Welcome to our Summer news update. Since the last one we don’t seem to have much more clarity on what the post-Brexit business landscape will look like, but we have seen the publication of the European Union (Withdrawal) Bill, which is the most significant piece of constitutional legislation for decades.
We’ve also seen some important cases on property development in relation to pub conversions and student accommodation, and VAT has now become the focus of the upcoming changes to the government’s Making Tax Digital programme.
Pub and shop conversions
We report on the VAT pitfalls that can occur in converting commercial buildings into residential as illustrated by two recent cases. Get in touch if you are not clear on the rules. Read more
When is student accommodation a dwelling for VAT?
A recent case has highlighted some important VAT differences that contractors and sub-contractors need to be aware of when working on student accommodation. Read more
UK VAT Brexit and EU law- an example
The European Union (Withdrawal) Bill in clause 4(1) aims to convert EU law applicable in the UK the day before the UK leaves the EU into domestic law. This will then be “frozen” and any question as to the meaning of EU-derived law will be determined in the UK Supreme Court by reference to the Court of Justice of the EU (CJEU) case law as it exists on the day we leave the EU.
This is not such a change for us VAT practitioners, because the legislative structure of the UK VAT Act and domestic VAT Regulations are, in principle anyway, meant to reflect EU principles. One of these is that UK VAT laws are as far as possible, meant to be construed in accordance with the Principal VAT Directive (PVD) and the case-law of the Court of Justice of the EU. Where UK law deviates from EU law that principle can be an important benefit for UK taxpayers, who can argue against HMRC for the ‘direct effect’ of the EU provisions, as can be seen from the case of The Learning Centre (Romford) Ltd in which the tribunal has ruled that HMRC were wrong to force the company to charge VAT on welfare services.
The Bill however provides that the principle of ‘direct effect’ is abolished as from exit day. From exit day, therefore, it will no longer be possible to base a tax claim on the PVD itself, and the case above, if heard after then, might therefore have had a different outcome.
Making Tax Digital
The Government announced major changes to the timeline for the implementation of Making Tax Digital (MTD). Under the new timetable only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes, though they can volunteer to do so for other taxes. There is still a lot of detail to flesh out. Read more