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VAT Memo 2007-2008 Newsletter Issue 1

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Scope 

 

Admission charges

See VM ¶160

Admission charges levied by a non-profit making organisation that is managed and administered on a voluntary basis by persons who have no direct or indirect financial interest in its activities are exempt from VAT.

HMRC have stated that direct or indirect financial interest will only affect entitlement to exemption if the interest is actual, not potential.

They provide the following as examples of the type of payments that would and would not result in the recipient being treated as having a direct or indirect financial interest in the activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Memo points This guidance is not intended to be exhaustive and is provided as a general guideline only.

HMRC Brief 27/07

 

Betting, gaming and lotteries

See VM ¶232

With effect from 1 September 2007, participation fees based on a percentage of the stakes risked in a game, and those charged for games against the house, are no longer exempt but are standard-rated.

Memo points However, exemption will remain on participation fees that are charged for:

- remote gaming for the purpose of remote gaming duty;

- prize gaming under a permit or at any qualifying centre or fair;

- non-commercial gaming;

- equal chance gaming at a qualifying club or institute; or

- gaming for small prizes at a bingo hall.

 

HMRC Brief 59/07

 

Greenhouse gas emission trading

See VM ¶312

In an earlier announcement HMRC had confirmed that the place of supply for EU trading of greenhouse gas emission allowances is where the recipient belongs.

They have now confirmed that this rule also applies for EU trading in the following greenhouse gas emission instruments:

- instruments representing emission reductions and carbon credits; and

- certificates that identify that the production of energy has been generated from renewable sources.

This applies to all transactions from 23 August 2007 (including those entered into before this date but on which a decision on place of supply has not been taken). For relevant transactions concluded prior to 23 August 2007, the parties can choose to revisit the arrangements and apply these rules or leave things as they are.

Memo points 1. Relevant certificates include (but are not limited to) those relating to:

- certified emission reductions;

- renewal obligation certificates;

- emission reduction units;

- levy exemption certificates;

- assigned amount units;

- EU allowances; and

- renewable energy certificates.

2. HMRC will issue more detailed guidance about verified emission reductions in the near future, although they have confirmed that their place of supply is as for emission allowances.
3. Transactions that take place between parties established in the UK will continue to be treated as taking place where the supplier belongs (¶277).

HMRC Brief 52/07

 

Cross border leasing

See VM ¶485

In a recent case (which is subject to appeal by HMRC), it was held that a scheme which enabled a company to recover input tax whilst avoiding accounting for output tax was not abusive (although commentators have expressed doubts on the reasoning given).

 

Memo points In this particular case, a German company (with a UK VAT registration) leased cars to UK customers without accounting for output tax in Germany or the UK, whilst claiming an input tax deduction on the purchase of the cars. Due to the interaction of UK and German VAT law, the company enjoyed an unintended VAT advantage.

 

HMRC Brief 60/07

 

Illegally supplied goods or services

See VM ¶544

In a recent case, HMRC contended that wholly artificial transactions entered into as part of an avoidance scheme did not rank as supplies for VAT purposes. Consequently the scheme should fail (and the VAT advantage be denied).

The matter was referred to the ECJ, where it was held that a transaction carried out for the purposes of obtaining a tax advantage can still be a supply (although the transactions themselves could not give rise to a VAT advantage, because of the EU principle of abuse prevents this).

Following this ruling, the taxpayer withdrew the appeal, so the matter is now settled in favour of HMRC. In similar cases, many of which were stood over pending the outcome of the ECJ ruling on this case, HMRC expect taxpayers either to withdraw their appeals or to proceed to a full hearing, so that the tribunal can decide whether VAT is due

 

Memo points 1. The case concerned was Halifax and others v HMRC [2006]. The taxpayer had set up an artificial structure to avoid suffering irrecoverable VAT on its call centre costs.

2. It remains to be seen what the approach of HMRC will be for similar cases if they are taken to full hearings.

 

HMRC Brief 30/07

 

 

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