VATease Monthly VAT Newsletter October 2006

This months newsletter covers issues on Gaming Machines, Hotels B/B's, Mobile Phones, Tribunal costs.

VAT on Gaming Machine Takings

We have continued to receive numerous phone calls in respect of the Linneweber case reported in our July 2006 newsletter

The Linneweber case was a German European Court of Justice case and centred around the VAT liability of gaming machine takings, (for full details please use the link to our July 06 newsletter above).

Following on from this, various consultancy companies in the UK issued mail shots to businesses advising them to consider making a claim for VAT declared on their gaming machine takings.

For those businesses considering a claim, HMRC, on receipt of the claim, appear to be issuing a standard letter asking for full details of the gaming machines and reasons why the Linneweber case is of relevance to their circumstances.

In addition to this, HMRC have issued Business Brief 15/2006 stating attempts to'avoid' VAT by developing machines so the random number generator was sited outside the machine, (which then meant the machine did not fall under the legal definition of a gaming machine, hence the takings were not subject to VAT) will not be tolerated. Any businesses which have failed to license or account for VAT on such machines, face a potential assessment and HMRC have said any claims which have been submitted for VAT paid on these machines will not be paid. As always, if you require any assistance in providing a response, please contact us.

Hotels/B & B's

A recent tribunal case Afro Caribbean Housing Association has successfully challenged HMRC's view that the VAT free 29 day rule for hotels, B & B's etc., only applies where the supply of the accommodation is made to the individual occupying the room.

This means organisations contracting with hotels and similar establishments for the provision of accommodation can now qualify for the reduced value rule. Please note however, this only applies where the same individual is using the accommodation for a continuous period exceeding 28 days. It follows therefore that if a company block books accommodation for periods in excess of 28 days but the rooms are to be used by a number of people (for less than 28 days) this rule will not apply.

Reverse Charge for Mobile Phone Industry

Latest news suggests the reverse charge system for businesses trading in mobile telephones, computer chips etc. will be introduced with effect from 1 December 2006

HMRC have indicated they may, to start with, apply a "light touch" to any penalty regime while businesses amend their accounting software. A review is also being undertaken of the need for 'de minimis' limits.

Award of Costs in Tribunal

Over the past few years the VAT Tribunal have occasionally awarded costs against businesses that have not been successful at Hearing.

However, in South Herefordshire Golf Club when Customs applied for costs, the Tribunal dismissed their claim stating it was Customs' practice not to apply for costs unless an appeal "was exceptional in terms of its complexity and involved large sums of money" or was "frivolous of vexatious". This Appeal was found to be neither so an award to costs against the taxpayer was not appropriate.

Changes afoot for Business Briefs

'Hard' copies of Business Briefs (and Tax Bulletins) will be withdrawn from the end of this year with the introduction of a new online only publication.

Following on from this, HMRC are then proposing a combined direct and indirect tax information service. Comments are invited by 27 October 2006 to Graham.Taylor@hmrc.gsi.gov.uk

Hotel Deposits

In a recent French case, the Advocate-General has ruled that sums paid as deposits for hotel services which are retained by the vendor in the event of a cancellation is consideration for a reservation service and as such is subject to VAT

Is Property rental a business?

In 'Riverside Housing Association', the VAT Tribunal had to consider whether the housing associations activities were in the course of business.

VATease comment: It came as no suprise that the Tribunal did indeed find the income from property rentals and sales is in the course of business, (despite the fact the housing association was a charity and a social landlord). In the Morrison's Academy Boarding Houses Association case, general criteria was laid down to identify business activity as follows:

(i) Is the activity a 'serious undertaking earnestly pursued' or a 'serious occupation not necessarily confined to commercial or profit making undertakings'?

(ii) Is the activity an occupation or function actively pursued with reasonable or recognisable continuity?

(iii) Does the activity have a certain measure of substance as measured by the quarterly or annual value of taxable supplies made?

(iv) Is the activity conducted in a regular manner and on sound and recognised business principles?

(v) Is the activity predominantly concerned with the making of taxable supplies to consumers for a consideration?

It is the author's opinion that although the above is not conclusive in every case, Riverside Housing Association clearly fell under the above principles.

Simone Hurst

If you are in the Midlands area you may well have seen our Principal Consultant, Simone, appear on Central News with her 8 year old son Max.

Most of you will know Simone either through the cheery yet professional advice she gives through our helpline service, or perhaps you have seen her at one of the many VAT talks she has given. Either way you will probably agree with us, when we say Simone has a smile on her face and in her voice for everyone that comes into contact with her.

However, what you will not know about Simone is that her young son suffers from Attention Deficit Hyperactive Disorder or ADHD as it is commonly known. In addition to being committed to providing high standards of service at VATease, she is also passionate about raising awareness of this largely misunderstood condition through her own very personal challenging experiences in day to day life with her much loved son.

In April next year, Simone is to undertake the Inca Trail in Peru to raised funds for ADDIS, the national ADHD charity and is looking to raise sponsorship of £3,500. If you would like make a donation please visit Just Giving/Simone for more information and to learn about the daily struggle of living with ADHD.

LexisNexis Tolley presents ...

VAT & PROPERTY CONFERENCE 2006

10 October 2006 - Central London - special discount to VATease readers visit www.conferencesandtraining.co.uk/vp2006

ADVANCED VAT COURSE

21 November 2006 - Central London - special discount to VATease readers visit www.conferencesandtraining.co.uk/vatcourses

If you require further information please contact us on 0121 778 4299.

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