Weekly VAT News

Sarabande: whether exempt supply of land – FTT

Sarabande is a charity which provides emerging artists with studio and exhibition space and other support. Sarabande claimed input tax on the acquisition and refurbishment of a property, which HMRC disallowed, on the basis that Sarabande was making exempt supplies of land. The FTT has upheld Sarabande’s appeal against HMRC’s decision and subsequent assessment. (The FTT noted HMRC’s difficulties in establishing the fact pattern so as to determine the VAT treatment, given inconsistencies in the information provided by Sarabande, a lack of clear records, and inconsistences in the preparation of its accounts and tax returns.) HMRC argued that there was an exempt supply of land by Sarabande to its subsidiary, Suture Inc Limited (SIL), which then made a supply to the artists. Sarabande argued that it was making supplies directly to the artists, which were not supplies of land, but rather a wider programme of support. Given the lack of written documentation (which meant that could be no transfer of a proprietary interest), the issue was whether there was a licence to occupy the land. As SIL was only established after Sarabande had started entering into the leases, the FTT concluded that SIL did not acquire from Sarabande a contractual right to occupy the building. Accordingly, there was no exempt supply made by Sarabande to SIL, and HMRC’s disallowance of Sarabande’s input tax claim on the acquisition and refurbishment of the property was not valid, as this was based on a supply that was not made. The FTT went on to conclude that there was a supply by Sarabande to the artists, and that this was not an exempt supply of land, as the supply was of the support programme, of which the studio rental was only one (albeit central) element. (Contact: Ben Tennant)

Customs modernising authorisations project closed

The Chartered Institute of Taxation (CIOT) has reported that HMRC have announced the closure of the customs and excise modernising authorisations project. The project was announced at the Spring Budget 2023 to “streamline and digitise the government’s customs and excise authorisation processes to improve HMRC’s offer to traders. HMRC will radically reduce the number of customs authorisations to make the new authorisations more facilitative.” HMRC’s announcement stated that following the government’s public spending audit, HMRC reviewed priorities and delivery plans, and decided to close the project. HMRC recognised stakeholders’ engagement with the project, and noted that insights gained will be preserved for the future, and that improvements to HMRC customs guidance and technical handbooks will continue to be made. HMRC have recently published two customs technical handbooks, on Economic Operators Registration and Identification (EORI) and on safety and security declarations. (Contact: Jeffrie Mann) 

Finance Bill update

The Public Bill Committee’s consideration of Finance Bill 2024-25 has concluded. The government amendments and new clauses tabled in December and January (see the Business Tax Briefings of 10 January 2025 and 24 January 2025) were approved by the Committee on 28 and 30 January 2025. No amendments or new clauses tabled by opposition MPs on the Committee were passed. The amended Finance Bill will now return to the House of Commons for its remaining Commons stages (Report Stage and Third Reading). No dates for these stages have been announced yet. (Contact: Andrew Clarke)

This week’s CJEU VAT calendar

On 13 February, there will be Advocate General opinions released in Ati-19 on provisional enforcement of an order requiring the sealing of business premises, Beach and bar management on the sealing of premises and the imposition of financial penalties for the same offence, and Dyrektor Krajowej Informacji Skarbowej on the VAT treatment of subsidies for operating public transport.

Dbriefs webcast

On Wednesday 12 February at 12.00, there will be a webcast on Cost-out: the role tax and legal can play in optimising supply chains. Hosted by Gareth Pritchard, our panel will discuss how businesses’ tax and legal departments can help with the adoption of agile, adaptable and resilient supply chain strategies; themes and trends in the evolving global landscape; and practical insights and examples.