Indirect tax news from the past week
18/12/2023
VAT treatment of fund management services – response to consultation
In December 2022, the government published a technical consultation on the VAT treatment of fund management services. The consultation was part of a broader tax and regulatory review of the UK’s funds regime, and proposed reform of the VAT legislation to codify policy. The government has now published a summary of responses to the consultation. The summary reports that the government will retain the current list of fund types to which the fund management exemption applies. Respondents submitted that defining the term ‘management’ could provide greater clarity on the application of the exemption. However, the “government has concluded that the current position established by settled case-law provides sufficient legal certainty.” In response to the request for more definition, the government will “take this forward as part of the review of current guidance”, with work focussing on providing clarity to the existing legal position, and not widening the definition. (Contact: Alex Beattie)
VAT on energy-saving materials – response to call for evidence
Since 1 April 2022, zero-rating applies (until 31 March 2027) to the installation of energy-saving materials (ESMs) such as solar panels, heat pumps, and insulation (which previously qualified for a reduced VAT rate), and to wind and water turbines (which had not qualified for the reduced rate since 2019). Following these changes, and with a view to extending the scope of zero-rating for ESMs, the government issued a call for evidence. The government has now published a summary of responses to that call for evidence, including next steps. As announced in Autumn Statement 2023, the government has confirmed that zero-rating will be extended to include the installation of electrical battery storage, water-source heat pumps, and diverters retrofitted to ESMs. Specific groundworks necessary for the installation of certain types of heat pumps will also be brought within scope. The scope of the zero rate will also be extended to the installation of qualifying ESMs in buildings used solely for a relevant charitable purpose. It is intended that the changes will apply from 1 February 2024. The zero rate will apply until 31 March 2027, at which time the reduced VAT rate will apply. (Contact: Zoe Hawes)
VAT zero-rating for reusable period underwear – SI
As announced in Autumn Statement 2023, the scope of the VAT zero rate is being extended to include reusable period underwear. The Value Added Tax (Women’s Sanitary Products: Reusable Underwear) Order 2023, with an accompanying tax information and impact note, implements this measure. The zero rate will apply from 1 January 2024. (Contact: Donna Huggard)
New guidance on the use of artificial intelligence in the courts and tribunals
On 12 December 2023, the Courts and Tribunals Judiciary published new guidance to assist judicial office holders in relation to the use of artificial intelligence (AI) in the courts and tribunals system. The Judiciary notes that the use of AI throughout society continues to increase, and so does its relevance to the courts and tribunals. The guidance highlights a number of key risks and issues associated with AI’s increased use. These include the risk that unrepresented litigants may use AI chatbots as their only source of assistance, and such litigants may not be aware that they are prone to error and may not be able to independently verify the accuracy of the information provided by AI. A recent decision of the First-tier Tribunal in respect of income tax, where a number of citations and summaries of plausible-sounding supporting case law precedent had been ‘hallucinated’ by an AI large language model, considered some of these issues in practice. (Contact: Andrew Clarke)
This week’s CJEU calendar
On 21 December, the CJEU will deliver a judgment in TP v Administration de l’enregistrement, des domaines et de la TVA, on the VAT treatment of directors’ fees.
Compliments of the season
This is the last edition of Weekly VAT News for 2023 – the next issue will be published on 8 January 2024. We wish all our readers a very Merry Christmas, and a Happy New Year.