Constable VAT Focus 28 May 2020


Revenue & Customs Brief 5 (2020)
HMRC has now issued Brief 5 (2020): VAT treatment on fixed odds betting terminals and gaming machines. Explains what taxpayers with appeals relating to The Rank Group and Done Brothers should now do following the decisions in these cases.

Monthly Exchange Rates
HMRC has released the foreign exchange rates to be used when converting foreign currency for VAT purposes.

No Import Duty or VAT on Certain Documents & Articles
HMRC has released Guidance detailing how to claim relief from import duty and VAT when importing miscellaneous documents and related articles into the UK.

Conditions for Zero-rating: Exports Affected by COVID19
HMRC has updated its internal guidance regarding time limits on exports and removals. This guidance explains the circumstances in which HMRC can agree to additional time for the export or removal before any VAT is collected.


Constable VAT has been able to assist many DIY builders who have had claims for repayment of VAT rejected by HMRC. We can help by liaising with and drafting letters to HMRC. We can assist with appealing decisions to Tribunal. In the recent case of Andrew Fuller, our client was successful in representing himself at Tribunal with support from Constable VAT.

This case is yet another in a long line of decisions revolving around the question “When is a building complete?”. Our detailed coverage of the appeal can be read in full here.


Partly exempt businesses recover VAT incurred provisionally throughout the VAT accounting year. At the end of the VAT year they must perform an annual adjustment calculation to determine the amount of input VAT recoverable in the VAT year. The provisional input VAT deduction is compared with the actual recovery allowed and, if necessary, the position must be adjusted. This adjustment is normally made on the VAT return following a business’ partial exemption year end, although it is possible to make an ‘in year’ adjustment. A business submitting calendar quarterly VAT returns, with a VAT year end of 31 March, usually includes its partial exemption annual adjustment on the VAT return in respect of the VAT accounting period ending 30 June.

Many taxpayers will imminently need to perform their annual adjustment calculations. This can often be a particularly difficult and time-consuming exercise which often poses problems for businesses. It is advisable to seek professional advice when performing partial exemption annual adjustments, particularly at uncertain times such as now where the values of taxable or VAT exempt supplies may have fluctuated unexpectedly. Our coverage of partial exemption can be read in full here. For assistance with any partial exemption query, please do not hesitate to contact Constable VAT.


Upper Tribunal

1. Supply of Staff or Medical Care?

This appeal by Mainpay Limited concerned an assessment raised by HMRC in the sum of £164,866. Mainpay, a Channel Islands umbrella company, had treated its UK supplies as VAT exempt medical care. HMRC believed that Mainpay made standard rated supplies of staff and sought to assess for undeclared output VAT.

Mainpay operates in various sectors where temporary workers are often used, including supplying locum doctors and other hospital staff, referred to as consultants. It contracts with A&E Agency Ltd, a UK recruitment company, which subsequently contracts with NHS Trusts for the supply of temporary staff.

The issue in this case was whether Mainpay makes VAT exempt supplies of medical care, or if it makes taxable supplies of staff. This issue (supplies of staff or a supply of services) has come before the Tribunal before and there is a significant amount of case law which was considered. It was common ground that the key issue was whether, in the light of the contractual framework, whether the staff being supplied came under the direction and control of the NHS Trusts to which they were provided or if they were under the control of Mainpay.

Mainpay argued that it always retained control of the staff, claiming in particular that it:

  • Dictates which consultant provides medical care
  • Can dismiss a consultant for breach of contract
  • Can replace a consultant with a suitable alternative
  • Determines the rate of pay for consultants employed by them
  • Determines the hours which consultants it supplies work

HMRC argued that Mainpay provided little more than a tax efficient payroll service to medical consultants in the UK and, in reality, it was not making VAT exempt medical supplies. To support this argument, it submitted that, as Mainpay is based in Sark, it could not exercise the necessary physical level of control over the medical consultants in England for its supplies to be consistent with a supply of medical care.

Attention was also drawn to Mainpay’s advertising which described its activities as “…providing temporary workers to recruitment agencies and end clients…” and as “…operating a high quality and tax-efficient payroll structure.”. HMRC were also not satisfied that Mainpay had professional indemnity insurance for medical care which is fatal to the contention that Mainpay was making supplies of medical care. It was also highlighted that Mainpay did not verify the consultants’ qualifications so could not realistically believe itself to be providing medical care.

The Tribunal agreed with HMRC, noting that the consultants had no real contact with Mainpay and effectively became “part and parcel” of the NHS. This is a view which aligned with that of the consultants themselves who, when interviewed by HMRC, regarded Mainpay as a payroll service and not their employer.

Constable Comment: This case will be of interest to comparable umbrella organisations which treat their supplies as VAT exempt medical care. The facts of this case were quite specific, and a significant amount of attention was paid to the contractual framework between the various parties as well as the lack of Mainpay’s insurance. Cases of this nature will always turn on their own merits and regard must be had to the overall situation. Those operating such arrangements may wish to consider reviewing the agreements currently in place. The case also demonstrates that HMRC do consider in detail the nature of supplies and whether it can be classified as the delivery of a service or more correctly assessed as a supply of staff.     

This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. 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 newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.