International Cases Update – May-July 2014 – decision by Court of Appeal on VAT and tripartite agreements

In the period May to July 2014 the following decisions dealing with VAT and GST in the United Kingdom and New Zealand were handed down.

Of particular interest is the decision of the UK Court of Appeal in Airtours Holidays Transport Ltd v Revenue and Customs [2014] EWCA Civ 1033 which dealt with the question of whether the appellant taxpayer was entitled to recover input tax credits pursuant to a tripartite arrangement pursuant to which PwC was engaged to provide services. While the appellant paid for the services, the issue was whether any services were provided to the appellant. The hearing of the appeal was deferred pending the consideration of appeals by the Supreme Court in HMRC v Aimia Coalition Loyalty UK Ltd (formerly Loyalty Management UK Ltd) [2013] UKSC 15 and WHA Ltd v HMRC [2013] UKSC 24 (my analysis of those decisions can be found here and here, respectively). The Court noted that in those cases the Supreme Court confirmed the decision of the House of Lords in CCE v Redrow Group plc [1999] STC 161 (HL) but qualified the decision in a limited respect.

The services were provided by PwC in the context of a large-scale restructuring of the appellant, at a time when its business was in financial crisis. The First Tier Tribunal accepted the argument of the appellant (supported by PwC) that the services provided by PwC for which the appellant paid had been supplied for VAT purposes by PwC to the appellant. On appeal the Upper Tribunal concluded that the FTT was wrong in law in its construction of the relevant agreements and that, looking at the substance of the transactions, the appellant did not receive a supply of services from PwC, but rather that the Services had been supplied to a number of banks, to which the appellant was, at the relevant time, indebted. The Upper Tribunal also decided that the appellant received nothing of value from PwC to use for the purpose of its business in return for payment.

The Court of Appeal (2:1) dismissed the appeal by the taxpayer. As noted by one of the majority justices, the appeal raised a narrow point, but one of some difficulty on which it is possible to take different views. The dissenting judgment helpfully outlines the current state of the law and distills a number of propositions from the decision in Redrow and the recent decisions of the Supreme Court. My analysis of the decision can be accessed here.

United Kingdom

Court of Appeal

Upper Tax Tribunal

  • Revenue and Customs v Earlsferry Thistle Golf Club [2014] UKUT 250 – VAT – jurisdiction of Tribunal – appeal by recipient of supply against refusal by HMRC to repay VAT erroneously charged on exempt supply – VATA 1994, section 80 – exercise of Community law right to obtain repayment directly from HMRC – whether Tribunal erred in refusing application to strike out – Appeal allowed.
  • Revenue and Customs v Finnamore (t/a Hanbidge Storage Services) [2014] UKUT 336 – AT – Classification of supply of plot of land and storage container – Item 1 Group 1 Schedule 9 Value Added Tax Act – supply exempt – no – appeal allowed
  • Revenue and Customs v LOK’nSTORE Group plc [2014] UKUT 288 – VAT – input tax – partial exemption – company making taxable supplies of storage and exempt supplies of insurance – special method for calculating proportion of deductible input tax on overheads – whether special method produces fairer and more reasonable result than standard method – held yes by FTT – whether FTT erred in law in so concluding – held no – appeal dismissed
  • Noble v Revenue and Customs [2014] UKUT 252 – VALUE ADDED TAX – Edwards v Bairstow – whether First-tier Tribunal erred in law in finding that that supplies shown on invoices did not take place – no – appeal dismissed
  • Revenue and Customs v Pinevale Ltd [2014] UKUT 202 – Value Added Tax – Reduced rate supply – Energy saving materials – Insulation for roofs – Polycarbonate panels for conservatories – Panels supplied to create new roof – Panels supplied to replace existing panels – Whether energy saving materials comprising insulation for roofs – Appeal allowed
  • Revenue and Customs v Roger Skinner Ltd [2014] UKUT 204 – VALUE ADDED TAX – whether certain kinds of dog food were pet food – meaning of “meal” in expression “biscuits and meal” in zero-rating schedule
  • South African Tourist Board v Revenue and Customs [2014] UKUT 280 – VAT – input tax recoverability – s 26 VATA – reg 103 VAT Regulations – whether certain activities of appellant would be taxable supplies if made in the UK – whether supplies made for a consideration – art 2, Principal VAT Directive – Apple and Pear; Tolsma – whether appellant acting as a taxable person – economic activity – art 9, Principal VAT Directive

First Tier Tribunal

  • African Consolidated Resources Plc v Revenue & Customs [2014] UKFTT 580 – VAT – holding company – economic activities – taxable supplies – intra-group loan finance – intra- group management services- HELD – loan finance quasi- equity -not carried on on commercial basis –not economic activity – management services –insufficient link between fixed fee and services provided – not taxable supply – appeals dismissed.
  • Baldwin (t/a Ventnor Towers Hotels) v Revenue & Customs [2014] UKFTT 489 – VAT – Place of supply – hotel accommodation supplied to non UK travel agents; EC Sales Lists
  • Helmbridge Ltd v Revenue & Customs [2014] UKFTT 732 – VAT – input tax – five invoices – whether supply to appellant or to directors personally – whether benefit in kind or pecuniary liability – appeal dismissed
  • Itchen Sash Window Renovation Ltd v Revenue & Customs [2014] IKFTT 518 – VALUE ADDED TAX – reduced rate on supplies of energy-saving materials – weather stripping services supplied with other services generally related to renovation of windows – whether composite or separate supplies – held that where weather stripping services were invoiced for separate prices they were separate supplies, otherwise they were elements of composite supplies not attracting the reduced rate – penalty considered – held that in relation to all but one of the periods assessed the inaccuracy was not careless with two minor exceptions – mitigation reduction percentages also increased – decision in principle – appeal allowed in part
  • Lees of Scotland Ltd & Thomas Tunnock Ltd v Revenue & Customs [2014] UKFTT 630 – VAT – food – excepted items – confectionary – subset cakes – snowballs – sufficient characteristics to be classified as cakes – yes – appeal allowed
  • Norseman Gold plc v Revenue & Customs [2014] UKFTT 573 – VALUE ADDED TAX — input tax — whether appellant carrying on economic activity — whether expenses attributable to onward taxable supply — UK resident company providing management services to overseas subsidiaries — no agreement on amount of consideration to be paid by subsidiaries — no — whether taxable supplies made — no — whether assessments in time — yes — appeal dismissed
  • Oriflame UK Ltd v Commissioners for Revenue & Customs [2014] UKFTT 454 – VAT – Preliminary issue – Single supply made by appellant to its non-VAT registered sales consultants – Subsequent retail sale of goods sold by sales consultants – Direction that output tax on appellant’s due at “open market value on a sale by retail” – Whether “open market value on a sale by retail” should include delivery charges made to sales consultants – Appeal Allowed – Paragraph 2 Schedule 6 Value Added Tax Act 1994
  • Spencer-Churchill v Revenue & Customs [2014] UKFTT 635 – Value Added Tax  –  Whether a “one-off” service, for which the consideration received was arguably gratuitous was undertaken “in the course of business”  –  Appeal dismissed
  • Temple Retail Ltd v Revenue & Customs [2014] UKFTT 702 – VAT – time limits for assessment – whether assessment made more than one year after the HMRC officer had received “evidence of the facts sufficient in the opinion of the commissioners to justify the making of the assessments” – held, yes – appeal allowed.
  • Vodaphone Group Services Ltd v Revenue & Customs [2014] UKFTT 701 – VAT – claim for repayment of over paid tax – appellant sought to justify claim on a different basis to the basis on which claim originally made – whether that was the making of a new claim out of time –Reed Employment considered –  appeal allowed

New Zealand

Taxation Review Authority

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