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Gambling
Two new Treasury Orders have been laid before Parliament that will come into effect on 1 November 2006. The new Orders continue to update VAT law in light of the Gambling Act, and will:
- remove the separate definition of 'gaming machine' from VATA 1994, Sch 9 Group 4, replacing it by a cross-reference to the identical definition in VATA 1994, s 23;
- provide a new definition of 'game of chance' in Group 4 and s 23, replacing the cross reference to the Gaming Act 1968 definition;
- ensure that the definition of 'game of chance' is the same across the UK for both Group 4 and s 23;
- restore the application of VAT to pinball machines; and
- ensure that any game of chance which is not played for a prize does not fall within the exemption.
Business Brief 16/06, 12 October 2006
Disclosure statistics
HMRC intend to publish the number of disclosures of tax avoidance schemes received. Since the introduction of the disclosure rules in 2004, tax professionals, business and others have shown a great deal of interest in the total number of disclosures made, and have made many requests to HMRC for the information. These have included requests under the terms of the Freedom of Information Act. As the disclosure rules were developed in collaboration with tax professionals and business, HMRC see making the information more accessible part of their continuing commitment to this collaboration. Publication of the information is not inconsistent with the strict rules on taxpayer confidentiality and the provisions of the Freedom of Information Act.
Starting on 31 October 2006, HMRC will publish the total number of disclosures that have been made up to 30 September 2006. The information will appear in two tables, one for direct tax and SDLT and the other for VAT. The statistics will be updated in April and October of subsequent years.
Each tax within a table, with the exception of SDLT, is subdivided by category of scheme. For direct tax, the categories are financial and employment up to 31 July 2006, and hallmark from 1 August 2006 onwards. For VAT, the categories are listed and hallmark.
Within these categories the totals received will be given as six-monthly totals (for the six months ending 31 March and 30 September each year) and annual totals (for the financial year ending 31 March). An exception to giving a six-monthly total is for the six months ending 30 September 2006, as this covers the 1 August 2006 change of categories for direct tax disclosures. In this case the totals for each category will be for the period that they are applicable. The latest totals published will always be provisional, and will only be finalised when the statistics are next updated.
Information on the history of the disclosure rules and further details on interpreting the statistics will be published alongside the tables. The information note will give details of the total number of voluntary registration scheme (VAT hallmark) disclosures received to date.
The statistics will be published on HMRC's website, www.hmrc.gov.uk under 'What's new', otherwise from the home page use the link to the 'Practitioner zone' and then use the link under Library to 'Anti avoidance group' and follow further links to the statistics.
The updated totals to 31 March 2007 will be published on 30 April 2007.
Business Brief 16/06, 12 October 2006
Private tuition
HMRC's policy on the liability of private tuition is set out in VAT Notice 701/30 'Education and vocational training'. It advises that the VAT exemption for private tuition only applies to sole proprietors and partnerships who teach a subject that is taught regularly in a number of schools or universities. HMRC say that some businesses that supply private tuition have incorrectly exempted their supplies from VAT. This follows a tribunal decision in Empowerment Enterprises Ltd, which found that the exemption extended to tuition provided by directors of limited companies and those employed by sole proprietors, partnerships or limited companies.
HMRC appealed against the tribunal's findings and the Court of Session confirmed that exemption is only available to sole proprietors and partnerships. Therefore, HMRC say that all suppliers of private education should ensure that they are applying the correct liability to their supplies. Suppliers who have been using the incorrect liability, should account for any unpaid VAT either by means of an adjustment to their current VAT return or by a separate voluntary disclosure.
Business Brief 16/06, 12 October 2006
Supplies to charities
Pasante Healthcare Ltd supplied condoms to a charity that provides free and confidential sexual health advice and contraception to young people. It contended that condoms are medicinal products within the terms of VATA 1994, Sch 8 group 15, and therefore should be zero rated when supplied to such a charity. In order to qualify as a medicinal product, the law requires that they be 'administered'. HMRC contended that the distribution of condoms by a charity did not meet the legal test.
The tribunal agreed with the appellant that a condom falls within the legal definition of a medicinal product as condoms distributed by a sexual health charity are administered within the terms of the legislation.
HMRC have decided not to appeal the tribunal's decision. Businesses supplying condoms in similar circumstances to those of Pasante's should zero rate their supplies. The decision does not affect supplies of condoms to customers other than charities providing care, medical or surgical treatment. They will continue to be liable to the reduced rate of VAT, which applied to contraceptive products, with effect from 1 July 2006.
Business Brief 16/06, 12 October 2006
