News
Monthly VAT news - November 2011 - 2011-11-30
Cost sharing exemption
The Chancellor's Autumn Statement of 29 November confirmed that the Government will introduce the long-awaited cost sharing exemption for VAT exempt bodies that wish to share back-office services such as HR and IT. This removes a VAT cost which can take place when organisations, such as charities, schools and universities, pool resources to achieve economies of scale. Additional business sectors likely to benefit from cost sharing arrangements include health, insurance, banking, property, housing associations and gambling.
The requirement that entities wishing to share services must set up an independent cost sharing group (CSG) to benefit from the exemption was opposed by the not for profit sector but has been retained in the Government proposal. The CSG must be controlled jointly by, and will provide services to, its members. It is believed that the requirement to form a CGS may prevent some smaller charities from taking advantage of the exemption.
The draft legislation for Finance Bill 2012, due to be released on 6 December 2011, will include the detail of the implementation of the cost sharing exemption.
Court of Appeal accepts “floor space” partial exemption method
The Court of Appeal has rejected HMRC's appeal in the case of London Clubs Management Limited. HMRC had rejected the Company's proposed partial exemption special method, which moved away from a turnover based method and towards a floor space method, on the grounds that it was not fair and reasonable, and certainly no more so than the existing method. The Court of Appeal, however, agreed with the First Tier Tribunal and the Upper Tribunal and found that this method satisfied a test of economic use in relation to the proposed floor space, making this proposal more fair, reasonable and accurate than the existing method.
HMRC issues updated notice on health institutions
HMRC has issued an updated version of VAT Notice 701/31 ‘Health institutions' which cancels and replaces the February 2007 version. The notice has been revised and provides additional guidance on independent pharmacies operating within hospitals and can be found at http://tinyurl.com/cddkmvh.
VAT sailaway boat scheme – zero rate concession to be withdrawn
HMRC has announced that from 1 January 2012, the current concessionary treatment which permits VAT-registered businesses to zero rate the supply of a sailaway boat to aUKresident who intends to keep it outside the European Community (EC) will be withdrawn. However, businesses can still zero rate the supply of a boat to aUKresident, provided they meet the conditions set out in paragraph 3.3 of Notice 703 VAT: Export of goods from theUnited Kingdom. Most importantly, this means that businesses must export the boat themselves, or make arrangements for the export of the boat, obtaining the required evidence of export within three months.
HMRC issues updated notice on clubs and associations
HMRC has issued an updated version of VAT Notice 701/5 ‘Clubs and Associations' which cancels and replaces the March 2002 version and contains minor amendments. It can be viewed at http://tinyurl.com/6yubjtf.
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
