Monthly Archives: May 2015

VAT on Crowdfunding?

By Marcus Ward 28 May 2015

The EC is has begun an investigation into whether VAT should apply to crowdfunding activities.

An alternative is for the Commission to consider whether crowdfunding should be covered by the exemption for financial services. In my view this seems unlikely.

So what could the outcome be if VAT is applicable to crowdfunding? Well, a large number of UK projects will face a 20% VAT liability on investor returns. This is especially relevant to the popular “rewards crowdfunding”, where payments by investors are made in return for products or services to be developed as a result of the fundraising. These rewards projects may include; films, albums, or software development, which are offered “free” or at a reduced rate. It would appear that in these cases, consideration is flowing in both directions.

The Commission may also decide that crowdfunding intermediary services offered by many platforms will become liable to VAT.

The current position is that the Commission has now referred the question of crowdfunding to the EU VAT Committee.

More on this subject as soon as we have it.

VAT – Compound interest now payable on retrospective claims. Littlewoods Court of Appeal decision

By Marcus Ward 21 May 2015

If your business have ever submitted a retrospective claim to HMRC on the basis of UK law being incompatible with EC legislation, it is possible to claim compound interest.

Full judgement here: https://emeia.ey-vx.com/730/28558/landing-pages/littlewoods-coa-judgment-21-may-2015.pdf

Please contact us if you require any further information or assistance.

VAT – The Future for the EC Digital Single Market

By Marcus Ward 11 May 2015

VAT – The Future for the EC Digital Single Market

The EC has announced its plans for its VAT digital single market in respect of online sales. Full details are here and here.

The highlights are:

• Extension of MOSS to intra-EC and third country online B2C sales of goods.

• Introduction of a new EC-wide VAT threshold to help start-up businesses.

• Ending current distance selling thresholds.

• Allowing for domestic controls, including a single audit of cross-border sales.

• Removal of the VAT exemption for the import of small consignments form third countries.

• Removal of barriers to cross-border sales eg; geo-blocking and costs.

This is likely to have a huge impact on the way businesses deal with VAT on sales of goods to individuals overseas. If the introduction of MOSS is anything to go by, we may be in for a bumpy ride.

VAT – Business Entertainment Flowchart. What input tax may I recover?

By Marcus Ward 11 May 2015

VAT – Recovery of input tax incurred on entertainment

One of the most common questions asked on “day-to-day” VAT is whether input tax incurred on entertainment is claimable. The answer to this seemingly straightforward question has become increasingly complex as a result of; HMRC policy, EC involvement and case law. Different rules apply to entertaining; clients, contacts, staff, partners and directors depending on the circumstances. It seems reasonable to treat entertaining costs as a valid business expense. After all, a business, amongst other things, aims to increase sales and reduce costs as a result of these meetings. However, HMRC sees things differently and there is a general block on business entertainment. It seems like HMRC does not like watching people enjoying themselves at the government’s expense!

If, like me, you think in pictures, then a flowchart may be useful for deciding whether to claim entertainment VAT. It covers all scenarios, but if you have a unique set of circumstances or require assistance with some of the definitions, please contact me.

I thank my friend and colleague Leila Ong for help with this, and also with the series of presentations we have recently carried out and which, amongst other subjects, covered business entertainment. Should you require VAT training or presentations, don’t forget our comprehensive service here which can be tailored to your needs.

VAT -Business Entertainment Flowchart

Download here: VAT Business Entertainment Input tax recovery flowchart

VAT- Is the Upper Tribunal bound by High Court decisions?

By Marcus Ward 6 May 2015

Upper Tribunal versus High Court

In the recent case of Meena Seddon Settlement which involved Inheritance Tax, the First Tier Tribunal (FTT) was required to decide whether the Upper Tribunal is bound by decisions made in the High Court. The FTT decision will doubtless affect VAT cases in the future.

It decided to follow a precedent set by the Upper Tribunal over an earlier decision by the High Court.

The taxpayer contended that the matter should be decided on the basis of a previous High Court decision. HMRC argued on the basis of a later Upper Tribunal decision. In normal circumstances, a later decision should take precedence over the earlier if both decisions have the same authority and have fully considered the previous judgments. However, if the taxpayer was correct to say that the Upper Tribunal was bound by precedents set by the High Court, the later decision could be disregarded as being wrong in law.

The FTT decided that it was the intention of Parliament that the Upper Tribunal was not bound to follow High Court precedents. This was notwithstanding the fact that a High Court could have a supervisory role over the Upper Tribunal in cases of judicial review. Therefore, it determined the case on the authority of the later Upper Tribunal decision in favour of HMRC.