ALLISON PLAGER reports two recent VAT tribunal cases: Kieran Mullin Ltd (17683); Royal Bank of Scotland Group plc (17637).
Services supplied to whom?
The taxpayer, Kieran Mullin Ltd, operated several hairdressing salons in Derby, Coventry and Scunthorpe using a mixture of employed and self-employed stylists. In 1996, Customs told the taxpayer that chair rentals were standard-rated supplies, and VAT should be duly accounted for.
ALLISON PLAGER reports two recent VAT tribunal cases: Kieran Mullin Ltd (17683); Royal Bank of Scotland Group plc (17637).
Services supplied to whom?
The taxpayer, Kieran Mullin Ltd, operated several hairdressing salons in Derby, Coventry and Scunthorpe using a mixture of employed and self-employed stylists. In 1996, Customs told the taxpayer that chair rentals were standard-rated supplies, and VAT should be duly accounted for.
It turned out from complaints to Customs by some of the self-employed staff that the taxpayer required the self-employed staff to pay out of their earnings the VAT. Customs advised that the stylists made supplies to the taxpayer and wrote a letter accordingly.
The taxpayer company disagreed, and requested a meeting where its representatives maintained that the self-employed stylists made supplies direct to their customers, and agreed to supply Customs with information which would confirm this. However, the information from the stylists confirmed the opposite to Customs.
The tribunal concluded that the self-employed stylists supplied their services to Kieran Mullin. The fact that the contract between the business and the stylist stipulated that the stylist had to be in attendance at the salon during the normal opening hours of the salon was in itself sufficient, ruled the tribunal, to support that the stylist's services were provided to the business rather than the public. Furthermore, the clause preventing a stylist from competing against Kieran Mullin for one year within a radius of half a mile following termination of contract was completely incompatible with a stylist being independent and supplying services direct to the public.
The evidence overwhelmingly showed that the stylists supplied their services to Kieran Mullin. The appeal was dismissed.
Clearing services dispute
The Royal Bank of Scotland was in dispute with Customs over the VAT chargeable on the transfer to Electronic Data Systems of the part of National Westminster Bank which deals with clearing services.
Electronic Data Systems dealt with all the Royal Bank of Scotland's clearing and processing. When Royal Bank of Scotland acquired National Westminster Bank, it was decided to use Electronic Data Systems for National Westminster Bank's clearing also. The agreement in respect of this included the transfer of certain assets. The dispute concerned whether the transfer should be treated as a supply of goods or services or as transfer of a going concern. Royal Bank of Scotland argued that it was the latter, but Customs disagreed.
The tribunal concluded that there had been a transfer of a going concern. The factors favouring this included the transfer of all the National Westminster Bank employees involved in the relevant activities, the supply of equipment, and the intention of the parties concerned. There was no significance in the option to repurchase. The agreement between the Royal Bank of Scotland and Electronic Data Systems was for ten years, by the end of which time, both the equipment and software were likely to have been replaced.
A part of the appellant's business had been transferred, and could operate separately. The appeal was allowed.
(Royal Bank of Scotland Group plc (17637).)
