UK: Weekly VAT News - Week ended 23 September 2005

Retrospective VAT claims

Businesses involved in disputes about whether retrospective VAT claims are still open or have been settled following a payment by HMRC will be interested in the case of John Martin Group, where the Tribunal decided that even though HMRC had made a payment and contended that the initial claim had been settled, the matter was still under discussion and that a revised claim could be considered. The Tribunal was critical of the informality of e-mail correspondence and the fact that HMRC had not sent their usual "you have 30 days to appeal …" letter.

Businesses involved in "outsourcing" of work related to insurance will be aware that HMRC plan to increase the amount of VAT charged on such work, perhaps from the beginning of 2006. A consultation about the proposed changes began last July and businesses have until 30 September to make their views known.

Vehicle leasing businesses will be relieved that the ECJ’s advocate–general has suggested that the court should find that a Danish leasing company was entitled to use the special arrangements for dealers in secondhand goods to work out how much VAT should be paid when it sold secondhand cars that it had previously leased out. The Danish authorities argued that VAT was due on the full selling price even though this meant that there was an element of double taxation. As long as the ECJ follows the A-G opinion (as it usually does), existing practices in the UK should be able to continue as before.

We hear that the Tribunal’s decision in Enron Europe Limited is to be appealed. Businesses that traded with Enron and were affected by the termination of contracts resulting from the administration now face a further period of uncertainty until the case is finally decided.

HMRC have announced a campaign to help pubs comply with their obligations. According to the press release, VAT officers will be visiting a large number of pubs in the next 6 months!

It is well known that VAT is a long way from being the "simple tax" it was claimed to be when it was first introduced in the UK more than 30 years ago. A report in The Times this week considering the possibility of an eastern European style (single rate) tax system illustrated the complexities by reference to the treatment of gingerbread men, where the VAT treatment is determined by how much decoration they wear!

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