Welcome to my November newsletter. Last month I had the pleasure of publishing a number of articles on AccountingWeb, I’ve summarised them for you here.
Student essay supplier learns lesson in VAT case
An organisation called All Answers that uses freelance writers to complete academic work for students (!), has been through the tribunal system for the third time.
On this occasion, All Answers believed that VAT should only be due on two thirds of the price they charge students, as a third of the price is passed on to the writer, who is self employed and generally not VAT registered.
HMRC argued, and ultimately the upper tribunal agreed, that as the contract is between All Answers and the student, and the writers are supplying a service to All Answers rather than directly to the student, VAT is due on the full amount charged to the student.
My second article published on AccountingWeb covered the first tier tribunal case of UK Funerals Online Limited (UKFO). The case looked at whether the repatriation services supplied by UKFO, both to and from the UK, should be zero rated or exempt.
Essentially, the deciding factor was whether the services should be classified as “the disposal of the remains of the dead” and “the making of arrangements for or in connection with the disposal of the remains of the dead” OR whether is could be classified as “the transport of goods from a place within to a place outside the United Kingdom or vice versa, to the extent that those services are supplied within the United Kingdom”.
Services in connection with the disposal of the dead are VAT exempt, which HMRC argued should apply to UKFO’s repatriation services as they very clearly involved the making arrangements for or in connection with the disposal of the remains of the dead.
UKFO argued that the service should be zero rated, as airlines treat transport of a dead body as cargo, not as a passenger. “The transport of goods from a place within to a place outside the United Kingdom or vice versa, to the extent that those services are supplied within the United Kingdom” is zero rated.
The court concluded that the repatriation service fell within both the zero rating and the exemption, and in that case, zero rating takes precedence.
Key judgement made on financial services exemption
In a ruling that could affect many businesses in the financial services sector, a case that went to the Supreme Court has been concluded.
Target Group Ltd provides loan administration services to Shawbrook Bank Limited.
Under UK legislation, aspects of this service such as granting and managing credit are VAT exempt. However, as Target is administering the loans on behalf of a bank, the company’s predominant role is not that of the provision of exempt financial services.
At every tribunal stage, the conclusion has been that the services supplied by Target are standard rated.
Finally, the Supreme Court concluded that Target is processing payments and inputting accounting entries in loan accounts. As neither of these supplies are covered by the VAT exemption, the service supplied is standard rated.
The impact of this ruling is that, in most circumstances only services provided by a bank or similar financial services institution will ever fall within the exemption.