UK Budget 2024 – The Chancellor delivered his Spring Budget on 6 March 2024.
VAT registration thresholds
The VAT registration threshold increased from £85,000 to £90,000 on 1 April 2024 – the first increase since 2017. If a taxpayer’s total taxable supplies in the last twelve calendar months have exceeded £90,000, or are expected to exceed £90,000 in the next 30 days alone, registration for VAT is compulsory.
On the same date, the deregistration threshold rose from £83,000 to £88,000. If a VAT-registered business expects its total taxable supplies in the next twelve months to fall below the deregistration threshold, it may ask HMRC to cancel its registration.
Private hire vehicles
The Supreme Court ruled in 2021 that the taxi operator Uber is a principal (and not an agent) and must therefore charge VAT on all its fares. If Uber were an agent, it would only charge VAT on its services to drivers. The drivers would be the principals and would generally fall below the VAT registration threshold.
Uber sought to level the competitive playing field by having the same ruling imposed on other taxi operators throughout England and Wales, and the High Court ruled in August 2023 that an operator who accepts a private hire booking acts as a principal. HMRC plans a consultation on the impact of the judgement in 2024, as originally announced in the Autumn Statement.
Retail export scheme
The retail export scheme, which was withdrawn in England, Scotland and Wales at the end of 2020, allowed retailers to zero-rate sales of goods to visitors to the EU who were taking the goods to destinations outside the EU. The scheme still operates in Northern Ireland. The Office for Budget Responsibility has reviewed the removal of the scheme and concluded that re-introducing the scheme would be a net cost to the government.
HMRC Brief and other guidance
Brief 7 (2023) – Change to the VAT treatment of drugs and medicines supplied under patient group directions
Legislation zero-rates goods designed for use in any medical treatment, if they are dispensed to an individual on prescription. The government has announced that it is temporarily extending the use of the zero rate of VAT on prescriptions to drugs and medicines supplied through patient group directions from 9 October 2023 until 31 March 2027.
A patient group direction is a written instruction that allows healthcare professionals to supply and administer specified drugs and medicines to a pre-defined group of patients without a prescription.
The new zero rate does not apply to vaccines and medicines administered by a health professional, for example by injection. These supplies are exempt where the service is provided by a pharmacist. The new zero rate only applies where the goods are administered by the patient, in other words where the supply is not one of exempt medical care.
Brief 1 (2024) – Live web streaming of funeral services
Legislation exempts the disposal of the remains of the dead, and making arrangements for or in connection with the disposal of the remains of the dead. Certain other services are exempt, including the right to grave space and the right to place an urn in a niche. A full list is in VAT Notice 701/32.
Brief 1 confirms that live web streaming of a funeral, where this is provided by an undertaker, cemetery or crematorium operator, is exempt. Where, however, the streaming is provided by a third party for a separate consideration, this is standard-rated.
VAT – COURT AND TRIBUNAL DECISIONS
Aspire in the Community Services Ltd – pre-registration input tax on changed intention to make taxable and exempt supplies
A charity which provided residential care and services for individuals with autism, learning difficulties and behavioural problems initially viewed its services as falling within the welfare exemption and did not register for VAT. Then came the decision in Life Services that bodies which are not state-regulated private welfare institutions cannot exempt their supplies. Aspire in the Community subsequently registered for VAT, making both taxable and exempt supplies, and sought to recover £31,727 of pre-registration input tax. HMRC exercised their discretion in determining how much of the pre-registration input tax was attributable to taxable supplies. The appellant sought disclosure of the documents which enabled HMRC to decide how much input tax was recoverable, but HMRC declined to disclose those documents.
The Tribunal held that HMRC has the discretion to rule on the amount of pre-registration input tax that can be recovered. The appellant was of the view that it should ordinarily be regarded as fair and just for a party to be entitled to review documents held by the other party, Nevertheless, the Tribunal refused the application.
WHY IT MATTERS: Pre-registration input tax is reclaimable on services which are for the purposes of a business which is to be carried on by the taxpayer at the time of the supply. At the time when the input tax was incurred, Aspire had the intention to subsequently carry on a business which was partly taxable, and therefore the input tax was partly recoverable. Understandably the appellant wanted to hear how HMRC had made its decision on how much recovery to allow, but the FTT has taken a strictly legal interpretation of the rules and declined disclosure, which it was entitled to do.
Northumbria Healthcare NHS Foundation Trust – no VAT on hospital car parking unless HMRC can show a distortion of competition
The EU VAT Directive provides that bodies governed by public law shall be treated as taxable persons where their exclusion from registering for VAT would lead to significant distortions of competition. Northumbria Healthcare NHS Foundation Trust operated car parks and HMRC were not able to show that such a distortion would arise if VAT were not charged on car parking. Distortion cannot be assumed based on participation in the car parking market. VAT was not chargeable on car parking.
WHY IT MATTERS: NHS hospitals that operate their own hospital car parks should ensure that users can park “as safely, conveniently and economically as possible”, under guidelines issued by the Department of Health. If VAT is charged, users are less likely to be able to park economically.
Wm Morrisons Supermarkets – definition of confectionery
Nakd are raw fruit and nut bars, and Organix are organic foods and snacks for young children. Whether they are confectionery is determined by the look, feel and taste of the bars. The FTT held that both these foods are confectionery and are standard-rated.
WHY IT MATTERS: The FTT said that “small bars of a similar size to chocolate or candy bars and are clearly intended to be eaten with the hands”. This fits with the statutory definition of “sweetened prepared food normally eaten with the fingers”.
H. Ripley & Co – export evidence considered insufficient
The appellant exported scrap copper to Belgium and zero-rated the supply, but HMRC assessed them for unpaid output tax because of insufficient evidence of export. VAT Notice 703 requires that prescribed evidence should be obtained within three months of receiving full payment from the customer. Here, the appellant obtained evidence more than 18 months later. Also, international consignment notes had not been fully completed by the haulier or signed by the consignee.
WHY IT MATTERS: The conditions for zero-rating of exports are outlined in VAT Notice 703 and have the force of law. Not only must the goods be exported from the UK within the specified time limits (three months, or six months for goods involved in processing or incorporation prior to export), but the exporter must get and hold official or commercial evidence of export within the specified time limits. The exporter must also keep supplementary evidence of the export. The terms “official”, “commercial” and “supplementary” are defined in Notice 703.
SC Adient – fixed establishment is relevant only if the establishment is taking the place of the head office
The Advocate General has given his opinion in this case. Adient Romania (AR) made car seat covers, and the Romanian tax authorities sought to treat it as a fixed establishment of an affiliated entity, Adient Germany, which owned the raw materials and the finished goods. The AG has reiterated that the business establishment (the head office) should normally be preferred to the fixed establishment when judging where the place of supply is. If AR were a fixed establishment of Adient Germany, AR would have to charge VAT on its manufacturing services.
AR could only be a fixed establishment of Adient Germany, said the AG, if it took the place of the head office in connection with certain transactions, and did so using resources placed at its disposal by another group company.
WHY IT MATTERS: The AG’s opinion referred to four ECJ cases since 2018 in which judgments had been reached along similar lines.
Many thanks to Peter Hughes for the above, [email protected].
