Welcome to my world
For many years I have been a member of the VAT Practitioners’ Group. According to the VPG website:
‘The VPG membership is comprised of specialists from the VAT profession, leading law firms, industry, major retailers and commerce. Through its diverse technical sub-committees the VPG can exercise considerable influence upon H M Revenue & Customs, the Judiciary and Government itself.
Members receive regular bulletins, which provide comprehensive information relating to changes in VAT law and interpretation. Additionally, members are able to attend the annual VPG Conference that is widely acknowledged to be the premier indirect taxation conference of the year.
To become a member of the VPG you must spend much of your time working on VAT issues and be prepared to spend one evening per month to attend your Chapter meeting.’
The meetings of my VPG Chapter take place between 6 and 8 pm on the third Tuesday of every month. The October meeting was held yesterday. The evening was dark and wet, cold and windy.
I went to the meeting determined to resign. I hadn’t been to more than one meeting a year for ages, and the last time I attended the Conference was in 2007. I wasn’t a VAT Che Guevara any more, more of a VAT Victor Meldrew. Besides, I was behind with my blog so had better things to do with my time, particularly when it was raining (and cold, and windy).
I was definitely in for a fun-filled evening. Amongst the agenda items were:
1. The Lucozade Sport case (Glaxosmithkline Services Unlimited v HMRC): was Lucozade Sport a standard rated beverage for VAT purposes?. What else could it be?
Zero-rated ‘body fuel’, according to the manufacturer. Hah, gotcha!
“No”, said the tribunal, taking a swig, “Lucozade Sport is, in the main, drunk to ‘assuage thirst’ and not for its nutritional value”.
2. The decision of the European Court in Astra Zeneca on the VAT implications of salary sacrifice arrangements.
A salary sacrifice is when an employee gives up the right to part of his pay in return for some form of non-cash benefit. If done properly this, in effect, allows employees to buy goods or services out of pre-tax income. The European Court ruled that the employer could potentially have to account for VAT out of the amounts sacrificed. Per astra ad ardua, one might say.
With the Daily Telegraph reporting that about half of British employers offer some kind of salary sacrifice scheme, expect HMRC to pounce.
3. The tribunal decision in Hanover Company Services Ltd.
In a finding that could have inspired a Kafka novel, the tribunal ruled that taxpayers cannot rely on the content of the HMRC Guidance Manuals (which are published on the HMRC website here) because of the ‘health warning’ in the introduction to those Manuals.
The tribunal in Hanover also decided that a taxpayer is not ‘relying on’ the practice of a tax authority where it is the taxpayer’s advisers who look at the guidance and tell him what it says.
Cue Victor: “I don’t believe it!”
Cue McEnroe: “You cannot be serious!”
I arrived at the meeting ten minutes late. When I left shortly before 8 pm I was still a fully-paid up VPG member. How did that happen?
By the way, I’m also a member of the Stamp Taxes Practitioners’ Group but I’ll tell you about that some other time.
*** UPDATE – October 2011 ***
HMRC have announced in Revenue & Customs Brief 28/11 (issued on 28 July 2011) that they will use the decision of the European Court in Astra Zeneca as authority for subjecting certain salary sacrifice schemes to VAT from 1 January 2012.
The salary sacrificed will be treated as consideration for supplies of the benefits provided to the employees. Where the benefit is liable to VAT, input VAT may be recoverable by the employer rules and output VAT will be due on an amount equal to the salary sacrificed or the cost to the employer (if higher).
The Cycle to Work Scheme in particular may be affected if done by way of salary sacrifice.
In September 2011 the Upper Tribunal confirmed the decision of the First-tier Tribunal referred to in the blog post.
Lucozade is a standard rated beverage. It’s official!
Tax lawyer specialising in business tax, SDLT and VAT