Case Law Corner
Caithness Rugby Club

Zero-rating - whether new clubhouse to be used as a village hall or similarly.
The taxpayer, a charity, had written to HMRC asking for a ruling to confirm that the construction of their new clubhouse would be zero-rated.

HMRC disagreed, suggesting that, as the control of the clubhouse was not in the hands of the community, the building works could not be zero-rated.

The upper tier Tribunal disagreed and stated that the use of a building could be intended to be at the disposal of a local community even though the community was not the body directing or controlling its use
Vehicle Control Services

The appellant was a private car park operator.  The bulk of its income was derived from Parking Charge Notices which were issued to persons parking on the land without a ticket or permit.  An earlier case had established that such income was outside the scope of VAT as a penalty as opposed to the supply of  a right over land.  

In this case the appellant had argued that the receipt of such non-business income should not impact on its input tax recovery position.

The Tribunal found that costs associated with the PCN activity formed part of the component costs of the VCS's supplies.  Accordingly,  Input tax on costs associated with the PCN activity fell to be apportioned under s 24(5), VATA 1994.

Fairway Lakes Ltd
Fairway operates a holiday village on the site of a golf and country club.

Some of the plots were owned by a 3rd party landlord.  Persons wishing to buy holiday accommodation entered into a 'building agreement' with Fairway.  Under the agreement, F collected various payments from the customer including, in its capacity as agent of the landlord, the first year's rent .

The issue centred around whether the payment to F consisted solely of a charge for construction services (zero-rated) or a composite supply which involved F procuring a lease for the customer.
The tribunal dismissed the appellant's arguments finding that part of the supply was standard rated. 
September 2016
Welcome to our latest edition of The Eye. 
It's been one busy year what with the Olympics, Euro 2016, oh and the small matter of Brexit!  What better antidote then than a newsletter focussing on some of the finer points of VAT.  Oh ok, that said, some of the stuff herein is rather important.
New dwellings built or formed from more than one building

HMRC has issued RCB 13/2016 which details a change in policy concerning construction projects which involve the conversion of multiple buildings into a new dwelling.

The wording of the law is such that it only conceives of a single building being either built or converted for use as a dwelling.  Strict interpretation of the wording thus prevented VAT relief (either at 0% or 5%) on some schemes where 2 buildings formed one single household dwelling.

Two cases, Catchpole (TC01995) & Fox (TC01957) highlighted this anomaly.  Thankfully the Tribunal saw sense in both cases and found in favour of the appellant.

Single Market Notice gets update!
The timing might seem odd given the result of the referendum but it is true, VAT notice 725 which contains full details on the VAT treatment of intra EC supplies of goods has been updated.

Virtual Intermediation

The case of Dollar Financial UK Limited demonstrates that the exemption for financial intermediation is more widely drawn than was perhaps first thought.   At one time HMRC were reluctant to accept that a supply consisted of intermediation where the services of the agent were minimal.  The advent of technology now means that a person's eligibility to purchase a financial product can quickly be assessed by platforms sited within a webpage.  Ostensibly the webpages act as a lead generating tool for sellers of financial products.

HMRC argued in this case that there had to be a legal relationship between lead generator and customer for the exemption to apply - the Tribunal disagreed.

If you have clients advertising financial products via the web this item may be of real interest.

VAT on the ground
Statutory Planning Consents - A Reminder
The case of Cavendish Green Limited provides a timely reminder for residential developers.

Note 2 (d) to Group 5 of Schedule 8 stipulates that a building is only designed as a dwelling where statutory planning consents have been granted.  Similar provisions also apply for 5% rated works.

In the above case Cavendish sold a site on which it had commenced construction of a boundary wall which was to be part of a large house.  The site was sold to a second developer without any planning permission having been secured.

The tribunal did not dispute that Cavendish's original intention was to build a new dwelling on the site, nor that the buyer had the same intentions.  However, without the necessary planning consents in place at the time of sale, the Tribunal found that the sale could not be zero-rated.

This is something which is often overlooked and can be particularly costly where a customer is expecting to receive zero or reduced rated construction services.  
Assessments, Penalties & Surcharges
A simple plea.  Let us check them for you.  The law is the law and if HMRC make mistakes in issuing assessments or penalties they can be removed or reduced.

If we cannot assist in mitigating or removing an assessment we won't charge!

If you need to discuss any of the above items please contact Nick or Alan.