Allen

VAT Tip

Moving To New Premises? Make Sure You Tell HMRC Beforehand!

When we move premises, we remember to tell the telephone, gas and electricity about it.  However, forgetting to tell HMRC could lead to a lot of unnecessary hassle. 

Legally, a business is required to tell HMRC of a change of address within 30 days, so what can happen if it forgets or chooses not to do this?  Here’s what happened to one particular business we know of, which we’ll call ‘Lord Lucan Ltd’ for the sake of anonymity. 

Lord Lucan Ltd registered itself for VAT, and was quickly visited by a VAT Officer to check some of the registration details.  After two months, it moved premises, and HMRC came out to see the business again, only to find it wasn’t there.  Not surprisingly, the VAT Officer quickly decided that he may be dealing with a bogus business, such is the high incidence of ‘missing traders’ in relation to ‘carousel fraud’. He promptly deregistered the business on ‘revenue protection’ grounds. 
 
It was more than a month before Lord Lucan Ltd found out what had happened, and even then it was only through one of its customers, who had contacted the business after checking its VAT number. Alas, Lord Lucan Ltd is still trying to sort the matter out and get its registration reinstated. It later transpired that the VAT Officer had compounded things with a mistake of his own. Lord Lucan Ltd had actually faxed the VAT Officer details of their new address a month before the move, and later confirmed it in writing too.  However, he had taken no action.

Tip. If you change address, write to the VAT Registration Unit.  Ring up after a couple of weeks to check they received your letter and are acting on it, or else you could find yourself in the same position as Lord Lucan Ltd!

VAT case round-up 

High Court says unenforced restriction on caravan pitches was not enough for VAT exemption to be applied

On 10 August 2007, the High Court released its judgment in this appeal by HMRC against the Tribunal’s decision of 7 January 2007.

The case concerned the supply of caravan pitches, and whether the Appellant fell foul of the 'prevented by any covenant, statutory planning consent or similar permission from occupying by living in a caravan at all times throughout the period' definition of a 'seasonal pitch'.

The Appellant argued that it did not operate a seasonal holiday park, and that the references to the February occupation prohibition in the planning licence should be disregarded as they had never been enforced, and the period of time during which the Council could have taken action for non-compliance had long elapsed, such that that there was a mutually accepted variation of the prohibition.

The Tribunal had agreed the Appellant's arguments on the planning prohibition commenting; 'The effect of the lapse of the planning condition is that, whilst the words remain on the local authorities' records, it cannot be said that the occupiers of the pitches are prevented by the planning consent or the site licence from occupying their caravans, as would be required by Note 14 for the exception to the exemption to be effective', and thus allowed the appeal.

The High Court, however, allowed HMRC’s appeal against the Tribunal decision, largely on the basis that the Tribunal Chairman had misunderstood the planning licence position. 

Tallington Lakes Ltd, 10 August 2007

VAT Tribunal says input tax incurred on betting shop screen broadcasts is residual

This was an appeal by a bookmaker on the issue on input tax attribution, and whether there was an direct and immediate link in relation to input tax incurred on satellite information screen (‘SIS’) broadcasts in the shops.

The Appellant argued that the input tax was partially deductible, as it related to the totality of operations in the shops, including the taxable activities of 'amusement with prizes' machines, and 'fixed odds betting terminals' (‘FOBTs’).  HMRC, on the other hand, argued that the input tax was irrecoverable, as it related directly and exclusively to exempt over-the-counter betting on horse and greyhound racing.

The case was similar to that of the June 2006 Tribunal case involving Town and County Factors (VTD 19,616), a Ladbrokes subsidiary, which found in favour of the Appellant. However, HMRC later responded with a policy statement in Business Brief 17/2006, which said  they only accepted SIS services could be treated as residual where (as with T&CF) the bookmaker added specific advertising items for its taxable services. This further case effectively questioned the validity of that further restriction imposed by HMRC. The Appellant gave evidence of the way in which the 'betting shop experience' had evolved from the early days of austere premises providing only facilities to place bets, into a wider experience to which the screens provided a necessary background. The Tribunal accepted this, and also rejected the HMRC policy from Business Brief 17/2006, noting that, whilst T&CF, an organisation with 2000 shops, may well choose to add its own specific advertising, it is unlikely to be realistic for an organisation with 6 shops to do the same.  Consequently, the failure to add specific advertising did not mean that no direct and immediate link could exist between the SIS content and the taxable supplies.

The Tribunal took from the BLP case an approach that one must take the wider view suggested by the Appellant, and, on that basis, concluded that there was a direct and immediate link between the SIS services and both taxable and exempt supplies.

The appeal was thus allowed, although HMRC took the opportunity to state that they reserved the right to question whether the partial exemption standard method provided a fair and reasonable attribution of the input tax.

Cheshire Racing Ltd (VTD 20,283)