Constable VAT Focus 11 February 2021


Pay VAT deferred due to Coronavirus
HMRC has updated this guidance with information relating to the new scheme which allows businesses that deferred VAT payments between 20 March 2020 and 30 June 2020 to pay in 11 interest free instalments.

Claim VAT refunds in NI or the EU if you are established in NI or the EU
HMRC has updated its guidance on how Northern Ireland and EU businesses can claim refunds of VAT incurred on goods in the EU and Northern Ireland using the EU VAT refund system.

VAT Isle of Man
HMRC has updated its internal guidance advising its VAT Officers on dealing the control of UK businesses with establishments in the Isle of Man and Isle of Man businesses with establishments in the UK.

Value Added Tax EU Exit Transitional Provisions
Find out about the VAT treatment of transactions or movements of goods which span the end of the transition period.


The domestic reverse charge for construction services comes into effect in the UK on 1 March 2021. The reverse charge will apply to building contractors engaging sub-contractors and, similarly, to sub-contractors engaging others through the supply chain where the parties involved are registered for VAT in the UK and the payment for the supply is reported within the Construction Industry Scheme (CIS). It shifts the responsibility to account for VAT on the supply from the VAT registered supplier to their VAT registered customer.

It is essential that UK contractors, or anyone who is VAT registered and required to report transactions through the CIS, is familiar with this incoming change to UK VAT accounting. Read our guidance on this topic in full here.


Court of Appeal

1. Electronic Newspapers

This decision is the latest in the line of News Corp UK cases revolving around the VAT liability of electronically supplied newspapers from 2010 to 2016. Originally, the First Tier Tribunal held that such supplies did not attract the zero-rate of VAT for newspapers. The Upper Tribunal overturned this decision, concluding that the zero-rate did apply. HMRC appealed against that decision to the Court of Appeal (CoA).

The Upper Tribunal decision considered the “always speaking” doctrine of statutory interpretation which, in essence, suggests that statutes should be deemed to take account of relevant changes that have occurred since the statute was drafted. The argument mounted by News Corp revolved around how, when the law was drafted, electronic versions of newspapers were not available but that the purpose of the law (to encourage literacy, the sharing of information and democratic accountability) and the always speaking doctrine indicated that electronic newspapers should benefit from the zero-rate for newspapers.

In this instance at the Court of Appeal, HMRC reiterated its arguments from previous hearings. Its argument against the applicability of the zero-rate centred on the need for a strict interpretation of zero-rating provisions, meaning that the always speaking doctrine either does not apply, or applies in a different way, to zero-rating legislation which itself exists as a deviation from the harmonised system. The provisions of EU law which allow some zero-rating in the UK did not allow the UK legislation for zero-rating to be altered as zero-rating is a deviation from the harmonised system.

HMRC suggested that, when the zero-rate was drafted, Parliament could not have envisaged electronic newspapers falling within that rate as they did not exist. Based on an everyday interpretation of the word “newspaper” in the 1970s, HMRC argued that only a tangible hard-copy newspaper could fall within the rate. To support this position, HMRC highlighted that the relevant zero-rate for newspapers is contained in Schedule 8, Group 3 which only lists physical goods which, HMRC argued, shows that Parliament did not envisage any services being covered by the zero-rate for newspapers.

Ultimately, the Court held in favour of HMRC, considering that the language used to identify the specific tangible goods listed in Group 3 requires a narrow interpretation in line with a narrow and circumscribed Parliamentary intention. Adopting a broad and permissive interpretation of zero-rating provisions is unacceptable.

Constable Comment: Recently, the UK Government extended the zero-rating provisions to include electronically supplied publications from 1 May 2020. HMRC guidance on this topic can be read here.

This is permissible owing to the EU Directive 2018/1713 which specifically permits the inclusion of electronic versions of publications to be included in domestic zero-rating provisions. If your business or charity zero-rated electronic supplies of newspapers or other publications prior to 1 May 2020 then error corrections may be required. Constable VAT can assist with this.

Upper Tier Tribunal

2. Teaching Ceroc Dancing

This case concerned supplies of dance tuition made by Ms. Anna Cook. HMRC considered that such supplies are standard rated for VAT purposes whereas Ms Cook believed them to be exempt as supplies of tuition in a subject normally taught in school or university, supplied by an individual without an employer. The FTT had previously held in Ms Cook’s favour and HMRC appealed the decision to the Upper Tribunal.

The parties agreed that Ms Cook was making supplies of private tuition given by a teacher and that dance is a subject ordinarily taught in schools and universities. It is a well established principle in EU and UK law that, in order for the tuition exemption to apply, it is not necessary for the tuition to lead to formal examinations or qualifications, but the tuition must aim to develop the knowledge and skills of the student in a way that is not purely recreational.

However, HMRC argued that the supplies should attract VAT at 20% on the grounds that Ceroc is not ordinarily taught in schools or universities and, in any event, the classes were purely recreational and thus excluded from VAT exemption. HMRC’s argument is that Ms Cook does not, as the FTT concluded, make supplies of tuition in dance, but rather tuition in a specific style of dance, which is not ordinarily taught in schools and universities.

The Tribunal analysed the Ceroc dance tuition and found that there are roughly 500 moves involved, some with variations leading to roughly 900 pre-approved moves taught by Ms Cook. It also found that there are specific competitions and medals available for Ceroc dancers. Ceroc is advertised as a distinct activity – tuition is in Ceroc dancing and not “dancing” in general. The Tribunal concluded that Ceroc is a distinct form or style of dance. It then turned to consider if Ceroc is ordinarily taught in schools or universities, which it concluded, it is not. Therefore, it held in favour of HMRC that Ms Cook’s supplies were standard rated for VAT.

The Tribunal went on to consider the purely recreational point which, whilst having no bearing on the result of this case, may be of interest to readers. HMRC sought to argue that the transfer of knowledge and skill was not a key component of Ceroc dance classes and observed several factors which it believed pointed to Ceroc being purely recreational such as the presence of a bar and the relaxed atmosphere combined with the lack of academic course materials and the presence of “freestyle” sessions which lacked structured tuition.

The Tribunal did not agree with HMRC on these points, observing that, purely because an activity has a recreational element, it is not precluded from being tuition. It commented that all of the factors highlighted by HMRC were indicative of a recreational element but fell very far short of proving that the classes were “purely” recreational. This may be of interest to taxpayers who provide tuition in a relaxed or semi-recreational setting.

Constable Comment: The VAT exemption for private tuition can be a complex area of the law, especially around the requirement that the tutor is not acting as an employee and that classes should not be purely recreational. If you provide private tuition and would like to discuss whether VAT exemption is appropriate to your supplies, please contact Constable VAT.

First Tier Tribunal

3. Overpayments for Car Parks

This appeal concerned the VAT treatment of overpayments for parking at public authority pay and display off-street car parks. These overpayments typically occur when a customer of a public authority car park does not have the correct change for the parking tariff and the on-side payment machine cannot give change. The main issue is whether the overpayment should be treated as consideration for the supply of parking services and therefore subject to VAT, or whether, as the council argued, the payments are outside the scope of VAT.

In the case of NCP, on appeal from the Upper Tribunal, the Court of Appeal held that such an overpayment was part of the consideration where the customer uses a private car park. However, in a previous appeal by Borough Council of King’s Lynn and West Norfolk, the First Tier Tribunal concluded that overpayments are not proper consideration and therefore not subject to VAT if the car parking services were provided by a public authority.

HMRC argued that the present case cannot be distinguished from the decision in NCP which should therefore be applied.  The council argued that the decision In NCP should not bind the Tribunal as the council is a public authority and, although accepting that there is some contractual relationship between the council and a driver, the parking charges are set by statutory order and not by contract as they are by private operators who are free to charge whatever price they deem appropriate.

Following NCP, HMRC argued that the overpayment represents a counteroffer which is accepted by the on-site machine at the car park. This means that the machine is deemed to accept, on behalf of the council, the offer made by the customer to pay over the amount originally offered by the council tariff. The council argued that, as its prices are set by statute, that it does not make an offer to contract with the customer and it does not have the power to vary offer amounts or accept counteroffers and, as such, it cannot accept overpayments as counteroffers. This, it was suggested, indicates that the overpayments cannot be rightly regarded as consideration for a supply.

The Tribunal agreed with the Council’s submission that it cannot freely contract with customers as the prices are set by statute and, as such, the council cannot make counteroffers. However, it observed that there is nothing in the relevant UK legislation to prevent the Council from accepting counteroffers. Considering that there is a direct link between the amount received by the machine and the supply of a parking space and that the Council is legally capable of accepting counteroffers made by customers, the appeal was dismissed and the Council must regard overpayments for parking made at machines as taxable consideration for a supply.

Constable Comment: This case revolved around points of contract law as much as it did around VAT, with the deciding factor being the contractual position established between the council and a customer when an overpayment is made at an on-site parking machine. Advertised prices are typically “invitations to treat”; rather than constituting an offer in themselves, they invite the customer to make an offer which is then accepted by the supplier. In this case, the customer was deemed to have made an offer of the overpayment which the machine was then deemed to accept on behalf of the Council. A binding agreement is formed on acceptance of the offer made by the customer, in this case an agreement that the total amount paid represents consideration for a taxable supply of a parking space.

Please note that this blog post is intended to provide a general overview of the subject. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.