Weekly VAT News

Nottingham Forest Football Club Ltd: burden of proof for VAT assessment time limits – UT

When issuing a VAT assessment, in addition to the four-year cap, HMRC must issue the assessment either within two years of the end of the relevant VAT period or within a year of having the facts they need to raise an assessment. HMRC received data downloads from Nottingham Forest Football Club Ltd’s new accounting system (Navision) on 20 April 2018, and from its old system (Sage) on 9 May 2018. HMRC considered that the change in accounting systems had led to an underpayment of £345,561 on the 08/15 VAT return, and issued an assessment on 29 April 2019. The club challenged the assessment on the basis that HMRC had all the information they needed on 20 April 2018 (the Sage data having been disregarded), meaning that it was out of time. The First-tier Tribunal dismissed the club’s appeal, as it had failed to show, on the balance of probabilities, that HMRC did not think that they needed the Sage data. The Upper Tribunal has now ruled that the burden of proof was on the club to show when HMRC had the evidence to raise an assessment. This proposition has not been explicitly argued before the courts previously, but it was accepted without comment by the Court of Appeal in Lithuanian Beer, and this is tantamount to binding authority. The UT also decided that the FTT had not followed the tests about the one-year rule set out in Pegasus Birds because it had not been provided with sufficient evidence, and rejected the club’s argument that the FTT had failed to apply the Pegasus Birds tests correctly. Finally, the UT rejected a challenge that the FTT had made its decision based on a view of the facts that could not reasonably be entertained. The club’s appeal was dismissed. (Contact: Oliver Jarratt)

SilverDoor Ltd: VAT on recharges of merchant acquirer costs – UT

SilverDoor Ltd acts as an intermediary between serviced apartment operators and businesses looking for short-term accommodation for employees on temporary assignments. SilverDoor charges a commission to the property owner for its services. It does not normally charge the business unless the business pays using a corporate card, when SilverDoor passes on the 2.95% fee that it is charged by the merchant acquirer. It did not add VAT to those recharges, and was assessed by HMRC for VAT £109,305. The courts have generally rejected attempts by taxpayers to treat credit card charges as separate from services that they deliver to customers, even when the charges are made by separate, but related, entities (such as in Bookit). In this case, the credit card charge was only imposed on the businesses that paid by credit card, whereas SilverDoor generated most of its turnover from commissions charged to the property owners. The credit card charge was therefore isolated to a greater extent than in previous cases. Nevertheless, endorsing the First-tier Tribunal’s decision, the Upper Tribunal considered that SilverDoor was providing a reservation service to businesses, albeit a service which businesses not paying by credit card received free of charge. The 2.95% charged to businesses paying by corporate credit card could not be provided separately from the reservation service, and represented consideration for that service. Even if the charge should be characterised differently, the UT ruled that there was no contract for the provision of a financial service by merchant acquirers to the businesses, and that SilverDoor was not involved in negotiating any such service. Consequently, SilverDoor’s services could not qualify for the financial intermediary VAT exemption. Its appeal was dismissed. (Contact: Nicole Faith)

Finance Act

The Finance (No. 2) Bill 2023-24 (the Spring Finance Bill), introduced following March’s Spring Budget, received Royal Assent on 24 May 2024, shortly before the prorogation of parliament, and became the Finance (No. 2) Act 2024. (Contact: Andrew Clarke)

This week’s CJEU VAT case calendar

On 6 June, Advocate General opinions will be delivered in Drebers on VAT deduction for renovation works and Novo Nordisk on payments by a pharmaceutical company to a national health insurance agency. 

Dbriefs webcast

On 5 June at 12.00, the UK Tax Update – June webcast will be hosted by David Walters. Our panel will discuss the latest UK tax developments, with updates on news in corporate, employment and indirect tax.