As you may have read in the National Press, Customs have won the latest hearing on the Card Handling Scheme adopted by Debenhams and many other leading retailers. Whilst this is not entirely unexpected and of course may be subject to further legal challenges by the retailers, it does bring up the question of how long VAT avoidance schemes are sustainable particularly if the ECJ upholds the Advocate General’s opinion that the Halifax VAT avoidance scheme was an abuse of rights.

Whilst it remains to be seen how these cases will affect both avoidance schemes and VAT planning in general, given Customs’ undoubted pleasure at winning at least one of these cases it is reasonable to assume that at the very least avoidance schemes will be subject to much closer scrutiny. However, we think it is inevitable that the edges between effective VAT Planning and schemes set up for VAT avoidance will become ever more blurred and that legitimate planning may well be caught up in Customs’ enthusiasm to close any schemes that garner a VAT advantage for the business.

Our advice is that businesses who already have VAT saving measures in place should review these to ensure that they are operated correctly and are as robust as possible. For businesses considering entering into arrangements that could result in a tax advantage our advice is that is more important than ever that specialist tax advice is taken.

Contact: Rob on 0870 420 8971.

Further to the mention in our Winter VAT News, there is now a big opportunity for any business that has paid (but not claimed in full) VAT on professional costs relating to a share sale to now recover this VAT. This affects any business that has sold or issued shares in its business and stems from an AG’s opinion in an ECJ case that the sale / issue of shares by a company is not a supply for VAT purposes.

Rob McCann comments: “Given that even small share issues can incur significant professional fees, irrecoverable VAT has long been an additional cost to a deal. We see that there will be huge benefits to business as claims will be possible for the last 3 years”. Given the 3-year time limit, we need to hear from you or your Corporate Finance colleagues / contacts now to secure maximum benefit.

Contact: Rob on 0870 420 8971.

Given the advent of A-Day in April 2006, BA Vat consider the potential VAT consequence of owning property in other EU states: “Unbeknown to many people the UK has the highest VAT threshold in the EU which means for many ‘sideline’ businesses such as the rental of second or holiday properties the owners, be they individuals, businesses of from April 2006 possibly pension schemes, do not have to be concerned with VAT registration. However, other EU states have low or even nil thresholds meaning that if any supply is made, VAT registration is applicable.

It is worth bearing in mind therefore that if you are a property owner that rents out a property abroad you will undoubtedly have a liability to register for VAT abroad which if not met could potentially lead to back VAT, interest and fines being levied. Conversely whilst VAT is due on sales, VAT registration should also allow recovery of VAT on costs.

Given that every EU country does have a different threshold and differing rules to the UK our advice is to check out all the consequences of letting property out overseas” We will of course be happy to assist you with this process in liaising with other EU authorities or advisers in other EU countries as required. .