Monthly Archives: November 2014

International Cases Update: August – October 2014

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In the period August to October 2014 the following decisions relating to VAT and GST were handed down in the United Kingdom and New Zealand.

Of interest is the decision of the New Zealand Taxation Review Authority in Disputant and Commissioner of Inland Revenue [2014] NZTRA 13 where the Authority considered whether the supply of “advisory services” to overseas tour operators in respect of inbound tourism products was taxable or GST-free. This is the third case this year dealing with the GST treatment of supplies of travel arrangements for inbound tourism, with the Full Federal Court here considering the issue in ATS Pacific Pty Ltd v Commissioner of Taxation [2014] FCAFC 33 (my analysis of the decision can be accessed here) (the High Court recently dismissed the taxpayer’s application for special leave – transcript here) and the UK Supreme Court in Revenue & Customs v Secret Hotels2 Ltd [2014] UKSC 16 (my analysis of this decision can be accessed here).

United Kingdom

Upper Tax Tribunal

  • Revenue and Customs v IFX Investment Company Ltd [2014] 398 – VAT – Exemption in Group 4 of Schedule 5 to Finance Act 1972 – Playing games of chance – Whether “Spot the Ball” competition is a “game” – Whether entrants are “playing” a game” Appeal Allowed
  • Taylor Clark Leisure Plc v Revenue and Customs [2014] UKUT 396 – VAT – Fleming claims – Preliminary Issues – Time-bar: construction of VATA 1994, s. 80 – Entitlement: whether right to repayment assigned; whether right capable of assignation; VATA 1994, s. 43.
  • Revenue and Customs v University of Huddersfield [2014] UKUT 438 – VALUE ADDED TAX – University making exempt supplies of education services – refurbishment of leasehold property – lease of property to trust and underlease to University of property by trust – exercise of option to treat lease and underlease as taxable – whether input tax deductible as related to taxable supply of immovable property – purpose of EU and domestic legislation – whether scheme constitutes abuse of right – appeal allowed
  • Westinsure Group Limited v Revenue and Customs [2014] UKUT 452 – VAT – exemption for provision of services of an insurance broker or agent – whether exemption applies to services to facilitate insurance brokers obtaining better terms and related benefits from insurance companies and other insurance related services

First Tier Tribunal

  • Bookit Ltd v Revenue and Customs [2014] UKFTT 856 – VALUE ADDED TAX – financial transactions – exemption – Article 135(1)(d) Principal VAT Directive – card handling services – nature of services – whether transactions concerning payments – scope of exemption – questions to be referred to the CJEU for a preliminary ruling – whether in any event to be excluded from exemption as debt collection – abuse of rights
  • Boxmoor Construction Ltd v Revenue and Customs [2014] UKFTT 833 – VAT –zero- rating for construction of new building – planning permission for extension and alteration – building demolished in substance save for part of facade -whether supply was of construction of new building or alteration of existing building –whether retention of facade was condition of planning permission – HELD –retention of facade not explicit or implicit condition of planning permission – not supply of new building – appeal dismissed.
  • British Credit Trust Ltd v Revenue and Customs [2014] UKFTT 744 – VALUE ADDED TAX – hire-purchase agreements –  whether input tax on repossession costs fully allowable –  subsequent adjustment to appellant’s VAT account – whether a decrease in consideration leading to an adjustment for the purposes of regulation 38 VAT Regulations 1995 – whether an entitlement to bad debt relief under section 36 VATA 1994 – whether valid claim or amendment to claim –  appeal allowed
  • HSM Law Ltd v Revenue and Customs [2014] UKFTT 830 – VAT – creation of company to wind up solicitors practice – transfer of assets of exiting practice to appellant – whether a Transfer of a Going Concern – no – appeal allowed.
  • Ing Intermediate Holdings Ltd v Revenue and Customs [2014] UKFTT 938 – VAT – claim to recover input tax incurred by bank in providing deposit accounts – deposit accounts provided ‘free of charge’ to bank’s customers – whether supply for consideration – yes – whether consideration capable of valuation – yes – appeal dismissed
  • McAllister v Revenue and Customs [2014[ UKFTT 875 – VALUE ADDED TAX – whether operating a trade of buying and selling used cars and car parts – no – whether liable to be registered for VAT – no – whether assessment made to best judgement – no – whether penalty due under VAT Section 67(1) – no – appeal allowed.
  • O’Ryan v Revenue and Customs [2014] UKFTT 838 – VAT  – Registration – whether HMRC were correct to register the Appellant – effect of Appellant being victim of alleged fraud – appeal dismissed
  • Richmond Park Maintenance Ltd v Revenue and Customs [2014] UKFTT 743 – VAT –– Service charges in respect of accommodation units at golf resort –– Some units timeshare units, others subject to 99 year leases –– Whether units are “holiday accommodation” (Group 1 of Schedule 9 VATA) –– In the circumstances of the case, yes –– Whether particular items in the service charges are disbursements –– In the circumstances of the case, no –– Appeal dismissed
  • The Serpentine Trust Ltd v Revenue and Customs [2014] UKFTT 876 – VAT – mixed bag of benefits to supporters making ‘donations’ to charity – whether benefits supplied ‘for’ the ‘donations’ – yes – whether single or multiple supplies – single – whether element of single supply could be zero rated – no – nature of single supply – standard rated – appeal dismissed
  • TJ Charters LLP v Revenue and Customs [2014] UKFTT 896 – VAT – output tax – motor yacht acquired, intended to be used for chartering business with some private use – input tax on purchase of vessel recovered in full – no material records of private use – whether appropriate to apply Lennartz method of accounting for output tax – whether input tax should instead have been apportioned – whether assessment out of time under s 73(6)(b) VATA – appeal allowed in part
  • Tyne Valley Motorhomes v Revenue and Customs [2014] UKFTT 969 – VAT – zero rating –vehicles converted for disabled persons

New Zealand

Taxation Review Authority

Draft ruling issued on development leases with government agencies

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Yesterday the Commissioner issued draft GST Ruling GSTR 2014/D5 ‘Goods and Services tax: development lease arrangements with government entities’.

The draft ruling outlines the Commissioner’s views on the GST treatment of arrangements between government entities and private developers that typically have the following features:

  • the private developer undertakes a development on land owned by a government agency in accordance with the terms of a written agreement between the developer and the government agency; and
  • the government agency supplies the land by way of freehold or grant of a long term lease to the developer, subject to the developer undertaking the development in accordance with the terms of the written agreement – that is, the developer becomes entitled to a transfer of the freehold or grant of a long term lease when the development is completed.

The ruling is comprehensive and considers the following matters:

  • the relevant principles for identifying and characterising the various supplies that are made for consideration under a development lease arrangement;
  • whether the grant of a short-term lease or licence (development lease) by the government agency to allow the developer to undertake the development on land is a supply for consideration;
  • whether, in completing the words on land owned by the government agency, the developer makes a supply of development services to the government agency for consideration;
  • whether the sale of the freehold or grant of the long-term lease of land by the government agency is a supply for consideration, and whether any consideration the developer provides for supply of the land includes undertaking of the development words on land owned by the government agency;
  • the extent to which the consideration for particular supplies made under a development lease arrangement includes consideration that is not expressed as an amount of money, that is, non-monetary consideration;
  • how the value of any non-monetary consideration provided for supplies made in the context of a development lease arrangement may be determined; and
  • the attribution, under Division 29, of the GST liabilities and input tax credit entitlements that may arise under development arrangements.

My analysis of the draft ruling can be accessed here.

Comments on the draft ruling are due by 9 January 2015.

Commissioner’s appeal in MBI Properties heard by the High Court

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On 4 November 2014 the High Court completed the hearing of the Commissioner’s appeal of the Full Federal Court’s decision in Commissioner of Taxation v MBI Properties Pty Ltd [2013] FCAFC 112. The appeal was part herd on 11 September 2014.

The transcript of the hearing on 11 September 2014 can be accessed here.

The transcript of the hearing on 4 November 2014 can be accessed here.

The fundamental issue put by the Commissioner in the appeal is that the decision of the Full Federal Court in South Steyne that there is no supply by the purchaser of a reversion made to the tenant sitting at the time of purchase was wrong and that the Court below was wrong to follow it.

The documents filed by the parties are as follows:

Tribunal finds taxpayer partially entitled to input tax credits

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In Ryan and Commissioner of Taxation [2014] AATA 818 the Tribunal found that the applicant was entitled to part of the input tax credits disallowed by the Commissioner as the result of an audit.

The Commissioner initially found that the applicant was not carrying on an enterprise (and therefore was not entitled to any credits), but after the proceedings commenced concede that issue and the claim before the Tribunal was solely on whether the applicant was entitled to claim credits for particular acquisitions. The central issue appears to have been whether the acquisitions were non-creditable as they were for private or domestic use.

The Tribunal allowed expenses such as legal and accounting fees, domestic air fares, certain taxi fares, car rental and accommodation charges. The applicants accepted that he had mistakenly claimed credits for the rent of his home and life insurance (input taxed) and international travel and water charges (GST-free). The Tribunal disallowed claims for home contents insurance, utilities, airfares of other passengers and various entertainment expenses, including tickets for events. The Tribunal allowed a portion of some expenses after the Commissioner conceded that a 1/3rd apportionment was appropriate.