Weekly VAT News

United Carpets (Franchisor) Limited: Single or separate supplies – FTT

United Carpets (Franchisor) Limited is a retailer of flooring materials. Customers purchasing flooring materials were given the option to have an independent, self-employed fitter carry out the fitting. United Carpets considered that the fitting services were separately supplied to customers by the fitters and accounted for VAT only on its sales of the flooring materials. HMRC considered that United Carpets was making single supplies of flooring materials and fitting services, on the basis that the fitters were subcontractors, and assessed United Carpets for under-declared VAT. The First-tier Tribunal has held that there were two separate supplies: the supply of goods (carpets and other flooring) by United Carpets to the customer, and the supply of services (fitting) by the fitter to the customer. Having reviewed the contractual documentation and the economic and commercial reality, the FTT were satisfied that there were three agreements: between United Carpets and the customer, between United Carpets and the fitter, and between the fitter and the customer, with the fitter providing services to the customer and the customer liable to pay the fitter. Although not necessary given its conclusion, the FTT also considered United Carpets’ argument that the assessments should be quashed based on legitimate expectation, as HMRC had stated in the course of their investigation that they would not be taking any further action regarding United Carpets’ VAT treatment. However, the FTT found that HMRC had advised that they would not be taking further action “at this time”. Accordingly, there had not been a clear and unambiguous statement so as to create a legitimate expectation. This conclusion was academic, given the FTT’s findings on the supply issue, and accordingly United Carpets’ appeal was allowed. (Contact: Oliver Jarratt)

D.E.L.T.A. Merseyside Limited and another v Uber Britannia Limited: Regulation of private hire vehicles – SC

The Supreme Court has issued its judgment in D.E.L.T.A. Merseyside Limited and another v Uber Britannia Limited, confirming that private hire vehicle operators (PHVOs) can operationally structure themselves as agents under the Local Government (Miscellaneous Provisions) Act 1976 concerning the regulation of private hire vehicles outside of London. While this is a regulatory law case, it has consequences on the commercial models, and thus the VAT outcomes, available to PHVOs. This now results in a misaligned national position, following the earlier High Court decision concluding that PHVOs are obliged to be structured as principals under the equivalent regulations applicable in London (which was not appealed). In April 2024, HMRC issued a consultation on the VAT treatment of private hire vehicles. The consultation closed in August 2024 and it remains to be seen what impact this Supreme Court judgment will have on the government’s approach in this area. Also outstanding is the application of the tour operators’ margin scheme to the sector, which will be considered by the Court of Appeal in Bolt Services UK Limited next year. (Contact: Donna Huggard)

Online platforms and marketplaces: The tax and regulatory landscape

The digital economy has revolutionised the way business is conducted, with online platforms and marketplaces playing an increasingly central role. Tax authorities and regulators have responded by introducing a framework of tax and regulatory demands that platforms and marketplaces must grapple with. Over the summer, Deloitte will be publishing a series of viewpoints on the challenges that digital platforms face. Topics that will be covered include: deemed reseller VAT rules, DAC 7 and comparable reporting obligations, the digital services tax and digital tax landscape, the EU Central Electronic System of Payments (CESOP), and joint and several liability exposures. (Contact: Abi Briggs)