Tax

Tim Healy v The Commissioners for Her Majesty’s Revenue & Customs, [2012] UKFTT 246 (TC), 15 March 2012

Tue, 08 May 2012 21:38:38 GMT

This case concerend an actor working away from home and whether his accommodation, subsistence and travel expenses were “wholly and exclusively” incurred for the purpose of his profession.

Healy who is based in Cheshire was contracted to appear in the West End of London in the musical, Billy Elliot. Healy claimed tax relief on the costs of his accommodation, subsistence and travel to and from the theatre.

The First-tier Tribunal held that the cost of his accoomodation was allowable but that his subsistence expenses and taxi fares were not. The accommodation was allowable primarily because the actor had not moved to London. He was only there during the week for the purposes of performing on stage. That therefore met the “wholly and exclusively” test.

Healy’s subsistence expenses and taxi fares were disallowed on the basis that there was insufficient evidence to show the nature of the expense.

Joseph Nicholas Hanson as Trustee of the William Hanson 1957 Settlement v Revenue & Customs [2012] UKFTT 95 (TC), 31 January 2012

Tue, 28 Feb 2012 10:46:00 GMT

The First-tier tax Tribunal has held that when determining whether a farmhouse qualifies for agricultural property relief (APR) from inheritance tax, the farmhouse and the land to which it is of a “character appropriate” must be in the same occupation, but need not be in the same ownership.

A reminder of where “character appropriate” comes from:

Agricultural property” is defined for APR purposes in section 115(2) of IHTA 1984 as meaning:

Agricultural land or pasture.
Woodlands occupied with (but ancillary to) agricultural land or pasture.
Buildings used in connection with the intensive rearing of livestock or fish, provided the buildings are occupied with (but ancillary to) agricultural land or pasture.
Farmhouses, cottages and farm buildings, and the land occupied with them (such as garden or grounds), that are of a character appropriate to the property described above.

Some background

Immediately before his death in December 2002 Joseph Charles Hanson was the life tenant of a trust created by his father in 1957. The trust held a property that both parties in this matter agreed was a “farmhouse” for APR purposes and had an open market value in December 2002 of £450,000.

Mr Hanson’s son lived in the farmhouse which he had occupied since 1978 under a rent free licence. From there the son farmed 215 acres of land of which 128 acres was owned by the son and 25 acres was part owned by Mr Hanson. The remainder of the 215 acres comprised 20 acres rented by the son from a third party and a further 42 acres whose ownership was unspecified.

The only land in common ownership and common occupation with the farmhouse was the 25 acres part owned by Mr Hanson and farmed by the son.

Following Mr Hanson’s death his executors claimed APR on the value of his interest in the farmhouse. HMRC denied the relief on the basis that there was insufficient agricultural land in both common ownership and common occupation with the farmhouse for the farmhouse to pass the “character appropriate” test.

The son appealed the decision in his capacity as sole trustee of the trust arguing that common occupation was the only connecting factor required between the farmhouse and the agricultural land to which it was of a character appropriate. The Tribunal agreed with the son.

This decision may be of significance in situations where a downsizing farmer has moved out of the farmhouse and gives away much of the agricultural land.

This decision is likely to be appealed by HMRC.

Nicolette Vivian Pawson (deceased) v The Commissioners for Her Majesty's Revenue & Customs, TC 01748, 14 December 2011

Wed, 15 Feb 2012 22:08:00 GMT

The First Tier Tax Tribunal has ruled that a property used as a holiday cottage qualifies for inheritance tax business property relief (BPR).

This case has generated a lot of interest as HMRC has delayed a number of similar cases pending the outcome of this one. It will be interesting to see if HMRC decide to appeal this decision.

For those interested in how the legal teams interacted prior to the hearing I refer you to paragraphs 3 to 9 of the decision. Fascinating.

HMRC questioned:

(1) whether the property in question qualified to be treated as ”relevant business property” and (2) was it used in the operation of a business for “gain”. Section 105 IHTA 1984.

HMRC also argued that:

Even if the use to which the property had been put amounted to the operation of a business in principle, and for gain, it was to be excluded from the term “relevant business property” by reason of section 105(3) IHTA 1984 on the basis that the business consisted wholly or mainly of “holding investments”.

The main findings of the Tribunal were:

The exploitation of the property in question as a holiday cottage amounted to the operation of business.
The business was conducted with a view to gain even though it was not always profitable.
An intelligent businessman would not regard the ownership of a holiday letting property as an investment due to the need to constantly find new occupants and to provide servcies unconnected with and over above those needed for the bare upkeep of the property.

The Commissioners for her Majesty's Revenue and Customs v (1) Colin Atkinson (2) Paul Smith (executors of William Mashier Atkinson deceased), FTC/61/2010

Mon, 21 Nov 2011 22:38:00 GMT

The Upper Tax Tribunal has allowed HM Revenue & Customs’ appeal in the case HMRC v Executors of Atkinson.

The decision allows HMRC to refuse agricultural property relief on a farmhouse because the farmer had gone into in a care home just before his death. The executors were unrepresented at the appeal because they could not afford to pay HMRC’s costs if they lost.

The farm was owned by the deceased and let to a farming partnership. The deceased was a partner in the farming partnership and lived in a bungalow situated on the farm until ill-health meant he had to move into a care home. The deceased still made occasional visits to the bungalow and his possessions remained in it until his death.

HMRC had refused the Executors’ claim for agricultural property relief because they were of the view that the bungalow was not occupied for the purpose of agriculture for the relevant period required by section 117 of IHTA (“Inheritance Tax Act 1984”). The First Tier Tribunal allowed the Executors’ appeal.

On the basis of the findings of fact the First Tier Tribunal concluded that, for the purposes of the IHTA, the partnership was in occupation of the bungalow up to the date of Mr Atkinson’s death and that such occupation “was for the purposes of agriculture in the relevant sense because the bungalow was still used to accommodate the diminishing requirements of the senior partner”.

Section 117 (b): “… section 116 above does not apply to any agricultural property unless –

(a) It was occupied by the transferor for the purposes of agriculture throughout the period of two years with the death of the transferor, or

(b) It was owned by him throughout the period of seven years ending with that date and was throughout that period occupied (by him or another) for the purposes of agriculture.”

Section 116 grants relief for agricultural property.

Note. There is no definition of the word “occupied” nor is any special given to the words “for the purposes of agriculture”.

The question for the Upper Tribunal was whether the First Tier Tribunal made an error of law when they arrived at a decision of fact which no tribunal properly directed could properly have reached.

The Upper Tribunal found that the First Tier Tribunal did make an error in law.

“Were the matter for us, we would have no hesitation in concluding that the partnership ceased to occupy the bungalow for the purposes of agriculture when Mr Atkinson moved to the care home with no reasonable prospect of ever returning home.”

“In our judgment, the [First Tier] Tribunal failed to apply the correct approach and ask the correct questions. The correct approach is to identify what does and what does not amount to a sufficient connection between the use and occupation of the property in questions (the bungalow in the present case) and the agricultural activities being carried on on the agricultural property (the farm in the present case); and to ask whether the facts give rise to a sufficient connection.”

“If the [First Tier] Tribunal had adopted such an approach it could not, in our judgment, have come to only one conclusion, namely that the bungalow was not immediately before Mr Atkinson’s death, occupied for the purposes of agriculture and had not been since, at latest, it had become apparent that he would never be able to return there to live. In particular neither the occasional attendance of Margaret [his daughter-in-law] and Gary [his grandson] at the bungalow to deal with post or frost, nor the fact that some of Mr Atkinson’s belongings and furniture remained at the bungalow, can be said to constitute occupation for the purposes of agriculture throughout the seven years prior to Mr Atkinson’s death.”

Golding and another v HMRC, [2011] UKFTT 351 (TC)

Tue, 12 Jul 2011 18:07:10 GMT

The First-Tier Tax Tribunal recently ruled that a farmhouse is entitled to full agricultural property relief (APR) from inheritance tax even though the aged occupant only sold a few eggs to a handful of customers.

HMRC accepted the claim for APR on the land and other buildings but they did not accept that the 3 bedroom farmhouse, which was in a poor state of repair, was eligible for the relief. The deceased had farmed a 16-acre smallholding in Staffordshire since 1965.

HMRC argued that the three-bedroom farmhouse was not eligible for APR because it was not of a “character appropriate” for APR purposes. A Notice of Determination that the farmhouse did not qualify for APR was subsequently issued by HMRC.

The Tribunal heard that the level of activity on the smallholding had decreased over the years and, in the period leading up to his death, Mr Golding had grown vegetables mainly for his own consumption and sold a few eggs to some 15-20 customers. Whilst the level of profits was below the National Minimum Wage, it was concluded that the deceased was still working his holding, as a farm, when he died.

On the main issue of whether the farmhouse was or was not of a “character appropriate” for APR the Tribunal concluded that on the basis of the historical facts of the holding, the type of property, as well as the taxpayers’ intentions and actions, the house should qualify for APR.

The Tribunal also stated that it would be unreasonable to expect the activities of an 80-year old to be extensive in nature. It was also clear from the taxpayer’s actions that he intended to carry on farming. This was shown by the purchase of new equipment by Mr Golding shortly before his death.

HMRC have until mid-July to appeal this decision.

Gateshead Talmudical College v HMRC [2011] UKUT 131 (TCC)

Tue, 21 Jun 2011 17:29:00 GMT

This is an appeal by Gateshead College against the decision of the First-tier Tribunal.

The Upper Tribunal concluded that Capital Goods Scheme (CGS) adjustments were required when rental payments and VAT accounting stopped less than two years into a lease and leaseback arrangement.

CGS is a mechanism for regulating deductibility over the “VAT-life” of a capital good. For VATpurposes a capital good is a developed property. The scheme operates by ensuring that the deductibility for a property reflects the use to which the property is put over the VAT-life (adjustment period) of the property.

Facts

The main activity of Gateshead College is the provision of education. The background to this matter is the building of an extension by Gateshead College. Gateshead College leased these premises to a property company called Starburst Properties Ltd. Starburst on the same day granted a sublease over the same premises to Gateshead College. Gateshead College had registered for VAT two months earlier and had described its business as that of “property letting”. Both Gateshead College and Starburst elected to waive the VAT exemption over these premises.

Gateshead College then took credit for the input tax on its construction costs relating to these premises and this led to a VAT repayment for Gateshead College. However, after an initial period of less than two years the lease payments and the VAT accounting stopped. In addition, Starburst was dissolved and struck off the company register. Gateshead College took no action to forfeit the lease the benefit of which became vested in the Crown as bona vacantia.

HMRC assessed Gateshead College for failure to make adjustments under the CGS and Gateshead College appealed to the First-tier tax Tribunal.

At the First-tier Tribunal HMRC successfully argued that the making of taxable supplies had been reduced to nil once Starburst had been dissolved (as it could not be the recipient of any supplies). In addition the ceasing in the making of taxable supplies had given rise to the requirement to make a CGS adjustment. Gateshead College unsuccessfully argued that the continued existence in law of the lease meant that taxable supplies continued to be made after the initial period.

The arguments

Gateshead College appealed to the Upper Tribunal on the basis that the First-tier Tribunal had erred in law.

Gateshead College made two arguments. Firstly, it argued that the First-tier Tribunal had been wrong to include that no supplies were being made under the lease because the parties has stopped abiding by its terms and one of the parties had ceased to exist. Gateshead College contended that it had continued to make supplies despite its failure to seek payment of rent.

Gateshead College also argued that that the First-tier Tribunal had wrongly concluded that an adjustment under the CGS should have been made because of a decrease in the making of taxable supplies. Gateshead College argued that CGS adjustments are triggered not by the reduction in the value of taxable supplies but by a change in the extent of the use of the capital item for making taxable, as distinct from exempt supplies.

The decision

The Upper Tribunal dismissed Gateshead College’s first argument. The Upper Tribunal accepted the lease existed as an item bona vacantia but that did not alter the fact that no rent was paid and accounted for after a period of less than two years. A supply, i.e. rent, was therefore not being made once Starburst was struck off.

With regard to the “change of use” argument. The Upper Tribunal stated, as had the First-tier Tribunal, that it was “completely untenable” to maintain this argument. The parties had stopped abiding by the lease and the payment of rent had been abandoned completely. Gateshead College’s argument that the premises were used exclusively for leasing supplies, despite there being no actual rental charges or payment nor any intention of any being made, could not be sustained.

Commissioners for Her Majesty's Revenue and Customs v Tower MCashback LLP 1 and another [2011] UKSC 19 (11/05/2011)

Fri, 13 May 2011 09:39:01 GMT

This appeal raises two issues of tax law. The first (“the procedural issue”), of general importance to the self-assessment regime, concerns the scope of arguments which may be advanced by HMRC in a taxpayer’s appeal against a closure notice which the HMRC issues to conclude its enquiry into a tax return. The second issue (“the expenditure issue”) concerns the proper approach to determining whether expenditure has been “incurred” for the purposes of the Capital Allowances Act 2001.

The case concerns the tax consequences of the scheme used by MCashback Limited (“MCashback”) to raise finance to enable it to “roll-out” M Rewards, a software package which it had developed and which enabled manufacturers to promote products to customers by offering free mobile phone airtime. On the advice of Tower Group plc (Tower), it was decided to raise funds by selling rights to the software, via software licence agreements (SLAs), to four Limited Liability Partnerships to be set up as part of the financing scheme. Tower personnel were founder members of the LLPs and negotiated the SLAs with MCashback. The SLAs provided for each LLP to receive a proportion of the clearing fees which manufacturers would pay in respect of each transaction via the M Rewards system. For the purposes of this litigation, the situation of Tower MCashback 2 LLP (LLP2) has been taken as representative of the other LLPs. LLP 2 entered an SLA with MCashback, under which it was to pay £27.5m for a licence of part of the M Rewards system. LLP2 was entitled to 2.5% of the gross clearance fees received from exploitation of M Rewards. LLP2 obtained the funds required to pay the consideration under the SLA (and the associated professional fees) from investors, who became investor members of LLP2. They contributed 25% from their own funds and obtained the remaining 75% from bank borrowing, on uncommercial terms. Janus Holdings Ltd (Janus) lent the required sum to a special purpose vehicle set up by Tower, which made interest-free, non-recourse loans to the investor members. MCashback was obliged to deposit approximately 82% of the consideration due to it in terms of the SLA as indirect security for the investor members’ borrowing from Janus. These sums were placed on security deposit with R&D Investments Ltd (R&D), which R&D in turn deposited with Janus as security for Janus’s loan to the SPV.

LLP2 claimed £27.5m first year capital allowances for the 2004/05 tax year, the amount of consideration set out in the SLA. Because of the way LLPs are taxed, the investor members would take the benefit of these allowances if the claim is successful. One of the conditions for entitlement to capital allowances is that a person “incurs qualifying expenditure”: section 11 Capital Allowances Act 2001. Expenditure is qualifying expenditure if, amongst other things, it is capital expenditure on the provision of plant or machinery, which includes software or rights to software. On 30 June 2005 HMRC issued a notice of enquiry into LLP 2’s partnership return. Attention initially focused on section 45(4) CAA 2001, which withholds first year allowances for expenditure on software rights in certain circumstances. After a lengthy period of enquiry, during which correspondence was exchanged about the application of section 45(4), HMRC issued closure notices (under s28B Taxes Management Act 1970) which stated that, “as previously indicated … the claim for relief under section 45 CAA 2001 is excessive” and amended the partnership return so that the capital allowances claimed, and allowable loss, were “nil”.

The LLPs appealed against the closure notices. Before the Special Commissioner, HMRC abandoned the argument that the claims were disallowed by section 45(4) CAA and sought instead to argue that the full extent of the consideration under the SLAs was not expenditure incurred on software. The Special Commissioner decided the procedural point in favour of the HMRC, allowing them to advance this argument, and, on the expenditure issue, disallowed 75% of LLP2’s claims. On appeal, the High Court allowed the LLPs’ appeals on the procedural issue. It would also have allowed the LLPs’ appeals on the expenditure issue, had the point arisen for decision. The Court of Appeal, by majority, reversed the High Court on the procedural issue (Arden LJ dissenting), but agreed with the High Court on the expenditure issue. HMRC appeals against the determination of the expenditure issue and the LLPs cross-appeal against the determination of the procedural issue.

The Supreme Court unanimously allows the HMRC’s appeal and dismisses the LLPs’ cross-appeal. Lord Walker issues the leading judgment and Lord Hope a short, concurring judgment. The other members of the Court agree with both. It therefore holds that the HMRC could advance alternative arguments on the expenditure issue, and that all of the consideration provided for in the SLA was not expenditure incurred on the provision of software. The Court directs that the closure notices be amended to allow only 25% of the first year allowances claimed.

Commissioners for Her Majesty's Revenue and Customs (Respondent) v DCC Holdings (UK) Limited (Appellant) [2010] UKSC 58 15/12/2010

Fri, 24 Dec 2010 01:29:46 GMT

This appeal concerns complex statutory provisions relating to corporation tax on financial transactions known as repos. These provisions have now been replaced. The general interest of the appeal lies in the approach to be taken to ‘deeming’ provisions in statutes, namely those which create statutory hypotheses.

A repo is a financial transaction under which shares or securities are sold at one price and are later repurchased by the seller at a different price, fixed in advance. Although in legal theory a sale and repurchase, in economic substance a repo is a secured loan by the buyer to the seller. The payment of the purchase price by buyer to seller is the advance of the loan; the shares or securities act as security for the loan; and the repurchase price is the repayment of the loan. A dividend or instalment of interest may become payable during the period of the repo. In a gross-paying repo, the contract will provide for the interim holder (i.e. the buyer under the repo) to pay that dividend or interest over to the seller. Such a payment is, for tax purposes, called ‘manufactured interest’. In a net-paying repo, the dividend or interest is retained by the interim holder, and the repurchase price adjusted to take account of the receipt. The Appellant (DCC) and a Bank entered into five consecutive net-paying repo transactions in respect of UK government gilts. For the purposes of this case, these were treated as one composite transaction. The Bank sold gilts to DCC for £812m. During the 18½ day period when DCC held the gilts, interest of £28.8m (payable half-yearly) was received. The Bank repurchased the gilts for £785m.

The Supreme Court unanimously dismisses the appeal, but adopts different reasoning to the Court of Appeal. It holds that the credit in respect of the interest on the gilts is £2.9m. The purpose of the deemed payment of manufactured interest by DCC being to cancel out that receipt and to allow it to be taxed as income in the hands of the Bank, the debit for that payment was also £2.9m. Lord Walker gives the judgment of the Court.

Marks and Spencer plc (Appellants) v Her Majesty’s Commissioners of Customs and Excise (Respondents), [2009] UKHL 8

Wed, 04 Feb 2009 12:13:00 GMT

M&S had two basic claims against the Customs and Excise Commissioners concerning the correct tax treatment for (1) their chocolate-covered teacakes and (2) their gift vouchers sold at a discount to their face value.

M&S challenged retrospective legislation in relation to the Value Added Tax Act 1994 as infringing EU law and discussions took place in relation to the reliance upon general principles of Community law in the absence of a directly enforceable right. Discussions were also had as to whether individuals had rights under Community law where a Directive had in itself been correctly transposed into national law but that law was applied in a manner clearly inconsistent with the scope of the Directive.

Ina answer to the second reference in the case, the Court of Justice answered:-

(1) under art.28(2) of the Sixth Directive, zero-rating is permitted as a matter of derogation, but is not required. Therefore, M&S could get no assistance from art.12(1) of the Sixth Directive;
(2) the maintenance of exemptions or of reduced rates of VAT lower than the minimum rate laid down by the Sixth Directive is permissible only in so far as it complies with, inter alia, the principle of fiscal neutrality inherent in that system;
(3) disallowance of repayment claims on the ground of unjust enrichment is in principle compatible with Community law, but must be implemented in accordance with general principles such as that of equal treatment. The existence and degree of any unjust enrichment requires a full economic analysis, which is a matter for the national court. Further, the principle of fiscal neutrality precludes the prohibition of unjust enrichment from being applied only to taxable persons such as ‘payment traders’ and not to taxable persons such as ‘repayment traders’, insofar as those taxable persons have marketed similar goods. It will be for the national court to determine whether that is the position in the present case;
(4) the answer to (3) is not affected by evidence that the repayment trader in question has not suffered any financial loss or disadvantage;
(5) whether, if the repayment trader would be unjustly enriched, Community law required or permitted the national court to grant some other remedy in respect of an infringement of the principle of equal treatment - this was a task for the national court itself, but that the national court must comply with principles of Community law, and in particular the principle of equal treatment.

The Court of Justice’s answers to the third and fifth questions did therefore raise the possibility of further issues having to be decided by the national court. However, the Commissioners decided that they did not want to pursue these matters. The House therefore unanimously allowed the appeal.

Maco Door and Window Hardware (UK) Limited (Respondents) v Her Majesty’s Revenue and Customs (Appellants), [2008] UKHL 54

Wed, 30 Jul 2008 08:27:00 GMT

Maco claimed a writing-down allowance under s.3 of the Capital Allowances Act 1990 Act for its accounting period ending on 31 Dec 1999 and 31 Dec 2000. However, the Revenue amended Maco’s self-assessment so as to disallow the claims. This appeal raises a very short point of construction of s.18(2) of the Capital Allowances Act 1990. The issue is whether the warehouse in which the respondent, Maco, stores the stock that it purchases from its Austrian parent, Mayer, is an “industrial building or structure” as defined in s.18 of the 1990 Act.

s.18(1) states that an “industrial building or structure” means “a building or structure in use - “ for one or other of the purposes specified in the ten following paragraphs. Para (f)(i) is of use to Maco in that it specifies, “… the purposes of a trade which consists in the storage - of goods or materials which are to be used in the manufacture of other goods or materials”.

It is common ground that the goods which Maco purchases from Mayer and stores in its warehouse are, “goods … which are to be used in the manufacture of other goods or materials". However, it is also common ground that Maco does not carry on a, “trade which consists in the storage” of goods. Maco’s trade consists in the buying of goods and selling them on at a profit. Storage of the goods over the period between purchase and sale is an essential part of that trade but is not a trade on its own account.

In this regard, s.18(2) states that:-
“The provisions of subsection (1) above shall apply in relation to a part of a trade or undertaking as they apply in relation to a trade or undertaking except that where part only of a trade or undertaking complies with the conditions set out in subsection (1), a building or structure shall not by virtue of this subsection be an industrial building or structure unless it is in use for the purposes of that part of that trade or undertaking".

The Special Commissioner allowed Maco’s appeal. In the Chancery Division, the judge allowed the Revenue’s appeal. The Court of Appeal (by a majority) allowed Maco’s appeal and restored its claims. The Revenue appealed to the House of Lords.

Since storage is “a part of” Maco’s trade, subsection (2) requires the provisions of subsection (1)(f)(i) to be applied to that part of Maco’s trade. The disagreement between the majority and the minority on this appeal is a disagreement as to how that is to be done. Lord Scott of Foscote and Lord Mance, took the view that subsection (2) requires that paragraph (f)(i) of subsection (1) must be applied to the relevant part of Maco’s trade, i.e. the storage part, as if that part were a trade. The words in subsection (2) : “shall apply in relation to a part of a trade … as they apply in relation to a trade …” seemed to Lord Scott of Foscote to point clearly to that construction.

However, the majority view was that subsection (2) requires that paragraph (f)(i) be applied to Maco’s storage activity without any qualification. If that is right then, since Maco does not have “ a trade which consists in the storage” of goods, paragraph (f) cannot apply.

In light of the majority view, the appeal was allowed and the Chancery Division’s decision restored.

Bikeworld Ltd v. The Director-General of the Mauritius Revenue Authority (Mauritius) [2007] UKPC 5 (23 January 2007)

Tue, 23 Jan 2007 00:00:00 GMT

The taxpayer company did not submit returns for two years and the Revenue assessed to “best judgment”. The company did not respond, the assessments became final and no tax was paid. The company appealed out of time. On appeal the Privy Council held that the local tax tribunal had no jurisdiction to entertain the appeal once the assessments had become final, except in limited circumstances which did not apply. The Board went on obiter to consider the meaning of “best judgment” citing with approval Bi-Flex (1990) and van Boeckel (1981.

Deutsche Morgan Grenfell Group Plc v. Inland Revenue & Anor [2006] UKHL 49 (25 October 2006)

Wed, 25 Oct 2006 00:00:00 GMT

The taxpayer is the UK subsidiary of a German parent company. It had been prevented under earlier UK law from paying dividends to it’s parent gross, without advance corporation tax, because both companies were not in the UK. In 2001 the ECJ held that the UK position was contrary to European law. The claimant started restitution proceedings in 2000 for dividends from 1993 onwards. On appeal the issue was when for Limitation Act 1980 purposes knowledge of the mistake of law arose so that some of the claims were time-barred. Their Lordships held that for limitation knowledge of the mistake of law was postponed until the ECJ judgment in 2001.

Portman Escort Agency v HMRC , VAT Tribunal, 23rd August

Wed, 23 Aug 2006 00:00:00 GMT

The taxpayers run an escort introduction service. For a fee clients are introduced to escorts who then make their own arrangements with the client as to services and payment. The Tribunal rejected HMRC's reliance on a written agreement (to try to show an agency arrangement) as it did not realistically reflect the actual business structure in place. The Tribunal also allowed a female witness for the taxpayers to give evidence without her name being disclosed in order to protect her from publicity or allegations of criminal conduct (as it emerged there was no such suggestions). Appeal allowed.

Pirelli v HMRC, HL, 8th February 2006

Wed, 08 Feb 2006 00:00:00 GMT

In another Hoechst/Metallgesellschaft advance corporation tax case there was a UK holding company owning a UK subsidiary plus three continental companies together owning the UK holding company. The case was remitted back to the Chancery Division to determine the unresolved factual question whether had group income election been available the UK companies would have elected to pay dividends free of ACT or instead outside of group income elections so that the oversees parents could receive convention tax credits.

College of Estate Management v. Customs and Excise [2005] UKHL 62 (20 October 2005)

Thu, 20 Oct 2005 00:00:00 GMT

Their Lordships allowed the Customs appeal that the College made a single supply of education, exempt from VAT, in providing its distance learning in specially prepared written materials and not supplies of both education and zero-rated course materials.

Capital One Bank (Europe) Plc v Revenue and Customs [2005] UKVAT V19238 (9 September 2005)

Fri, 09 Sep 2005 00:00:00 GMT

A credit card business arranged for a securitisation of future sums to be received from its cardholders using a Jersey special purpose vehicle to reclaim £11.1 million as input tax. The Tribunal held the securitisation was not supply for VAT and that the taxpayer had been wrong to exclude the related exempt supplies from its partial exemption calculation. Appeal dismissed.

Marks and Spencer Plc v Customs and Excise [2005] UKHL 53 (28 July 2005)

Thu, 28 Jul 2005 00:00:00 GMT

The company paid output VAT on the sale of teacakes which should have been zero-rated but 90% of its reclaim was blocked by UK law. The company claimed it has a European law rights to the whole. Their Lordships made a reference (the second in this long-running case) to the ECJ as the position under European law was not clear.

HM Inspector of Taxes v Dextra Accessories Ltd [2005] UKHL 47 (07 July 2005)

Thu, 07 Jul 2005 00:00:00 GMT

The company paid £2.75mil into an employee benefit trust in 1998, which paid benefits to employees in 1999. For company accounts purposes the deduction arose in 1998 but employees were only taxable in 1999. Their Lordships held the funds were potential emoluments under FA 1989 s.43(11)(a) and so only deductible by the company in 1999.

Greenalls Management Ltd v. Customs and Excise [2005] UKHL 34(12 May 2005 )

Thu, 12 May 2005 00:00:00 GMT

A drinks manufacturer operating a warehouse was liable for the excise due, under the Excise Goods Regs SI 1992/2135, when goods were illegally diverted from their intended export after having left the warehouse, even though the taxpayer was innocent of any involvement in the diversion.