Status of OEIC

Status of OEIC

The applicant, Banque Bruxelles Lambert SA, provided services to open-ended investment companies (SICAVs) in Luxembourg. A tax investigation concluded that the applicant had not charged VAT on the fees charged to the companies, since the services were supplied in Luxembourg where SICAVs were not considered to be taxable. The investigation claimed that the applicant had acted with the intention of avoiding VAT, since it must have been aware that VAT arising on the costs of services supplied to the Luxembourg SICAVs had not been paid either to Belgium or Luxembourg. A final demand was issued and a fine imposed.

The applicant contested the demand, and the court referred to the European Court of Justice for a preliminary ruling on whether SICAVs established in a member state were taxable persons for VAT purposes within the meaning of Article 4 of the Sixth Directive, so that where services referred to in Article 9(2)(e) of the Sixth Directive were supplied to those companies, the deemed place of supply of those services was where the SICAVs were established.

The European Court ruled that SICAVs were taxable persons within the meaning of Article 4, so that where services referred to in Article 9(2)(e) were supplied to such companies established in a Member State other than that of the supplier of the services, the place where those services were provided was the place where the SICAVs had established their business.

(Banque Bruxelles Lambert SA v Belgium (Case C-8/03), European Court of Justice, 21 October 2004.)

Residential conversion

The conversion of a non-residential building into a residence will normally allow the owner to claim a refund of VAT on the supplies of materials and building services used. However, the conversion of a non-residential part of a building which already contains a residential part is not included unless the result is to create an additional dwelling or dwellings.

Mr Jacobs had bought a former residential school, in which the boys had boarded during school terms. The building had included residential accommodation for the boys, bed-sit accommodation for duty staff, and the headmaster's residence, as well as classrooms and other facilities. He converted it into a substantial residence for himself, including three staff flats. Customs refused to refund the VAT paid on the supplies and services.

The High Court upheld the decision of the VAT tribunal that a refund was due, although on different grounds. The tribunal had held that other provisions of the VAT Act allowed the zero rating of the supplies, despite the fact that the building already contained a residential part. The High Court held that the requirement to create a new dwelling or dwellings did apply, but that it was met by the creation of the staff flats. The taxpayer was therefore entitled to recover so much of the VAT payable by him as related to the conversion of those parts of the property that were non-residential in their previous use, so only the VAT relating to the conversion of the headmaster's flat and the boys' accommodation was excluded.

(Commissioners of Customs and Excise v Jacobs, Chancery Division, 22 October 2004.)

No co-operation

The taxpayer appealed against a closure notice given under TMA 1970, s 28A(1) and (2) relating to 1999-2000 following an enquiry. He was also director of his company, which appealed against a notice that the company was liable to pay primary and secondary Class 1 NICs in respect of an employee for the periods between 19 September 1998 and 30 September 2000, and a second similar notice in respect of the taxpayer's earnings.

The Special Commissioner praised the Revenue which he said had gone to 'considerable lengths' to obtain the required information. Equally, the Commissioner said that the taxpayer both in his own right and as director of his company had done 'everything he could to be obstructive, to procrastinate, obfuscate and delay producing relevant information properly requested and … required'. Overall, none of the grounds upon which the taxpayer had based his decision was well founded. The appeal was therefore rejected, although the assessment was reduced.

In respect of the company, the appeals were rejected, but the sum in respect of the later notice was modified.

(Dr A Gordon Siwek and Siwek Ltd (SpC 427).)

Issue: 3982 / Categories: