International Cases Update – September/October 2013

In September and October 2013 the following decisions were handed down in NZ, the UK and the ECJ, and Canada dealing with VAT issues.

There were a number of cases of interest, two of which are discussed below.

In Casa Blanca Homes Ltd v The Queen [2013] TCC 338 the Tax Court of Canada considered whether GST was payable on the entire fee received by a purchaser of land in respect of the assignment of the contractual rights to a third party, or whether GST was only payable on the amount received over and above the deposit initially paid by the purchaser. An issue was also whether the assignment of the deposit was a separate exempt supply of a financial security. The Court agreed with the taxpayer that there were two separate supplies, being the supply of the interest in the land (for which the assignment fee was received) and the supply of the deposit (for which the purchaser was reimbursed the deposit paid). The Court found that the deposit was a “debt security” and an exempt financial supply.

In A N Checker & Service Engineers v Revenue & Customs [2013] UKFTT 506  the issue was whether the supply of energy saving materials (taxed at a reduced rate) together with the installation of boiler and other central heating products (standard rated) was a single supply subject to differing rates of VAT. While the Tribunal had considerable sympathy for the position of the applicant, it agreed with the Revenue’s contention that the entire supply was standard rated. The First Tier Tribunal noted that the legislation provided for a reduced rate for a “supply” and to read the provisions as applying the reduced rate to elements within a supply would be to depart from the unambiguous meaning of the words used. This can be compared with s 9-80 of the GST Act which expressly provides for the circumstance where a single supply has taxable components and also GST-free or input taxed components.

New Zealand

Trustees of the B Trust v Commissioner of Inland Revenue [2013] NZTRA 5

  • whether taxpayer carrying on a taxable activity in respect of the purchase, development and sale of homes which were used as principal place of residence for short periods of time

United Kingdom

Upper Tax Tribunal

Loughborough Students Union v HMRC [2013] UKUT 517

  • VAT – exemptions – cultural services – bodies managed and administered on an essentially voluntary basis – student union governed by council – salaried sabbatical officers of executive committee as voting then non-voting members of council – whether FTT entitled to find student union not managed and administered on an essentially voluntary basis – yes

First Tier Tribunal

A N Checker & Service Engineers v Revenue & Customs [2013] UKFTT 506

  • Value Added Tax – reduced rate – energy saving materials supplied as part of a supply of the whole or part of a domestic central heating system – whether a single supply subject to a single rate of VAT, a single supply subject to two or more different rates of VAT or two or more separate supplies subject to different rates of VAT

Chubb Ltd v Revenue & Customs [2013] UKFTT 579

  • VALUE ADDED TAX – “Fleming Claim” by company who became the representative member after the original group member had received the input supply – recipient not a member of the group at time of input supply – whether representative member could sustain the claim – On facts – No – Appeal dismissed

Khoshaba (t/a Cinnamon Cafe) v Revenue & Customs [2013] UKFTT 481

  • VAT – pre-registration input tax – whether invoice for a single supply – yes – whether the supply was of goods or services – services – whether other input tax reclaims allowable – appeal dismissed save in respect of petrol

Lane v Revenue & Customs [2013] UKFTT 521

  • VAT – Compulsory registration – Supplies of cleaning services to owners of holiday cottages – Contract between owners of cottages and appellant – Whether appellant supplying cleaning services itself or engaging cleaners as agent of owners – Appeal dismissed

McCann v Revenue & Customs [2013] UKFTT 632

  • Value Added Tax – zero-rate –  construction of a dwelling – swimming pool – external but connected to dwelling – whether zero-rate applicable to construction of swimming pool – Value Added Tax Act 1994 s. 30, Schedule 8

MJ Fenwick Consultancy v Revenue & Customs [2013] UKFTT 598

  • VAT – Exemption – Provision of services by private addiction therapist not registered or enrolled on register or roll of health professionals included in paragraphs (a) to (d) of Item 1 Group 7 of Schedule 9 Value Added Tax Act 1994 – Whether services supplied are directly supervised by such a health professional – No – Appeal dismissed

North Weald Golf Club Ltd v Revenue & Customs [2013] UKFTT 491

  • Value added tax – Exemptions – Sport and physical education – whether Appellant an eligible body for the purposes of VAT exemption – whether assessments out of time – application for late amendment grounds of appeal

Planet Sport (Holdings) Ltd v Revenue & Customs [2013] UKFTT 639

  • After-school sports clubs – whether fees exempt or standard-rated – whether taxpayer a ‘state-regulated institution’ – whether sports clubs ‘welfare services’ – VATA 1994 Sch 9, Grp 7 Notes 6 & 8 – appeal dismissed

Rosen v Revenue & Customs [2013] UKFTT 466

  • VALUE ADDED TAX – whether appellant should be allowed to amend her grounds of appeal to raise the issue of whether she was the correct taxable person to assess rather than her husband – decided that the amendment should be allowed – appellant registered for VAT in respect of the business – whether the appellant or her husband ought to have been the person registered – whether the appellant or her husband owned and carried on the business – evidence considered – found that the appellant owned and carried on the business – whether the assessments on the appellant which had been made to the best judgment of the assessing officer were nonetheless in too high an amount – found on the evidence that they were – amount assessed reduced – appeal allowed in part accordingly

TLLC Ltd v Revenue & Customs [2013] UKFTT 467

  • VAT – recovery of input tax on professional fees relating to the sale of shares in subsidiary companies – Skatteverket v AB SKF – whether sale of shares constituted an economic activity – yes – if so, whether an exempt supply – yes – if an exempt supply, whether input tax recoverable – no  – whether sale of shares a transfer of a going concern – no – if so, whether input tax recoverable – no – whether discharge of indebtedness by subsidiary companies on completion of sale comprised part of consideration for the supply of the shares – no – appeal dismissed

Victorangle Ltd v Revenue & Customs [2013] UKFTT 607

  • VAT – analysis of the facts and on those facts finding there was no taxable supply and no consideration – appeal allowed

Wendy Lane v Revenue & Customs [2013] UKFTT 521

  • VAT – Compulsory registration – Supplies of cleaning services to owners of holiday cottages – Contract between owners of cottages and appellant – Whether appellant supplying cleaning services itself or engaging cleaners as agent of owners – Appeal dismissed

Why Pay More For Cars Ltd v Revenue & Customs [2013] UKFTT 497

  • VAT – motor vehicles – demonstrator bonus paid by manufacturer to dealer – whether VAT received on bonus and accounted for – silent periods – Elida Table and line of supply – appeal dismissed

Wosem Communities Development Ltd v Revenue & Customs [2013] UKFTT 609

  • VAT – appeal against refusal of input tax claim and de-registration for VAT –has appellant established that it is engaged in business activities – no – is the appellant entitled to recover input tax – no – appeal dismissed.

European Court of Justice

Le Credit Lyonnais v Ministre du Budget, des Comptes public et de la Reforme de l’Etat [2013] EUECJ C-388/11

  • Value added tax – Sixth Directive 77/388/EEC – Articles 17 and 19 – Deduction of input tax paid – Use of goods and services for both taxable and exempt transactions – Proportional deduction – Calculation of the proportion – Branches established in other Member States and in third States – Not taking their turnover into account

Canada

Casa Blanca Homes Ltd v The Queen [2013] TCC 338

  • whether GST payable on fees received by purchaser of real estate for assignment of contracts to third parties – whether fee payable for assignment of deposit an exempt supply of a financial service

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