Corporate transactions and flotations – Improved VAT Recovery?
Companies issuing shares will welcome the Advocate General’s opinion in Kretztechnik AG, as he proposes the ECJ should find that the issue of shares in obtaining a stock market listing is ignored for VAT purposes and suggests that VAT incurred on associated costs should be recoverable in the same way as other overhead VAT. Therefore, for a business like Kretztechnik, which charges VAT on all its sales, this VAT should be fully recoverable. An Advocate General’s opinion is not binding on the ECJ but we do suggest that companies submit protective claims to Customs to protect against the 3-year capping rules.
Care Homes
Another Advocate-General’s opinion published this week has suggested that the UK law, which allows accommodation in private care homes run for profit to be VAT free, is permitted under EU law. Kingscrest Associates Ltd and Montecello Ltd had argued that they should charge VAT and so could recover VAT on their costs. Since many of the charges made by care homes are paid by local authorities that can reclaim the VAT they incur, charging VAT could have resulted in an overall saving. If the ECJ confirms the Advocate-General’s opinion, some care homes may incur higher VAT costs because VAT on their costs will not be recoverable.
Retailers – Phone cards arrangements under appeal
Customs suffered a set back when the High Court found in favour of retailers who do not charge VAT on sales of certain "phone cards" that exploit the differences between the treatment of vouchers under UK and Irish VAT law. They have now appealed to the Court of Appeal. In their Business Brief, Customs have stated that they believe the arrangements are a tax avoidance scheme and although they may not be issuing assessments unless and until the Courts rule in their favour, they warn that businesses which do not pay VAT on sales of these cards may face VAT assessments, interest charges and, perhaps, penalties if Customs efforts to block the arrangements are successful.
Electronic books – publishers seek removal of "tax on knowledge"
Some large publishers propose to lobby the government and the EU Commission to remove VAT from on line subscriptions and journals. They see VAT on the cost of electronic books and journals as a tax on learning and discriminatory compared to VAT-free hard copies.
Gordon and his ninth Budget
Long serving Chancellor Gordon Brown will deliver his latest Budget on Wednesday 16 March. The Budget has been scheduled for about 1230 GMT. As usual there will be a "Budget Special" edition of Weekly VAT News following the announcement.
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