V@ update - September 2020

Welcome to the September 2020 edition of RPC's V@, an update on developments in the VAT world that may impact your business.

News

• The Treasury has published a consultation paper VAT and the Public Sector: Reform to VAT refund rules. Government departments, devolved administrations, the NHS and Highways England are currently eligible for VAT refunds under section 4, Value Added Tax Act 1994 (VATA 1994). The Treasury is proposing to extend the scope of section 41 to permit full refunds of the VAT incurred on all goods and services during the course of non-business activities for those organisations currently falling within the scope of section 41. Interested stakeholders are invited to provide views by 19 November 2020.

• HMRC has updated VAT Notice 700/11: cancelling your VAT registration. The notice explains when and how to cancel a VAT registration, and the supplement to the notice gives details of the previous and current registration and cancelled VAT registration thresholds.

• The Treasury has published VAT Grouping – Establishment, Eligibility and Registration Call for Evidence. It wishes to receive the views of businesses that utilise VAT grouping provisions, and other interested parties, on how these affect them and the wider business environment so as to inform future policy direction. The call for evidence will examine three distinct areas of VAT grouping: the establishment provisions; compulsory VAT grouping; and grouping eligibility criteria for businesses currently not in legislation, including limited partnerships.

• HMRC has published Revenue and Customs Brief 12 (2020): VAT early termination fees and compensation payments and updated its VAT and Supply Consideration Manual. This follows the CJEU judgments in Meo (C-295/17) and Vodafone Portugal (C-43/19), which confirmed that charges to customers for withdrawal from agreements to receive goods or services are normally for the supply of goods or services to which those agreements relate, and most early termination and cancellation fees are therefore liable for VAT (even if they are described as compensation or damages). Previous HMRC guidance stated that these charges were not generally for a supply and were outside the scope of VAT.

• HMRC has published guidance Pay less import duty and VAT when re-importing goods to the UK and EU. The guidance provides information in relation to Returned Goods Relief, which may be claimed by persons re-importing goods into the UK, or EU, that have previously been exported.

• HMRC has published Revenue and Customs Brief 13 (2020): VAT charity digital advertising relief. The brief sets out HMRC's policy regarding the VAT treatment of a range of digital advertising situations, where advertising services are supplied by a third party to a charity. The brief applies to persons providing advertising services to charities, the charities receiving such services, and representatives of the charities.

Case reports

Ingenious Construction Ltd - application for interim relief and permission to apply for judicial review refused to construction company whose VAT registration had been revoked by HMRC

In R (on application of Ingenious Construction Ltd) v HMRC [2020] EWHC 2255 (Admin), the Administrative Court refused an application by Ingenious Construction Ltd (ICL), a construction company, for (i) permission to apply for judicial review of HMRC's decision to refuse to reinstate its VAT registration, pending an appeal to the First-tier Tribunal (FTT) in relation to the substantive issue of HMRC's decision to cancel ICL's VAT registration, and (ii) interim relief in the form of restoration to the VAT register. Read more

All Answers Ltd - student essay writing company was principal and not agent for VAT purposes

In All Answers Ltd v HMRC [2020] UKUT 0236 (TCC), the Upper Tribunal (UT) dismissed the taxpayers appeal and held that All Answers Ltd (AAL), a company which operated online and provided essays and coursework to students, was making supplies for VAT purposes as principal and not as agent for the writers of the relevant material. Read more

Dhalomal Kishore - Upper Tribunal considers misdeclaration penalties imposed by HMRC for inaccuracies in VAT returns

In Dhalomal Kishore v HMRC [2020] UKUT 233 (TCC), Mr Dhalomal Kishore appealed against the decision of the FTT which upheld misdeclaration penalties imposed by HMRC under section 63, VATA 1994, in relation to inaccuracies in Mr Kishore's VAT returns. Mr Kishore had also appealed HMRC's decisions to refuse his claims for input tax, but the litigation was protracted and the appeals were ultimately struck out by the FTT. Read more