Category Archives: Latest from the Courts

Court of Appeal judgement on Subway hot food case

By   11 June 2014
0

The CoA has just released its judgement in the Subway hot food case.  It concerns the liability of toasted sandwiches (known as Subs) with a hot filling; meatball marinara.

This is a lead case for a large number of claims submitted on the basis that VAT has been over declared on certain supplies of hot takeaway food, that are (it was argued) essentially the same as supplies that have obtained zero rating. The Court has dismissed the taxpayer’s appeal.

If you have any “hot food” claims lodged – please contact us for further information.

Latest from the courts – Trinity Mirror plc

By   1 May 2014
0

Good news for taxpayers who submit returns or payments slightly late.

There is an HMRC default surcharge regime whereby a taxpayer is penalised when he fails to lodge a VAT return or payment by the due date (usually one month and one week after the end of the VAT period). There was no dispute over the fact that the return and payment was indeed a day late.

Trinity Mirror plc appealed against a default surcharge of £70,909 at the 2% rate.  Broadly, the company was late twice within the same 12 month period.  However, the return was just one day late and the company contended that such a surcharge was disproportionate having regard to domestic and EC legislation.   Applying the Upper Tribunal’s decision in the case of Total Technology (Engineering) Ltd, the Tribunal held that proportionality had to be assessed at the level of the default surcharge regime as a whole and at the individual level by asking whether the penalty imposed on a particular taxpayer based on the particular facts of its case was proportionate.  The Tribunal held that the surcharge in Trinity Mirror plc’s case was unfair as the company had been previously compliant and the default was only one day.  The chairman went on to comment that this penalty was harsh and excessive in light of the low gravity of the infringement.

Because there are no provisions for the Tribunal to mitigate such a surcharge, it had no option but to completely set aside the penalty.

This may well provide a taxpayer with an additional weapon in their armoury when dealing with HMRC’s surcharges and provides additional clarity on proportionality in relation to the levying of default surcharges.  There already exists a concept of “reasonable excuse” which goes toward mitigation of surcharges and there is significant case law to illustrate what constitutes a reasonable excuse.  If you have received what you consider to be an unfair or harsh penalty, please contact us as experience insists that in the majority of cases we have dealt with we have been able to either remove or reduce HMRC’s penalties.

Agent or principal? Latest from The Supreme Court

By   13 March 2014
0

There is a very important distinction in VAT terms between agent and principal as it dictates whether output tax is due on the entire amount received by a “middle-man” or just the amount which the middle-man retains (usually a commission). It is common for the relationship between parties to be open to interpretation and thus create VAT uncertainty in many transactions. It appears to me that this uncertainty has increased as a result of the increasing amount of on-line sales and different parties being involved in a single sale.

A very helpful recent case; Secret Hotels 2 Ltd (formerly Med Hotels) heard at the Supreme Court, has clarified some grey areas in agent/principal relationships.

Very broadly, in this case which the taxpayer won, the judgement tips the balance back into the favour of common law as opposed to civil law principles for UK taxpayers and that the nature of a supply is to be determined by the construction of the contract – unless it is a ‘sham’.

This Supreme Court Judgment helpfully indicates that we must place far greater emphasis on the form of the arrangement (contract) as opposed to the economic substance (as often argued by HMRC).

The full decision is available here: http://www.supremecourt.uk/decided-cases/docs/UKSC_2013_0036_PressSummary.pdf

Although there will always be disputes over agent/principal relationships, this decision goes some way to clarifying the analysis and demonstrating the importance of the contract over what HMRC describe as “economic reality”.

Please contact us if you are, or have been, in dispute with HMRC on this point as it provides additional ammunition for the taxpayer.

Please click here for information on disbursements for agents