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Weekly VAT News - 20/03/2017


Adecco: Upper Tribunal rules that VAT should be charged on temps’ earnings
The Upper Tribunal has found in favour of HMRC in Adecco, which concerns the nature of supplies made by employment businesses. Adecco argued that it was introducing certain temporary workers to its clients, and should only charge VAT on its commission. The Upper Tribunal, however, has ruled that Adecco should account for VAT on all charges (i.e. including earnings paid to temps). Its decision focuses exclusively on the contractual position, and considered it significant that the temps had no direct contract with the clients, and were paid by Adecco rather than by the clients. There is, however, little analysis of either the impact of the Employment Business Conduct Regulations (which affect the legal form of temps’ employment) or of the question of whether the client (rather than Adecco) consumes the services of the temps. The decision therefore potentially leaves scope for further clarification of the relationship between contractual analysis and economic reality. To discuss the case, or its implications, please contact Helen Thompson on 020 7007 3713.

Hilden Park: burden of proof in golf club rematch
At the beginning of 2016, the Court of Appeal refused leave to Hilden Park golf club to continue its challenge that the sporting exemption should apply to its services. The Upper Tribunal had found that the club’s efforts to establish a “not for profit” company (a condition of the exemption) were an abuse of law, intended to achieve a tax advantage that was contrary to the purpose of the VAT legislation. A successor partnership, Hilden Park LLP, has now been challenged by HMRC on similar grounds. In a preliminary decision, the First-tier Tribunal has considered where the burden of proof in such cases should lie. On this occasion, it has determined that the burden of proof lies on HMRC, in the same way that it would if they alleged that an arrangement was a sham. This decision could make HMRC’s preparation for abuse of law cases considerably more difficult: they are less likely to rely on cross-examination of the taxpayer's witnesses, and will have to consider leading evidence of their own. However, the FTT seems to expect that an appeal by HMRC against this preliminary decision is likely. To discuss the case, or its implications, please contact Anbreen Khan on 020 7007 0688.

Duty classification: Upper Tribunal emphasises objective characteristics
Honeywell Analytics imports a portable “Gas Alert Micro” device which detects and measures a number of potentially dangerous toxic gases. It can store those measurements on a memory card, as well as sounding an alarm if gas levels are too high. The First-tier Tribunal agreed with HMRC’s Binding Tariff Information which classified the device as an alarm (on which duty was payable at 2.2%) rather than an instrument for measuring gas (on which duty would be 0%). However, the Upper Tribunal has now overturned that decision: it was an error of law for the First-tier Tribunal to focus on its perception of the intended use of the device, rather than its objective characteristics. The Upper Tribunal also refused to entertain a belated argument from HMRC that the device was as “gas analysis apparatus”. To discuss the case, or its implications, please contact Jeffrie Mann on 020 7007 6975.


DBriefs webcast: The Gulf Cooperation Council VAT Treaty
The next Dbriefs webcast is on Tuesday 21 March at 11.00 GMT/12.00 CET. The topic is A Closer Look At The Gulf Cooperation Council VAT Treaty. The webcast will be hosted by Daniel Lyons and during the webcast our panel of experts will discuss the GCC VAT Treaty, which will provide the framework for implementation of VAT in the GCC countries. To register for the webcast, click here. The Ministry of Finance in the United Arab Emirates has launched a series of awareness sessions to present to advisors and businesses on the progress of VAT and excise implementation. The Dbriefs webcast will follow the first such session, which is aimed at the advisory community and is to be held on the morning of 21 March. Later sessions are aimed at the general business community. Full details of the sessions can be found by clicking here.




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