Constable VAT Focus 24 February 2016


VAT Notice 749: local authorities and similar bodies

This notice has been rewritten to improve readability.  It will help local authorities and other public bodies decide which of their activities are business or non-business for VAT purposes and when they can reclaim VAT incurred on costs that relate to non-business activity.

VAT Notice 700/67: registration scheme for racehorse owners

This notice describes the requirements of the VAT registration scheme for racehorse owners and point-to-point horses under the scheme. Owners may include breeders, dealers, trainers and racing clubs.

VAT Notice 709/5: tour operators margin scheme

This notice explains how you must account for VAT if you buy-in and re-sell travel facilities as a principal or undisclosed agent. The updated version has been produced to include important changes to TOMS legislation and practice which came into effect from 1 January 2010.


Upper Tribunal

 Penalties – Default surcharge – late payment of VAT – reasonable excuse established – unexpected decrease in overdraft – tentative time to pay arrangement had been agreed with HMRC

 Norseman Gold PLC and HMRC

Norseman was a holding company, which contended that it made taxable supplies of management services to its subsidiaries.  However, it had made no charge for these services and had reclaimed input tax but not declared any output tax.  Norseman argued that it had intended to make taxable supplies from the outset.  However, as the subsidiaries were making losses, Norseman had not invoiced the subsidiaries for these services.  This is because it would have required them to provide the funds to pay for the charges.

The Upper Tribunal found that Norseman had supplied services to its subsidiaries, with an intention to charge at some unspecified time in the future for its services and with no understanding of the amount or timing of such payments.  As such, the charge may or may not have exceeded recovery of the costs incurred in providing the service and may even have been nominal.  This was insufficient to establish an immediate and direct link with the services provided.  Particularly, since there had been no payment at all in relation to services provided.  Such supplies could not be said to be made for a consideration simply because there had been, at an earlier stage, an intention to make the supply for consideration.

 First-Tier Tribunal

 Appellant procuring construction of concrete mobile home bases on its own land – appellant retaining ownership of bases – no taxable supply between associated companies

 King’s Leisure Limited and HMRC

 HMRC attempted to recover input VATof £717,045 from King’s Leisure Limited (“KLL”) plus misdeclaration penalties, amounting to £136,461.  KLL acquired some land, from which it operated a mobile home park.  In connection with this, KLL incurred input tax on supplies of construction, including the laying of concrete bases for mobile homes.  The sales of the mobile homes were undertaken by an associated company, Autoclassic.  Autoclassic made payment to KLL for the installation of the bases.  Autoclassic also paid a commission on the sale of each mobile home to KLL.  However, once the bases were constructed, they formed part of KLL’s land.

The Tribunal held that there was no supply of bases from KLL to Autoclassic.  The only supply made by KLL to Autoclassic was of the right to sell mobile homes from the site.  KLL had authorised Autoclassic to offer bases, in respect of which it was willing to grant an occupation licence to the purchaser on its behalf.  This was an exempt supply falling within Item 1 of Group 1 of Sch 9 to VATA and so associated VAT on costs could not be recovered.

Excessive use of “no sale” button on cash tills – suppression – no reasonable explanation offered – HMRC had properly exercised its judgement – appeal dismissed

 Satpal Singh Laghmani and HMRC

Mr Laghmani carried on a business as a shopkeeper.  The business was primarily an off-licence.

Following an inspection, HMRC found that that over a period of forty days, the till records showed that the “no sale” button had been used 1409 times on one till and 1393 times on a second till, in excess of the assumed legitimate use.  HMRC found that the value of the average recorded sale on the first till was £7.45 and on the second till was £5.74.  On the basis of these figures, HMRC decided that excessive use of the “no sale” button had been used to conceal the true value of sales and so raised an assessment for £101,550.

At the hearing, Mr Laghmani was not able to offer any explanation as to the frequent use of the “no sale” button.  In the absence of any alternative explanation, the Tribunal found that the excessive use of the no sale button was indicative of a sale made but not recorded and dismissed the appeal.