News
Monthly VAT news - July 2011 - 2011-07-29
BAA Limited – recovery of input VAT disallowed on takeover fees
The Upper Tribunal has reversed a previous decision of the First Tier Tribunal and therefore allowed HMRC‟s appeal. To summarise, an investment consortium launched a takeover bid for theUKairport operator BAA plc (BAA). The bid vehicle was a new company called Airport Development and Investments Limited (ADIL). Shortly after the takeover, ADIL joined the BAA VAT group. The representative member of this group then reclaimed the VAT incurred on the associated acquisition costs as input tax for the group as being attributable to the general overheads of the group. HMRC however, argued that this recovery was disallowed as ADIL did not have an intention to make any taxable supplies at the point in which it incurred the VAT; there was no „direct and immediate‟ link of the costs incurred by ADIL to the activities of the group; and there was a lack of evidence as to the intention to join the VAT group at the point in which the VAT was incurred.
Occupational pension funds - VAT opportunity
Following the success of JP Morgan Fleming‟s appeal to the European Court of Justice (ECJ) where it was ruled that the fund management of “special investment funds” is exempt from VAT, the National Association of Pension Funds and the Wheels Common Investment Fund argued at Tribunal that the investment management of occupational pension schemes are similarly exempt. The Tribunal has referred the matter to the ECJ for an interpretation of the scope of the exemption; a response is expected later this year. If successful investment fund manager services to occupational pension funds will be exempt and the exemption could be applied retrospectively for up to 4 years. Pension funds are being urged to lodge protective claims to secure maximum retrospection and VAT refunds. However, it is the fund manager, as the VAT registered entity making the supply, that needs to lodge a retrospective claim for VAT overpaid, which it must repay to the pension funds under the unjust enrichment provisions. Fund managers may be reluctant to lodge claims given that it would be costly in terms of administration; and the fund manager would be partially exempt and unable to recover VAT on expenditure relating to this service, possibly leading to higher fund management fees in the future. The ECJ‟s ruling may impact on other similar investment vehicles adding to the current uncertainty. Occupational pension funds and other similar types of investment vehicles should consider approaching their fund manager to discuss lodging retrospective claims.
VAT refund scheme for adademies – HMRC guidance issued
HMRC have published guidance detailing how refunds of VAT incurred on or after 1 April 2011 can be claimed by academies, free schools, 16–19 academies, alternate provision academies and university technology colleges for 14–19 year olds. Both VAT registered academies and non-VAT registered academies can make such claims, but the method of claiming differs for each.
HMRC launch VAT initiative campaign
An amnesty launched by HMRC is offering people who think they should have been registered for VAT before now, to come forward and notify HMRC of this by 30 September 2011.Those who partake in this initiative can take advantage of lower penalties or may not have to pay a penalty at all, depending on circumstances. Tax liabilities other than VAT can also be declared. Completed VAT registration applications will need to be received by HMRC by 31 December 2011.
Fast food outlets - new taskforce to tackle VAT abuse
HMRC have announced plans to heavily penalise fast food outlets in Londonthat deliberately falsify their records and declare incorrect sales levels in order to avoid paying the correct amount of tax. Details can be found here .
For further information or advice about any of these issues please contact indirect tax partner Bob Jones on 020 7516 2295 or by email rjones@littlejohnllp.com
