Indirect tax news from the past week
Tartaruga: insurance for North Sea pipeline installation not subject to IPT – FTT
Subsea 7 Group (“S7”) lays undersea pipelines in the North Sea for oil companies. Laying pipelines up to 50km long at depths of up to 3,000m is a complex and expensive business for which appropriate insurance is required. S7’s client, an oil company, arranged Construction All Risks (CAR) insurance to cover itself and S7 against damage to the pipeline and associated equipment in the course of a project. However, any deductible (i.e. excess) under the CAR policy was S7’s responsibility, which it insured with its captive insurance company, Tartaruga Insurance Ltd. The FTT has now ruled that the risks insured by Tartaruga mainly related to the risk of something going wrong with the pipeline or the ship that was laying it, rather than a purely financial risk of S7 having to pay the deductible. To that extent, the risk related to “buildings” (which include pipelines) and was not subject to insurance premium tax if the project was taking place outside the UK’s 12-mile limit. Some risks did not relate to buildings (e.g. damage to materials while being transported) and were subject to IPT depending on where S7 was established. In those cases, the FTT accepted that S7’s ships were capable of being establishments for materials once they were on board, but not while they were in transit. An apportionment of the premium paid by S7 to Tartaruga will therefore have to be agreed, but HMRC’s argument that the entire premium should be subject to IPT has been rejected. (Contact: Tom Jacobs).
St George's University: medical courses delivered overseas – FTT
St George’s University (“SGU”) in Grenada offers a four-year medical degree which it delivers in partnership with universities in 12 different countries, and through a network of affiliated teaching hospitals. For example, the first year of the degree could be studied at the University of Northumbria in Newcastle (“UNN”), and years three or four could involve clinical training at a UK teaching hospital. Although the student experience might be similar to that of UK students, and although much of the teaching was carried out by staff at UNN or the teaching hospitals, it was clear to the FTT from the contracts that it was SGU and not the UK institution that was providing education to the students. This was potentially an issue, as the FTT rejected SGU’s claim that it was (or should be treated as) an eligible body, and it could not therefore exempt its fees from UK VAT. However, the FTT also concluded that SGU delivered its services in Grenada and not in the UK. As in the CJEU judgment in Geelen, SGU’s degree should be seen as a single complex supply, and although elements of it took place in the UK the overall delivery of the course was in Grenada. University courses are subject to VAT where they take place, and as this was outside the UK, the fees received by SGU from students were not subject to UK VAT. (Contact: Laurie Pay).
Cook: Ceroc dance tuition subject to VAT – UT
Ceroc involves a series of over 500 different dance moves drawn from a wide variety of different styles (including ballroom, salsa, and hip hop). Anna Cook, who taught Ceroc to adults, could exempt her classes if the subject was commonly taught in schools and universities and was not purely recreational. The Upper Tribunal drew a distinction between teaching “dance” (which everyone accepted was taught at school) and teaching a particular form or style of dance (Ceroc) which was not. The fact that Ceroc involved such a large number of possible moves (by contrast, there are only 12 moves you need to master in the waltz) did not elevate it from being a particular style of dance into dance generally. Ceroc involved dancing in pairs, using prescribed moves, could lead to Ceroc awards, and was not actually taught in schools, which all pointed to it being a particular dance style. Although the UT found that most of the classes were not “purely” recreational (despite clearly having a social element), Ms Cook was teaching a particular style of dance rather than dance generally, which could not be seen as commonly taught in schools, and which was not therefore exempt from VAT. (Contact: Adam Routledge).
King's Lynn Council: car parking overpayments subject to VAT – FTT
In 2012, the FTT ruled that overpayments at pay and display car parks run by the Borough Council of King's Lynn & West Norfolk were not subject to VAT. HMRC subsequently defeated a similar claim by NCP in the Court of Appeal in 2018. The CA ruled that NCP was offering an hour's car parking for at least £1.40, so if someone inserted £1 and 50p coins knowing that they would get no change, then the consideration for VAT purposes was £1.50. Undeterred, King’s Lynn Council submitted a follow-up claim distinguishing NCP. Its charges were prescribed by Regulations, and could only be changed if advertised in local newspapers in advance – unlike NCP, it simply was not allowed to charge £1.50. This has led the FTT to a slightly different contractual analysis but the same outcome as NCP. The Council might not be able to offer an hour's car parking for £1.50, but the driver could make a counter-offer, recognising that they needed to park but could only pay £1.50 and not the lower advertised rate. That counter-offer was accepted when the machine took the coins and returned no change. The overpayment was subject to VAT, and the Council's appeal was dismissed. (Contact: David Walters).