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28 February 2001
Customs news
Pension review services
Pension review services
Customs news
Pension review services
The Court of Appeal ruled in Century Life plc v Commissioners of Customs and Excise [2001] STC 38 that the company's pension review services are exempt from VAT, because they are insurance related services provided by insurance agents. The supplies at issue were pension review services, carried out as a result of the Financial Services Authority inspired review of possible pension mis-selling. Customs have decided not to seek leave to appeal to the House of Lords. However, Customs consider that the judgment does not necessarily apply to other services which are outsourced by insurers to insurance brokers or agents. Each case must be treated on its merits.
When someone reviews an insurer's personal pension policies for mis-selling, and during the course of this acts as an insurance broker or agent, having contact with insured persons on behalf of insurers, Customs will accept that the exemption applies to them.
Where a business meets these criteria, but it has already accounted for VAT on such services, it can make an adjustment to its VAT accounts as set out in paragraph 1.5 of Customs' Notice 700/45 'How to correct errors and make adjustments or claims'. Alternatively, it can make a claim for repayment of the VAT taking into account any overclaimed input tax. Such claims will be paid subject to the conditions set out below:
* the business must be able to produce suitable evidence that its case exactly fits the Century Life criteria;
* it must be able to substantiate the amount claimed;
* it will need to look back at earlier attributions of input tax (any input tax incurred on goods and services used exclusively for these pension review services is now attributable to an exempt supply), substituting exempt values for taxable values in its partial exemption calculation and deducting the resulting exempt input tax from overpaid output tax in determining the amount of the claim.
Adjustments and refunds are subject to capping after three years. If Customs can show that the business effectively did not bear the burden of the tax, they may reject the claim on the grounds of unjust enrichment. A notification to Customs of intention to claim in the future is not a valid claim.
(Source: Customs Business Brief 3/01 dated 20 February 2001.)
Three year cap
Changes have been made to Customs' policy regarding some VAT refund claims submitted between 18 July 1996 and 4 December 1996 as a result of the Court of Appeal decision in R v Commissioners of Customs and Excise ex parte Building Society Ombudsman Co Ltd [2000] STC 892.
Businesses can benefit from this decision if they meet all of the following criteria:
* they applied to a tribunal against Customs' policy of deferring claims for refunds of VAT, that were more than three years old before 19 November 1996;
* they can provide a copy of the Trib 1 form (which the Tribunal centre sent them) as evidence;
* they had already submitted refund claims which had been agreed, i.e. there was no dispute on the amount or liability of the refund;
* they received an order from the tribunal allowing their appeal, and can provide a copy of this;
* the deferred amount of the claim was capped and never paid.
Businesses which think they may be affected, should write to their local VAT office enclosing all of the following information:
* an explanation of why they consider they can benefit, together with details of the relevant figures;
* evidence that they appealed to a tribunal as detailed above, enclosing a copy of the Trib 1 form;
* evidence that they received an Order after 19 November 1996 from the tribunal allowing the appeal.
This ruling does not apply to the following cases:
* opticians;
* businesses generally submitting repayment returns (not capped until 1 May 1997);
* businesses who already qualify for a full refund where Customs exercised their discretion because of departmental errors.
(Source: Customs Business Brief 3/01 dated 20 February 2001.)
VAT and limited liability partnerships
The members of the limited liability partnership must prepare an incorporation document for the Registrar of Companies who, on acceptance, will issue a certificate of incorporation. This means that the limited liability partnership will be a corporate body, and that it, rather than the members will be the legal entity for VAT purposes. The limited liability partnership itself then becomes liable for VAT registration, subject to the normal registration rules.
As with unlimited partnerships this does not normally mean that the members will be seen as supplying their services to the limited liability partnerships and they therefore will not normally have to register for VAT.
If an existing partnership changes to a limited liability partnership, as the legal entity has changed from that of a partnership to a corporate body, it may have to apply for VAT registration, subject to the normal rules. The normal transfer of a going concern rules will then also apply, including those relating to any option to tax. If the general partnership ceases to exist, it may be possible for the VAT number to be transferred to the limited liability partnership (Notice 700/9, Transfer of a Going Concern, gives full details).
A limited liability partnership will be able to join a VAT group provided it meets the control conditions in section 43A, Value Added Tax Act 1994. If the LLP fulfils these conditions with a number of subsidiary companies, it may form a VAT group with them. It is also possible that a group could be formed by two or more eligible companies and a limited liability partnership, where those eligible companies are controlling partners in the limited liability partnership.
Customs will also agree that the control conditions are met, when the members of a limited liability partnership control all of the corporate bodies to be grouped.
(Source: Customs Business Brief 3/01 dated 20 February 2001.)
Pension review services
The Court of Appeal ruled in Century Life plc v Commissioners of Customs and Excise [2001] STC 38 that the company's pension review services are exempt from VAT, because they are insurance related services provided by insurance agents. The supplies at issue were pension review services, carried out as a result of the Financial Services Authority inspired review of possible pension mis-selling. Customs have decided not to seek leave to appeal to the House of Lords. However, Customs consider that the judgment does not necessarily apply to other services which are outsourced by insurers to insurance brokers or agents. Each case must be treated on its merits.
When someone reviews an insurer's personal pension policies for mis-selling, and during the course of this acts as an insurance broker or agent, having contact with insured persons on behalf of insurers, Customs will accept that the exemption applies to them.
Where a business meets these criteria, but it has already accounted for VAT on such services, it can make an adjustment to its VAT accounts as set out in paragraph 1.5 of Customs' Notice 700/45 'How to correct errors and make adjustments or claims'. Alternatively, it can make a claim for repayment of the VAT taking into account any overclaimed input tax. Such claims will be paid subject to the conditions set out below:
* the business must be able to produce suitable evidence that its case exactly fits the Century Life criteria;
* it must be able to substantiate the amount claimed;
* it will need to look back at earlier attributions of input tax (any input tax incurred on goods and services used exclusively for these pension review services is now attributable to an exempt supply), substituting exempt values for taxable values in its partial exemption calculation and deducting the resulting exempt input tax from overpaid output tax in determining the amount of the claim.
Adjustments and refunds are subject to capping after three years. If Customs can show that the business effectively did not bear the burden of the tax, they may reject the claim on the grounds of unjust enrichment. A notification to Customs of intention to claim in the future is not a valid claim.
(Source: Customs Business Brief 3/01 dated 20 February 2001.)
Three year cap
Changes have been made to Customs' policy regarding some VAT refund claims submitted between 18 July 1996 and 4 December 1996 as a result of the Court of Appeal decision in R v Commissioners of Customs and Excise ex parte Building Society Ombudsman Co Ltd [2000] STC 892.
Businesses can benefit from this decision if they meet all of the following criteria:
* they applied to a tribunal against Customs' policy of deferring claims for refunds of VAT, that were more than three years old before 19 November 1996;
* they can provide a copy of the Trib 1 form (which the Tribunal centre sent them) as evidence;
* they had already submitted refund claims which had been agreed, i.e. there was no dispute on the amount or liability of the refund;
* they received an order from the tribunal allowing their appeal, and can provide a copy of this;
* the deferred amount of the claim was capped and never paid.
Businesses which think they may be affected, should write to their local VAT office enclosing all of the following information:
* an explanation of why they consider they can benefit, together with details of the relevant figures;
* evidence that they appealed to a tribunal as detailed above, enclosing a copy of the Trib 1 form;
* evidence that they received an Order after 19 November 1996 from the tribunal allowing the appeal.
This ruling does not apply to the following cases:
* opticians;
* businesses generally submitting repayment returns (not capped until 1 May 1997);
* businesses who already qualify for a full refund where Customs exercised their discretion because of departmental errors.
(Source: Customs Business Brief 3/01 dated 20 February 2001.)
VAT and limited liability partnerships
The members of the limited liability partnership must prepare an incorporation document for the Registrar of Companies who, on acceptance, will issue a certificate of incorporation. This means that the limited liability partnership will be a corporate body, and that it, rather than the members will be the legal entity for VAT purposes. The limited liability partnership itself then becomes liable for VAT registration, subject to the normal registration rules.
As with unlimited partnerships this does not normally mean that the members will be seen as supplying their services to the limited liability partnerships and they therefore will not normally have to register for VAT.
If an existing partnership changes to a limited liability partnership, as the legal entity has changed from that of a partnership to a corporate body, it may have to apply for VAT registration, subject to the normal rules. The normal transfer of a going concern rules will then also apply, including those relating to any option to tax. If the general partnership ceases to exist, it may be possible for the VAT number to be transferred to the limited liability partnership (Notice 700/9, Transfer of a Going Concern, gives full details).
A limited liability partnership will be able to join a VAT group provided it meets the control conditions in section 43A, Value Added Tax Act 1994. If the LLP fulfils these conditions with a number of subsidiary companies, it may form a VAT group with them. It is also possible that a group could be formed by two or more eligible companies and a limited liability partnership, where those eligible companies are controlling partners in the limited liability partnership.
Customs will also agree that the control conditions are met, when the members of a limited liability partnership control all of the corporate bodies to be grouped.
(Source: Customs Business Brief 3/01 dated 20 February 2001.)
