News
Monthly VAT news - August 2011 - 2011-08-30
AstraZeneca – Revised VAT treatment of salary sacrifice
The Court of Justice of the European Union (CJEU) has delivered its decision in the AstraZeneca case and has found that the provision of retail vouchers (worth £10) to employees was a supply of services for a consideration. It found that there was a direct link between the supply of the vouchers and the cash remuneration given up by the employees. Consequently, AstraZeneca must account for output VAT on these supplies where they are subject to VAT. HMRC now considers that this ruling applies to all goods and services supplied by employers in return for salary sacrifice by employees. There is now no distinction between the VAT treatment of deductions from salary, where VAT has always been accountable, and a salary sacrifice. VAT, where applicable, will apply to goods and services provided under salary sacrifice schemes from 1 January 2012.
VAT cost sharing exemption – consultation
HMRC has launched a consultation into the introduction of the EU cost sharing exemption intoUKlaw. Business sectors likely to benefit from cost sharing arrangements include insurance, banking, charity, health, education, property, housing associations and gambling. If enacted the exemption would enable eligible businesses/organisations to avoid VAT on exempt and non-business activity by joining together to share costs.
To benefit from the exemption it is proposed that independent businesses/organisations would form a cost sharing group (CSG), which would have its own employees to provide services to the CSG members. The CSG would be independent of its members and no one member, or third party, would control the CSG. There are also proposals for minimum levels of exempt/non-business activity of members of a CSG and a restriction on the services that can be covered by the exemption unless a de minimis level of exempt/non-business activity by members applies. HMRC has asked for responses to its consultation document by 30 September 2011.
Paymex Limited – Tribunal rules IVA fees are exempt from VAT
The First Tier Tribunal has found against HMRC and upheld the appeal of Paymex Limited, concluding that the liability of the services of Insolvency Practitioners (IPs) when conducting and supervising consumer Individual Voluntary Arrangements (IVAs) are exempt from VAT. The Tribunal ruled that the services of an IP, including both the nominee and supervisory components of the IVA process, constitute a single exempt supply for VAT purposes. Moreover, it found that the two core elements - negotiation of debts and transactions concerning payments – were both exempt; therefore there was no need to determine which one was the dominant supply. If this had been necessary, negotiation of debts would have been deemed the core supply. HMRC will not be appealing this decision, and in the meantime, will be paying out claims for overpaid VAT subject to the normal rules. IPs can lodge claims for refunds of output tax incorrectly charged over the last 4 years but need to be aware that the partial exemption and unjust enrichment rules will apply.
Bridport and West Dorset Golf Club – HMRC appealing decision
As mentioned in our June edition, the First Tier Tribunal recently ruled in favour of Bridport and West Dorset Golf Club Limited and found that green fees charged by not-for-profit sports clubs to non-members/visitors (to play golf on its course) should be exempt from VAT. HMRC has decided to appeal this decision, and do not propose to pay out claims and will reject any new claims received.
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
