Weekly VAT News

Aesthetic-Doctor.com Ltd: VAT and cosmetic surgery treatments – FTT

From when it started trading in 2010, Aesthetic-doctor.com Ltd (ADCL) never charged VAT to its customers, considering that its treatments were exempt supplies of healthcare. HMRC disagreed, and assessed ADCL for VAT of £1.6m for the period from 2010 to 2020. The First-tier Tribunal has dismissed ADCL’s subsequent appeal. As in other recent cases in the same area, there was argument about whether only “purely cosmetic” surgery was excluded from exemption, and about how significant a therapeutic purpose had to be for treatments to qualify as healthcare. ADCL’s appeal principally failed, however, because of deficiencies in its documentary evidence, which could not be resolved through witness evidence from ADCL’s director. As the FTT noted, a taxpayer has to keep relevant and appropriate records to claim an exemption from VAT, and this obligation is brought into focus in tribunal, where the burden of proof is on the taxpayer. In this case, ADCL failed to prove the nature and extent of any psychological issues for individual patients even at a basic level. The FTT concluded that the purpose of the services provided by ADCL was not, in the round, to diagnose, treat or cure health disorders, nor to protect, maintain or restore human health. Consequently, its services did not qualify for exemption and its appeal was dismissed. (Contact: Chris Cherrill)

Paul Judd: personal liability notices – FTT

In 2014-15, HMRC assessed Award Drinks Ltd for VAT on the basis that its sales of alcoholic drinks had taken place in the UK and not in France. Award Drinks had previously been put into voluntary liquidation, but with assistance from the company’s former director, Paul Judd, the liquidators contested the assessments. The company’s appeal was ultimately unsuccessful, and HMRC therefore pursued penalties for deliberate errors both on the company and (by way of a personal liability notice) on Mr Judd. In defending himself against the penalty, Mr Judd argued, as had the company in its appeal, that the sales had taken place in France. In support of this case, he was prepared to provide further witness statements. In a case management decision, the First-tier Tribunal has ruled that it would be an abuse of process to allow Mr Rudd to present this evidence and run this argument after the courts had already established that Award Drinks’ supplies had taken place in the UK. Mr Judd had been closely involved in how Award Drinks’ appeal had been run, and there was “sufficient identification” between Mr Judd and the company, meaning that he should not be allowed to relitigate an argument that had been decided. Mr Judd’s appeal at the FTT can proceed based on his arguments that the company did not deliberately commit an error, and/or that the deliberate inaccuracy was not attributable to him. But the tribunal will hear the appeal based on the fact that Award Drinks should have charged VAT. (Contact: Adam Routledge) 

HPA – Construções SA: reduced VAT rate for repair and renovation – CJEU

In 2007, HPA-Construções SA renovated some buildings in Lisbon that were intended for residential use. At the time, a reduced VAT rate was authorised by the EU Principal VAT Directive for renovating and repairing private dwellings, and Portugal had enacted this as a 5% rate for work on properties “used for residential purposes”. The CJEU has ruled that the reduced rate applied to property that was actually being used for residential purposes, but not to properties being developed commercially (even if they would become private dwellings in the future). It noted that the purpose of the reduced rate was to benefit final consumers, which supported Portugal’s decision not to extend the lower rate to services provided to developers. If HPA-Construções could not demonstrate that the buildings were in use as dwellings, then it should have charged VAT at the standard rate. (Contact: David Walters)

This week’s CJEU calendar

On 30 January, the CJEU will deliver a judgment in P Sp. z o.o. v Dyrektor Izby Administracji Skarbowej w Lublinie, on VAT and employee fraud. On 1 February, an Advocate General opinion will be delivered in Adient, on VAT fixed establishment.

Dbriefs webcast

On 30 January at 14.30, there will be a webcast on Taking action on tax evasion: Corporate Criminal Offence and beyond. Hosted by Mark Kennedy, our panel, including representatives from HMRC, will discuss key aspects of the legislation, risk assessments, trends including the role of technology, and the interaction of CCO and broader anti-economic crime measures.