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Weekly VAT News - 13/02/2017

Vouchers given away with newspapers: CA judgment in Associated Newspapers
Associated Newspapers Ltd ran a promotion giving away M&S vouchers to people who bought the Daily Mail and Sunday Mail for three months. The Court of Appeal has been considering the VAT treatment of these vouchers, and has upheld the conclusions reached by the Upper Tribunal. It decided that ANL was entitled to recover input tax where it procured vouchers through intermediaries, as the cost of the vouchers was part of its general business overheads. ANL might have been giving the vouchers away, but this was for a business purpose and was not caught by deemed supply rules, so ANL did not need to account for output tax when it handed the voucher to readers. ANL also sought to reclaim VAT on vouchers bought direct from M&S. The CA agreed with the UT that no VAT was charged on these retailer vouchers, and to that extent no input tax recovery was possible. As it stands, the judgment casts doubt on sections of HMRC’s guidance on how to deal with vouchers. To discuss the case, or its implications, please contact Jason Craig on 0207 007 9264.

Student recruitment services supplied to universities
An increasing number of students at UK universities now come from outside the EU. To attract such students, Newcastle University engaged local agents (e.g. in Malaysia) to handle non-EU student recruitment. The First-tier Tribunal has now ruled that the agents’ services were made to the University, and not (in part) to the student. The University should therefore account for VAT on the full value of services received since 2010 under the reverse charge (although before 2010 different rules on place of supply applied). Moreover, the University was not entitled to any VAT recovery on the services (even as residual input tax). Given the increasing internationalisation of universities and the competitiveness of the education market, overseas agents have become a key part of international strategy, although new recruitment models have been increasingly used in recent years. To discuss the case, or its implications, please contact Laurie Pay on 0121 695 5296.

Santogal: evidence required for cross-border car sales – AG Opinion
In many cross-border sales, a supplier has to rely to some extent on evidence provided by their customer, in order to treat the sale as outside the scope of domestic VAT. In Santogal, the CJEU is considering this issue in relation to the sale of a Mercedes costing EUR 447,665 by a company based in Portugal, to an individual claiming to be resident in Spain. Although AG Paolo Mengozzi was critical of specific Portuguese rules in this area, he confirmed that suppliers need to take reasonable care and obtain objective evidence to support a decision not to charge VAT. This might even, he suggests, extend to contacting a customer up to 12 months after the sale. In this case, the fact that the customer provided three different addresses in Spain to the supplier on different documents should perhaps have prompted further scrutiny. The Opinion once again demonstrates how suppliers can be exposed to risk where customers are not sufficiently clear about their intentions. To discuss the case, or its implications, please contact Martin Tooze on 0121 695 5144.

Navigating Change: Brexit and Indirect Tax Survey
The results of a survey conducted towards the end of 2016 on the likely indirect tax consequences of Brexit are now available. Responses indicate that most businesses are starting to consider the impact of Brexit, even though considerable uncertainty remains. Significant areas of concern include possible changes to current Customs duty rules with resulting duty cost implications, losing the ability to rely on EU VAT principles, and more complex supply chains for goods and services in relation to potential non-tax impacts of Brexit. To discuss the results of the survey, or any indirect tax issues regarding Brexit, please contact Barney Horn on 0121 695 5902

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