UK VATable or not
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23rd June 2014 the vat
A recent First-tier Tribunal decision highlights how easy
it can be to become involved in an expensive dispute with HMRC relating
VAT treatment of supplies of services and the impact of applying for
type of VAT registration.
involved Muster Inns, which owned the Maltsters, a pub, restaurant and
business in Devon. The business engaged a Guernsey based construction
to refurbish the pub . The construction company registered for UK VAT ,
assumed as a UK established business, and invoiced Muster Inns for the
done plus VAT. Muster Inns claimed this VAT back as input tax on its
HMRC decided that
the construction company did not belong in the UK and that as a result
the VAT registration and VAT invoices were invalid. Instead of it
that Munster could have recovered, Munster was liable to account for
and recover input VAT under a reverse charge.
upheld HMRC’s decision on the basis that the construction company was
established, and therefore not a taxable person albeit VAT registered.
meant that it could not charge VAT and Muster could not claim it.
highlights the fact that it is very easy to fall foul of the complex
supply rules with supplies of land in the UK. The place of supply is
with a liability to register for VAT if the land supplied is ‘VATable’
However in the case of services relating to land supplied by a
supplier, it is optional for the supplier to either VAT register as a
business or for the customer to account for VAT under the reverse
In general most UK based suppliers making supplies of services
relating to land will register for UK VAT as overseas traders and
VAT on their onward supply as it enables them to recover UK VAT
related costs. Sadly, had the construction company in the case of
registered for VAT as an overseas trader there would be no argument
that it was
a UK taxable person and that it could charge UK VAT that its customer
About the Author
VAT People are leading VAT and Customs Duty
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Article Published/Sorted/Amended on Scopulus 2014-07-10 09:08:32 in Tax Articles