IMPORTANT CASE DECISIONS IN THE WORLD OF VAT

Shields and Sons Partnership (C-262/16)

This case was supported by Croner Taxwise’s Fee Protection and concerns the agricultural flat rate scheme (AFRS). HMRC compared the taxpayer’s AFRS income (4%) with ‘normal’ VAT accounting and withdrew the taxpayer from the scheme because they considered it to be too beneficial. The First Tier Tribunal held that HMRC had the power to do so, but the Upper Tribunal referred the matter to the European Court of Justice (ECJ). The ECJ held that a Member State may not withdraw use of the AFRS on those grounds. A Member State must define in advance the categories of farmers that are to be excluded from the AFRS so that individual farmers are able to decide whether they are, or are likely to be, excluded from the AFRS.

The English Bridge Union Limited (C-90/16)

The ECJ has held that they do not consider the game of duplicate bridge to fall within the VAT exemption for a sporting activity. The English Bridge Union had put forward their argument that it was a sport for VAT purposes as it promoted physical and mental well-being. The ECJ decided that for an activity to be a sport it must have a significant physical element which the card game did not have.

Praesto Consulting [2017] UKUT 395 (TCC)

This case concerned recovery of VAT incurred on litigation costs. Praesto had paid legal fees in relation to civil proceedings brought against its director by his former employer, CSP, which was also a competitor. Praesto claimed input tax on the fees charged by the solicitor in defending the director. HMRC refused the claim on the grounds that the solicitor’s services were supplied to the director and not the company. The First-tier Tribunal allowed the taxpayer’s appeal. The Upper Tribunal took a different view and concluded that there was no direct or immediate link between the company and the solicitor and that the legal fees were incurred on proceedings brought against the director in his personal capacity.

The Queen’s Club Ltd [2017] UKFTT 700 (TC)

The Appellant is a renowned sports club. It refurbished an area used for catering in one of its clubhouses and sought to recover the VAT incurred. However, HMRC regarded the costs as attributable to both its exempt membership fees and its taxable catering income, meaning that the input tax would only be recoverable in part. The First Tier Tribunal concluded that there was no direct and immediate link between the restaurant and the decision of players to become members or to renew their membership. It considered that members were attracted only to the playing activities when they applied to join. The taxpayer’s appeal was allowed.

The Ice Rink Company Ltd & Anor [2017] UKFTT 698 (TC)

The issue in this case was whether supplies of admission to an ice skating rink and the hire of children’s ice-skates where sold as a package were single or multiple supplies. The First Tier Tribunal concluded that on the facts of this particular case the hire of skates and admission to an ice rink were two separate supplies for VAT purposes. The Appellants were therefore entitled to zero rate the amounts received for the hire of children’s skates.

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