VAT Tribunal Decisions

Summaries of two recent VAT Tribunal Decisions

Fish and chip misery

A family run fish and chip shop came to be scrutinised by Customs over a number of years, raising several points which were put to the tribunal.

The first question for the tribunal to decide was whether the business was acquired by the taxpayers by way of a transfer of a going concern. The tribunal said that it was; the seller offered the business for sale and sold, in his own words, 'the whole shooting match'. The appellant had told the buyer to make the staff redundant as he was going to operate the business as a family concern. The fact that the appellants closed the premises after they had purchased it to refurbish it, and a few weeks later opened a restaurant upstairs, did not change that the business was transferred as a going concern.

The actual date of transfer was also disputed. The date of transfer was originally accepted as 18 March 1991, but it later transpired that the seller had not cancelled his VAT registration until 24 March. The tribunal decided, however, that 18 March was the effective date of transfer, as there could have been reasonable undisclosed reasons for the seller not to cancel his registration until the later date.

The tribunal then had to consider if the appellants' taxable supplies for the year ending at the time of the transfer exceeded £25,400. These supplies included those from the appellants' previous business and those of the seller, which fell to be treated as supplies made by the appellants under section 49, VAT Act 1994. The tribunal had no evidence relating to the appellants' previous business, but the seller's accounts for the relevant time showed average takings of around £1,600 a week, and this easily exceeded the £25,400 threshold.

The appellants' accountant claimed that the appellants' turnover for the following year was less than £24,400, and that had Customs been notified of this, they would have accepted that under paragraph 1(3) of Schedule 1 to the VAT Act 1994, the taxable turnover would not have been reached. The tribunal said, however, that Customs had not been told of this until 1996, and was satisfied that the appellants were registered for VAT with effect from 18 March 1991.

Finally, the tribunal had to consider if an assessment raised by Customs on the appellants was valid. The tribunal concluded that it was invalid. It accepted the appellants' claim that documents concerning the periods for which they were to make VAT returns were never received by them, and so they could not have known when they were supposed to make returns.

The appeal succeeded in part.

(Kyriakos Antoniou and Dorma Antoniou trading as Sackville Fisheries (17165).)

Margin scheme not available

The appellant dealt in secondhand cars and was VAT registered. Since 1997, he was involved in the import and sale of secondhand cars from Japan. The cars were imported into the European Union via Rotterdam, and then imported into the United Kingdom by the appellant between July 1997 and September 1999. He used the margin scheme to account for VAT on his sales of the motor cars, i.e., he accounted for VAT only on the profit made. Customs said that he should have accounted for VAT on the full sale price of the car, and issued an assessment accordingly.

In reaching its decision as to whether or not the taxpayer was entitled to use the margin scheme, the tribunal first considered whether the cars were taxable acquisitions under section 10, VAT Act 1994. It concluded that they were taxable acquisitions, as clearly the cars were not an exempt supply, and they were acquired in the furtherance of the taxpayer's business. Furthermore, given the evidence, the supplier of the cars to the taxpayer was a taxable person in the Netherlands despite the fact that it was not VAT registered there. The cars could be treated as having been acquired in the United Kingdom, since under section 13(2) goods are so treated if they have been acquired abroad in order to bring them into the United Kingdom. Thus section 10(1)(a) was satisfied.

The tribunal said that acquisition VAT was payable on the imports of the cars from the supplier company because the taxpayer was the person making the acquisitions, and he was at all material times a taxable person. However, the acquisition VAT was input tax, because the cars were to be used for the purposes of his business. This gave right to an entitlement to a corresponding right to deduct.

The next question for the tribunal was whether the taxpayer 'took possession of the motor car pursuant to a supply in respect of which no VAT was chargeable' under the VAT Act. Typically, this occurs where the motor dealer buys a used vehicle from a private customer. However, in this instance, the taxpayer took possession of the goods pursuant to a supply in the Netherlands and subsequent removal to the United Kingdom. This was a chargeable acquisition, and according to Customs disentitled the taxpayer to use the margin scheme.

Using the tribunal decision in Mrs E J Wood (17256) which concerned a dealer selling secondhand cars in the United Kingdom which had been imported from Japan into Ireland, the tribunal agreed that the margin scheme was not available to the taxpayer, and that Article 8(2)(a) of the Value Added Tax (Cars) Order was of no assistance to him.

The appeal was dismissed.

(Mr Philip M C Butcher (trading as Ashley Motor Services) (17423).)

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