News

Monthly VAT news - December 2011 - 2011-12-23

New HMRC taskforce to tackle tax evasion on property transactions

HMRC has announced the launch of a new taskforce, designed to tackle tax evasion on property transactions in Greater London. The taskforce will target cases where there has been a deliberate failure to comply with the Option to Tax regime, and will conduct full cross-tax reviews of the businesses involved. The taskforce will come down hard on commercial companies that break the rules and deliberately evade tax, with those found guilty facing heavy fines, in addition to a possible criminal prosecution.

The Rank Group Plc wins fiscal neutrality case at Court of Justice of EU

Following the decision of the European Court of Justice (CJEU) in The Rank Group Plc (Rank) case, HMRC has issued Brief 39/11 to clarify its position. Rank successfully proved that the taxing of certain supplies of gambling contravened the EU principle of fiscal neutrality, (which requires similar supplies to be treated the same for tax purposes to avoid any distortion of competition), confirming the findings of the Court of Appeal and the Upper Tribunal. The CJEU found that, from the point of view of the consumer, similar supplies should be taxed in the same way. It also found that when considering whether there has been a breach of fiscal neutrality, there is no need to apply a separate ‘competition' test; i.e. it is not necessary to consider whether the supplies are in competition with each other. The CJEU set out some tests for national courts to apply to establish whether gaming machines are ‘similar' in this context. This ruling has implications for both bingo and gaming machines. With regards to bingo, HMRC now considers the issue resolved, and its appeal will be withdrawn. All valid claims received have been paid, thus HMRC will not be seeking any repayments of these amounts. In relation to gaming machines, HMRC believes the CJEU judgment does not provide a final determination of the domestic litigation, therefore HMRC's appeals will continue. Any claims prior to November 1998 and post-December 2005 will continue not to be paid.

Low Value Consignment Relief (LVCR) – removal from 1 April 2012

From 1 April 2012 LVCR will no longer apply to goods imported to the UK from the Channel Islands. The change is targeted at structures involving the removal of goods from the UK to the Channel Islands and then mailed back to fulfill UK customer orders, and will not affect direct LVCR consignments. This ends the exploitation of LVCR, which has been used on a large scale in recent years to sell low value goods (such as CDs, DVDs etc) to UK customers VAT-free. It resulted in many high street retailers being unable to compete and many went bankrupt. The Government tried to address this loophole in the March 2011 Budget, by reducing the LVCR threshold, below which goods can be imported VAT-free, from £18 to £15. This came into effect on 1 November 2011 and will apply until 1 April 2012. The removal of LVCR to all goods imported to the UK from the Channel Islands will have effect for purchases made on or after 1 April 2012. The Government hopes that the withdrawal of LVCR will protect small and medium sized businesses from unfair competition, and protect the revenue. The impact of these changes will be closely monitored; if there is evidence that there is a diversion to other non-EU countries to exploit LVCR, the Government may consider additional action.

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