In Raschta Coatings Pty Ltd as trustee for the Raschta Coatings Trust and Commissioner of Taxation [2015] AATA 34 the Tribunal has found that the applicant discharged its onus of showing that default GST assessments were excessive.

During the audit, the Commissioner treated all deposits into the applicant’s bank accounts as taxable supplies unless it was plain that they were not. After some adjustments at the objection stage, the Commissioner concluded that the applicant’s taxable supplies totalled an additional $2,151,231 over the amounts returned in the BAS.

The decision illustrates the difficulties that are faced by taxpayers in discharging their onus of showing that an assessment is excessive. This is reflected in the following observation of the Tribunal (at [16]):

The Company presented a case which, at first blush, appears unpromising. It does not produce original documents and advances its case by relying on the evidence of Mr Thomas, a person whose reliability was the subject of considerable challenge by the Commissioner. The essence of that challenge was that Mr Thomas had failed to produce relevant documents and that he could not, and should not, be believed when he asserted that all the documents of the Company had been lost in the floods in 2010/2011. Additionally, the Commissioner points to unrelated historical matters that he says cast doubt on Mr Thomas’ credibility.

The Tribunal observed that there was considerable force in the Commissioner’s submissions, but nevertheless found for the applicant, principally it appears because the applicant was able to produce a complete printout of its general ledger plus some bank statements. Using those documents, the applicant produced a document that sought to demonstrate that none of the amounts recorded as credits on the bank accounts (and included by the Commissioner) were not taxable supplies. The Tribunal was satisfied that this evidence showed that the amounts were not taxable supplies, but were payments such as loans, transfers from related entities, non-taxable deposits, reversal entries. This decision illustrates the value of contemporaneous documents.

The Tribunal found that the applicant had substantiated exclusions of $1,878,462, leaving a difference of about $273,000. The Tribunal then considered the question whether the applicant had done enough to entitle it to the setting aside of the assessments and replace them with the amounts in the BAS originally lodged. The Tribunal found that it had, noting that it was a pity that the Commissioner did not use the general ledger to reconstruct the accounts, preferring to require the applicant to produce source documents.

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

• Disputant and Commissioner of Inland Revenue [2014] NZTRA 13 – whether supplies of advisory services to cruise lines, incentive houses and overseas travel agents is zero rated