Property outsourcing – "virtual" assignments
Businesses that wish to "outsource" their property requirements may not be facing an extra VAT hurdle. The High Court has decided that where a landlord contractually prevented a tenant from assigning a lease then an arrangement that achieves the same economic result will be VAT free. Abbey National plc wanted to assign the leases over a number of properties to an unconnected company, Mapeley, and then lease them back but was unable to gain the landlords’ consent. It attempted to achieve the same effect by assigning the "economic benefits and burdens" of the lease. The High Court decided that for all practical purposes, this was the same as "letting or leasing" the property and so was not subject to VAT.
Financial Services – Investment Trust Management
The Tribunal has decided to ask the ECJ to consider the VAT treatment of the management of UK Investment Trust Companies. It decided that a full hearing of the appeal by The Association of Investment Trust Companies/J P Morgan Claverhouse Investment Trust plc was not needed as many of the background facts were agreed. The parties will now agree a final statement of facts to accompany the questions that it will ask. The ECJ is likely to hear the case in about two years.
Business cars – VAT on defending company car drivers not recoverable
According to the High Court, VAT on the cost of defending the driver of a company car against a dangerous driving charge should not have been reclaimed by the employer. Jeancharm Ltd satisfied the Tribunal that it should be able to reclaim the VAT paid when one of its staff was prosecuted but the High Court decided that the solicitor’s work was done for the individual concerned, and not the business.
Business promotions - free concerts targeted by Customs?
We understand that the Tribunal may soon hear a case where Customs are arguing that free concerts organised to promote a venue are "non-business" activities and that the VAT on related costs is not reclaimable. If their argument succeeds, Customs may launch wider challenges to VAT recovery on "promotional" expenses.
Property – update to HMRC notice
HMRC have published an update to notice 742, which sets out their views on the VAT treatment of a range of property and related transactions. Among other things, the update deals with the VAT treatment of "commonhold" transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
