FTT rejects Fleming claim on unjust enrichment grounds
Following privatisation in 1990, water companies accounted for VAT on "infrastructure charges" when new houses were first connected to the mains water supply. It was later agreed that these charges should have been outside the scope of VAT, and Anglian Water submitted a Fleming claim for £12m. The FTT has upheld HMRC’s decision to reject the claim on the basis of unjust enrichment. As is frequently the case in unjust enrichment appeals, expert evidence was provided by economists on both sides, but this failed to provide conclusive proof of what was in the mind of the regulator in setting a cap on the infrastructure charges. On balance, however, the FTT preferred HMRC’s approach (noting that most customers would have been developers who would have recovered the VAT). Anglian’s appeal was therefore dismissed on grounds of unjust enrichment. To discuss the case, please contact Oliver Jarratt on 0121 695 5722.
decides that car exporter could not recover input tax
Car dealer franchise agreements frequently restrict dealers to local markets. Mr Boyce therefore established a business (Glenwood) to help UK dealers of prestige marques such as Porsche and Mercedes export cars to Singapore. By interposing "Named Purchasers" between the dealership and Glenwood, dealerships could show that they were not in breach of their franchise agreements. Unfortunately, this meant that the dealerships issued invoices to the Named Purchasers, and not to Glenwood. HMRC refused input tax recovery of £100,663, on the basis that the invoices were not addressed to Glenwood. The Upper Tribunal has now upheld that decision. According to the UT, the reason that Glenwood was unable to obtain the invoices in the correct name was not down to any defect in the UK's rules – it was simply a consequence of how Glenwood chose to structure its business. Therefore, even though it was accepted that the supply was to Glenwood, and the Named Purchasers were simply nominees, HMRC were entitled to deny input tax recovery. To discuss the case, please contact Aaron Bissett on 0113 292 1709.
Elbrook: UT dismissed
HMRC’s appeal in relation to hardship application
A feature of VAT appeals is that disputed tax has to be paid before the appeal can be heard, unless payment would cause the taxpayer “hardship” - which is sometimes hard to define. In Elbrook, HMRC took the view that the taxpayer should have borrowed £771,430 to pay the disputed tax, either by maximising its existing loan facilities, or seeking additional finance against investment assets. The Upper Tribunal has rejected HMRC’s appeal, holding that seeking additional finance in this way would cause hardship. Additional complaints by HMRC about the quality of evidence provided by Elbrook, and delays which may have contributed to hardship, suggest a deteriorating relationship between taxpayer and HMRC, but were also rejected by the Upper Tribunal. The decision is a reminder that, although hardship is rightly regarded as a difficult test to satisfy, it may nevertheless be appropriate to consider it when pursuing an appeal to the FTT. To discuss the case, please contact Anbreen Khan on 020 7007 0688.