2015 and the "mini one-stop shop"

The mini one-stop shop is coming. Last week’s release by the EU Council of amendments to Implementing Regulations 282/2011 is a timely reminder that 1 January 2015 is getting closer. What are the changes? From 2015 all B2C telecoms, broadcasting and electronics services are to be taxed in the EU member state where the customer is based (changing from supplier location). The implications for businesses in this sector, and indeed their customers, are wide ranging. As a quick example, from 2015 your kindle eBook will become subject to 20% UK VAT and no longer the 3% Luxembourg rate as you’ll currently find is the case.

Reasons for this change are fairly clear. Member states were not happy with the “VAT rate shopping” that had become relatively prevalent and straightforward in sectors where technology has increasingly permitted remote service delivery. This, on the surface, simple change in the place of supply from supplier to customer location effectively and quickly removes the competitive advantage gained by those businesses locating in low VAT rate jurisdictions. But the impact affects all businesses in the sector. And it presents a number of challenges...

Where is my customer?

Potentially the biggest challenge for all for businesses applying the 2015 place of supply rules is putting a process in place which can effectively and correctly identify the customer location. The new implementing regulations suggest that businesses will need to be able to identify where “the customer is established or has his permanent address or usual residence”. How individual member states interpret this requirement is yet to be seen, but it can be expected that different tax authorities will require a different burden of proof. Where credit card details with matching address may suffice in one member state, a cross checked national ID number may be required in another. Setting up a system that can handle such multiple requirements will be no easy task.

Whose VAT rules do I apply?

Whilst the place of supply change is superficially simple, the interaction with VAT “use and enjoyment” rules (that may apply to telecoms and broadcasting) makes the new position increasingly complex than the status quo. The starting point for applying EU use and enjoyment is that you should look first to the basic rule, and subsequently override that basic rule in specific situations. Pre-2015 you therefore look first to the basic rule of where the supplier is based, and would defer from that position based on the application of the use & enjoyment rules within the member state of that supplier. Post-2015 you look first to the basic rule of where the customer is based, and would defer based on the use & enjoyment rules within the member state of that customer. In order words, whereas currently each supplier operates one set of use & enjoyment rules (those in the member state where they are established) going forward they may need to operate twenty-seven different sets of rules. And none of them are especially simple.

Where should I register?

Finally, despite the name, the one-stop shop may ultimately involve a number of stops for businesses. Whilst MOSS will permit businesses to submit a single VAT return for all twenty seven member states, it may not be used in any member state in which that business has an establishment. As a consequence it is likely that a number of EU based business will end up in a hybrid situation where they operate separate VAT registrations in certain member states and a MOSS registration for the remainder, and will need to continuously monitor this position. The location of the business’s MOSS registration will be optional (to an extent) and the UK may well be a popular choice due to both the language advantage and a relatively accommodating tax authority.

Plenty to think about.

EU vs eBooks

This week saw the European Commission announce that it has launched infringement proceedings against France and Luxembourg for the VAT rates applied to sales of eBooks (7% and 3% respectively).  Link to EU Press Release.  This follows a decision by the two countries (presumably under some lobbying pressure) to change the VAT charged on eBooks at the start of 2012.

Those who have followed this story will know that there has been much campaigning by the publishing industry, politicians, and people who love reading, to extend the UK 0% VAT rate that applies to traditional books to also cover eBooks.  And the campaign no doubt intensified after France and Luxembourg reduced their own rates, not least because (somewhat unsurprisingly) most of the big eBook sellers are now located in one of these two countries.

But the pushback in the UK has always been that extending our 0% rate would not be compatible with EU law.  Indeed this was confirmed by a ministerial response to Tom Blenkinsop MP’s question at the end of last year see Tom's Question.  This makes the current infringement proceedings especially interesting, as they will provide a good indication as to where the UK can go next.

And there is a crucial difference between the French and Luxembourg cases...

France’s 7% reduce rate stems from EU VAT Law which permits the application of a reduced rate of VAT to the supply of “books on all physical means of support”, whilst also specifically stating that “the reduced rates shall not apply to electronically supplied services”.  France’s case will therefore focus around a broad interpretation of this EU law, and will need to counter the traditional view that an eBook falls within the EU definition of an electronically supplied service for VAT purposes.  This argument will be a challenging one.

Where Luxembourg differs (and the UK would be similar to Luxembourg in this regard) is that it’s 3% reduced rate is not actually an EU reduced rate (indeed the maximum permitted reduced rate under EU VAT Law is 5%).  The 3% Luxembourg rate pre-dates EU VAT harmonisation, and EU member states which had their own reduced VAT rates before 1991 (which differed from the new EU one) were allowed to keep those rates.  In this regard the Luxembourg 3% is very similar to the UK 0% rate.  And what this means is that Luxembourg’s 3% rate is not subject to the restriction as for France above i.e. that it “shall not apply to electronically supplied services”.

Luxembourg will therefore need to successfully argue its pre-1991 VAT law, which has always permitted a 3% reduced rate for books, is worded such that it, as a point of fact, it also includes eBooks.  In other words, Luxembourg can’t actually change its pre-1991 law, but needs to be able to justify that what is already written includes books in both electronic and physical form.  Now I don’t know exactly what that wording is, but there is a subtle difference to the French situation, and Luxembourg’s position is very similar to the one that the UK would need to apply our own 0% VAT rate to eBooks.

Watch this space, it will be an interesting one to follow.

Tax and Morality – what’s the solution?

Having miraculously returned from a great week in Ukraine not in a coffin, I swiftly discovered that this week’s media sensation is tax avoidance.  And a tax avoidance scheme aptly named after a mountain with a 25% death rate seems to have quickly killed off the career of Jimmy Carr.  But although the K2 offshore scheme is fairly easy to deride, there are surely areas of tax avoidance that are less easy to pin-point on a moral compass. 

Tax advisors like to use the term “tax planning” to essentially mean taking steps to minimise your tax bill, but in a less aggressive manner than the more ugly term “tax avoidance”.  It is certainly clear to me that trying not to pay too much tax is not morally wrong per se.  Here are a few examples, and maybe different people will draw the line in different places:

·         Putting your savings in an ISA so that the interest you earn is tax free;

·         Keeping track of the charity donations that you make and claiming the reduction in income tax allowed under the gift aid rules;

·         Giving money to your children every year in order to use the £3,000 annual exemption from inheritance tax;

·         Setting up a company to provide your services as a contractor, and deducting your work expenses from your tax bill;

·         Setting up your eBook business in Luxembourg so that you charge your customers only 3% VAT;

·         Flying your private jet out of the country at 23.45 and back in at 00.15 the next day, so that you’re not technically in the UK overnight for residence purposes;

·         Using the K2 tax avoidance scheme to only pay 1% income tax.

All of the above are / were technically legal (although some are challengeable), but obviously not all of them sit as comfortably with us as the others.  To simplify this in my mind I define tax planning as minimising your tax by doing something intended by the law (e.g. using an ISA which was intended to incentivise saving), whereas tax avoidance is minimising your tax by doing something not intended by the law (e.g. clearly income tax law was not written with the intention what some people would only pay 1%).  By defining and understanding this “purpose” we set a much clearer benchmark than a pure moral judgement which can change with the wind, a politician’s latest grab for headlines, or the media’s latest hunt for a sensation.

This is not new.  In Sweden, tax legislation is accompanied by interpreting provisions which define both the purpose of the law and guidance on how it should therefore be interpreted.  These interpretations are considered persuasive in the Swedish courts.

So maybe there is a simple answer to the complex question of defining a tax system which prevents abuse of rules.  New tax law should include a description of purpose, and this should be persuasive in court.  There are obviously a few hurdles in the way, but in an economic environment where every penny counts, knowing what you’re trying to achieve is surely a good starting point.

Lebara Made Simple

You may have noticed a few tweets over the last week about the Lebara case and changes to UK VAT rules on vouchers.  This is one of the most complex areas of VAT; and so in an attempt to maintain my reputation for making the complex simple, here’s a quick and easy take on Lebara and vouchers...

The way things were

The UK has in general taxed vouchers on redemption.  So as an example if you went to HMV and bought a gift voucher for a friend, they wouldn’t account for VAT at the time you paid the cash, but would do so when your friend came back to the store and used the voucher to buy stuff.  This gave retailers one big VAT advantage, if your friend lost the voucher and never used it, HMV would get its £10 VAT free – this concept is called “breakage”.

But difficulties arose when a voucher was sold through a distributor (which is fairly common practice).  UK rules say that the sale of a voucher by a middle-man is subject to VAT (unlike a sale by the retailer itself) in order to ensure that any margin made is appropriately taxed.  As a result in a three party chain the distributor accounts for VAT on its sale, the retailer accounts for VAT when the voucher is used, and the poor customer ends up paying VAT twice on the same thing!

And so HMRC came up with an odd work around to stop this happening.  This allowed the distributor in such a chain to recover VAT on its purchase of a voucher from a retailer, even though VAT would not actually be accounted for by the retailer on the sale (as we know from the HMV example above).  This “pseudo-VAT” was therefore netted against the VAT charged by the distributor, and ultimately the customer only paid VAT once (accounted for by the retailer when the voucher was ultimately used).  Right overall result but all a bit of a mess.

The new way

In its recent ECJ case Lebara challenged the UK rules.  VAT is a harmonised tax across the EU, and so while the UK has its own VAT legislation that legislation must fall within the parameters set by the EU VAT Directive.   I won’t go into the details of the case, but essentially Lebara had ended up in the position outlined above of being taxed twice; this was because its distributor was not based in the UK and therefore could not make use of HMRC’s special work around to recover “pseudo VAT”.

And last week Lebara won, and the UK has had to change its rules.  The result is that the sale of a voucher should now be treated as a sale of the actual goods or services which that voucher can be used to buy.  So back to the HMV example:  HMV should now account for VAT when you pay for its gift voucher, any distributor should do the same, and no VAT should be accounted for when your friend ultimately uses the voucher.

I’ll put in a small caveat here.  Lebara only considered vouchers with a single purpose i.e. ones that can only be used to buy one type of thing and at one VAT rate.  It’s obviously hard to tax a voucher based on what it can be used to buy if you don’t know what those things will be.  So the changes only apply to single purpose vouchers.

What are the implications?

Well the obvious big one is no more “breakage”, vouchers will be taxed even if they’re not used.  Judging by some of the messenging coming from the Treasury they feel that this is an anti-avoidance measure and will be a big winner for the Exchequer.  I think this may be a little premature.  Firstly it’s not obvious to me that breakage was tax avoidance in any event, after all, if a customer doesn’t actually buy anything why should VAT be charged?  Secondly, as the rules for multi-purpose vouchers haven’t changed there’s an obvious solution to keep breakage, make sure your voucher can be used to buy more than one type of thing...

Another interesting impact here is how and where a voucher will be taxed.  As the new rules apply VAT based on the underlying good or service, different vouchers will have different VAT treatments depending on what that good or service is.  And a sure consequence of numerous different treatments is numerous types of VAT planning around them.  Factor in cross border sales, special rules for different types of services, and the EU proposals for further changes to the voucher rules in 2015, and this becomes a complex and challenging area for businesses to get right!

The Realities of the Pasty Tax

Who knows when the British press are likely to get excited by VAT?  But following the Budget they’ve been truly salivating at the prospect of a “Pasty Tax” and all the class issues that this throws-up Link to one of many articles in the Daily Mail

Regular readers will know that VAT on food can be a minefield due to numerous historical attempts to challenge where the line should be drawn on how the 0% rate and 20% rate apply to food.   As a lover of FACTs, here’s my attempt to clarify what’s really going on with the VAT change.  And if indeed this is a change at all...

The basics.  The law as is now (and has been for years) separates food (generally at 0% VAT) from catering (at 20% VAT).  In an attempt to clarify what catering means the legislation states that catering includes hot food “heated for the purposes of enabling it to be consumed at a temperature above the ambient temperature”.

Where do you draw the line?  The historical point of challenge has been around the “purpose of enabling” something to be eaten hot.  For some foods the line is obviously clearer than others e.g. soup which people normally like to eat hot.  For others it is less obvious and a whole load of cases have reached the UK courts with varying success:


WIN:  The Great American Bagel Factory successfully argued that its bagels were not toasted to be hot but to “create a crunchy interior to the bagel and to promote freshness”.


WIN:  The Lewis Group (supermarkets) managed to convince the Tribunal that its roast chickens were not supposed to be eaten hot but were simply kept hot to comply with hygiene requirements.   And...


DEFEAT:  Domino’s Pizza was rumbled by its own advertising “delivery while hot” whilst attempting to claim that its pizzas were only hot due to baking and not to enable them to be eaten hot.


And perhaps most importantly...


WIN:  It was agreed that whilst Lutron Ltd sold Cornish parties which were often hot when purchased, the intention was solely to have them freshly baked, and the pasties were not deliberately kept warm after heating.  Hence we have the zero-rated pasty!


There are many many more cases, and it’s kind of easy to see how the tax man was getting a little fed up with people trying it on.  Therefore the change, with the new law simply stating that “hot food” means food “which is above the ambient air temperature at the time it is provided to the customer”.  And once it’s written down it almost sounds obvious.


So the Pasty Tax isn’t even a new law, it’s a tinkering with an old one, but a tinkering with some significant effect.  One thing the new wording specifically excludes from hot food is “freshly baked bread”, and so I guess the Tribunals can expect a loaf of fresh cases on what constitutes bread.  Watch this space...

April Fools

It’s April Fool’s Day on Sunday!  With years of experience pounding the streets our Customs officers between us we’re seen a fair few fools in our time.  Here are some examples to provide some light VAT filled entertainment over the weekend...

·    In pre-EU days a repayment trader was claiming VAT back on purchases of tractors exported to Ireland.  All the export documentation was in order but strangely some of the tractors had ended up back in the UK being sold without VAT.  It turned that the trader had been driving the tractors back over the land border through a muddy field in the dead of night with the risk of being shot at by the IRA or the security forces or perhaps both.  Proper hands on tax planning!

·    One trader seemed to be expecting a large outbreak of norovirus as they were found with a mountain of toilet paper stacked up floor to ceiling in the basement along with the rest of the stock.   On closer inspection by a beady-eyed inspector the mountain of toilet rolls turned out to be makeshift false wall behind which was found six crates of extremely low-grade but highly illegal vodka.  The shop owner first denied all knowledge and then hurriedly called his accountant who appeared with some handwritten invoices.  However, the ink was still drying on these invoices and thus all the vodka was seized. 

·    A veteran of Chinese restaurant inspections (with the girth to prove it) carried out his usual spot checks on chits and carton orders.  His instinct told him something was wrong – the till receipts were just too low for this kind of business.  Braving the wrath of a cleaver wielding chef he ventured into the kitchen area and spotted a pig carcass with a small length of till receipt hanging from its rear end.  Shuffling in closer he noticed stitches on the belly, which after a few quick tugs split apart to reveal a second till craftily hidden inside the pig!  A sweet and sour experience all round.

A VAT Free Valentines

Love is in the air again.  But then so is recession.  So in these hard times you’ll be especially keen to pick up a few bargains that don’t involve paying 20% of the price to the tax man.  So here are a few suggestions on how to adapt traditional valentine’s gifts so that none of your Valentine’s Day needs to involve George Osborne spending your hard earned cash.

The Card

First one is one of the toughest.  Cards, eCards you pay for, and even paper to make a card, all come with VAT.  You could try making one out of a zero-rate magazine or picture book.  Or maybe buy a zero-rated map and circle your house with a heart.  Luckily, whatever you do send, the postage will be VAT free!

Flowers

Grow your own.  This one involves planning ahead but, if you’ve got the skill to do it, seeds at 0% are a far better option than flowers at 20%.

Dinner

You may not need an extra excuse to avoid the happy couple competition at your local restaurant, but happily the 20% VAT on catering and hot take-away food gives you one.  If you can pluck up the courage to cook at home you can have oysters, asparagus, fantastic steak and organic vegetables, all at a pleasing 0% VAT.

Chocolates

Sadly chocolate love hearts, chocolate truffles, and Quality Street all come in with 20% VAT.  But pick up some brownies or a chocolate covered cake from M&S and you’re back in zero-rating...

Photo Frame

This could be the year to avoid the ubiquitous heart-shaped photo frame at 20% VAT.  Happily, following last year’s Trueprint case, photobooks are now all VAT free, and just as romantic.

Lingerie

An old ploy for the smaller female has been to buy clothes in children’s sizes which are VAT free.  Somewhat reassuringly the legislation prevents this extending to lingerie so other solutions are needed.  Sadly I don’t really have any.  Maybe if it was made of food, but not sweets or chocolates as they’re all 20% rated confectionary.

Jewellery

Necklaces, earrings, rings and bracelets are all out I’m afraid.  But if he or she has got a taste for precious metals, a block of gold or some gold coins would come VAT free.

Going Out

Happily there are masses of things you can do together without the heavy burden of VAT.  Travel by tube or bus at 0%, instead of taxi or car at 20%.  A James Bond night at the Casino, no VAT, but if you start gambling there is admittedly betting and gaming duty.  Not-for-profit museums and zoos are all VAT free.  And similarly theatre and music; so avoid the profit making X-Factor gigs and get tickets for the not-for-profit Royal Opera House.

Romancing

Finally, if the evening progresses well, some more intimate romancing may come into play.  Just remember that all contraception comes at a reduced VAT rate of 5%.  Sure it’s not the full 20%, but if, like me, you want to be true to your VAT free principles abstinence is the only way.

Best wishes for a romantic VATless evening!

VAT Fact - Fine Wine

Now “dry January” has come to an end, a good bottle of red is surely featuring higher people's minds. With 20% VAT, plus excise and customs duties, the indirect tax implications can be substantial.

Where a business imports wine to the UK, customs and excise warehousing can be used to suspend the payment of VAT and duty until the wine is bought into “free circulation” e.g. drunk. This gives a great cash flow advantage, but if the wine remains in the UK ultimately taxes still need to be paid.

However, the beady-eyed advisor may note that “collectors' pieces” benefit from 0% customs duty and a reduced effective VAT rate of 5%. A potentially massive saving! So could wine be considered a collectors’ item of historical or ethnographic (cultural) interest?

Precedent comes from the decision in E Daiber v Hauptzollamt Reutlingen, identifying five criteria for classification as a “collectors’ piece”. So perhaps we can consider the recent sale of three bottles of Chateau Lafite 1869 (for a bargain approx £500k), in light of these specific criteria.
Link to info on expensive wine auction...

1. Possesses a certain scarcity value: Chateau Lafite has a small output and not many will have survived since 1869.


2. Not normally used for their original purpose: Given the article informs us there’s “a likelihood that at least one of them may be opened and drunk”, this suggests the majority of the bottles would not be used for their original purpose.



3. Subject of special transactions outside the normal trade in similar utility articles: Most wine is sold in shops, collectors’ items are generally sold at auction.



4. Of high value: Fairly self evident.


5. Illustrates a significant step in the evolution of human achievements or a period of that evolution: Perhaps of more debate but there is apparently huge interest in “pre-phylloxera vintages” and I’m sure many a wine buff would happily argue the cultural value of certain wines.

I leave this for you to decide...

Books, eBooks, and VAT

eBooks have been a hot topic all year. Prompted by my proud 10th follower on Twitter I thought I'd jot a short post to highlight where we are and what can happen next.

When EU and UK VAT legislation was drafted eBooks didn’t exist. Hence books have been defined in VAT law as being in physical form, and an eBook falls within the broad category of an "electronically supplied service". The result in the UK is books at 0% VAT and eBooks at 20%. Not very modern, or fair it may seem.

So why not change the law? Unfortunately it's not that simple. VAT is an EU harmonised tax, and when the UK joined the EU it agreed to follow the VAT Directive. Any "new" reduced rates in the UK must be EU wide and permitted by the Directive. Currently it is not permitted to apply a reduced rate to eBooks, a change would require 27 member state approval, and we all know this doesn’t happen quickly. More on this in a bit.

An added twist is that eBooks are currently subject to VAT where the supplier is established. This means that if you (a UK resident) buy an eBook from a UK based company you'll be charged 20% UK VAT, but if you buy one from a Luxembourg based company you'll be charged 3% VAT. Next time you buy an eBook have a look at the t'c and c's, you may be interested to see who it is you're actually buying your eBook from. The rules change in 2015 but for the moment there is a competitive advantage for eBook providers to be located outside the UK.

Why can Luxembourg charge a 3% rate and not the UK? On 1st January 2012 France introduced a 7% reduced rate for eBooks, and Luxembourg (possibly in response to this) a 3% rate. Whether France and Luxembourg are correctly able to do this within EU VAT law is a complex question. However, there is a technical difference between the two. Countries who had existing reduced rates of VAT for certain goods/ services were allowed to keep these when they joined the EU; Luxembourg’s 3% is a pre-EU rate (similar to the UK’s 0% rate), whereas France appears to be extending an EU wide reduced rate. So when it comes to extending our 0% VAT rate to eBooks the UK ought to be in a similar position to Luxembourg.

David Gauke that Treasury Minister has said that “There is therefore no scope in the principal VAT Directive to apply a reduced rate on e-books”. This is technically correct but doesn’t really answer the question as the UK 0% rate is permitted outside of the Directive. The real question is whether the UK can legally extend/ apply its 0% VAT rate to eBooks, and the technical article “How to Zero-Rate eBooks” suggests that it probably can: www.taxjournal.com/tj/issuearticles/909

Actually this would put the UK in a very strong position as it is one of only two EU countries able to apply 0% VAT to books. If this rate could be extended to cover eBooks, the UK could undercut both Luxembourg and France (and pretty much all the EU) as being the most preferable location for an eBook business. The reality is that that political pressure will probably mean that the EU VAT treatment of eBooks will eventually fall in line with physical books. This is not the easiest time to attract business to the UK, perhaps the government is missing a trick...

VAT Fact - Renovations...

Just a quick fact this week! As the economic forecasts are downgraded around us this is a time to be thrifty, and even William and Kate are renovating their Kensington Palace apartment rather than moving to a newer more functional home Link to intrusive article on Will & Kate's personal life. So, you’re probably wondering if this is simply more convenient, or do Will and Kate know something that we don’t know?

And the answer is probably that the second. Unlike work on an ordinary home, an approved alteration of a protected building (for example listed building) is subject to 0% VAT, and this includes the building materials that they use. So where as you or I will probably end up paying 20% VAT on our loft extension, for older more historic dwellings the treatment is different.

Joey the Horse

No doubt everyone will have been excited to see the attendance of Joey the horse at the UK premier of Steven Spielberg’s War Horse this week Link to article on War Horse Premier. Although, like me, you might have been concerned as to the VAT implications of his foray to the UK.

Unlike “meat animals” the supply of horses is standard-rated, and so, in common with any racehorse, Joey could be expected to pay 20% import VAT on arrival. We would hope he could get around the relevant import duty and VAT under temporary importation relief, which would usually allow a temporary stay of up to two years in the EU. However, the legislation does refer to “import for training, breeding, veterinary
treatment, participation in a race, or grazing” and so we would probably want to seek a ruling on import for attendance at a movie premier.

Should Joey be paid attendance money, his position would be similar to that of racehorses; whilst prize money is usually outside the scope of VAT, attendance money or guaranteed prize money is subject to VAT. We would also need to look at the VAT establishment of the supplier who owns Joey (different to establishment for CT purposes) in order to determine whether the place of supply is in the UK or otherwise.

A few interesting facts about VAT

This is a Christmas special that I wrote for Harry's blog http://www.trivialpursuits.org/. Hope you enjoy...

To help whip up some enthusiasm for my forthcoming article on “Growth and Taxation” (yes, the title may be dry but the content will juicy), here come some Christmas VAT pleasers to add extra entertainment to your family gatherings this December.
Britain’s favourite VAT fact, as demonstrated by a Sun newspaper poll on the topic (this is not the link but I couldn't find the real one), concerned the biscuit status of our beloved Jaffa Cake. This fervent argument which rumbled all the way to tribunal, all stemmed from differing treatment of chocolate covered biscuits (20% VAT) and chocolate covered cakes (0% VAT). Whilst the taxman would contend (and still does) that it looks like a biscuit, is packaged like a biscuit, is used like a biscuit, Sun readers think it’s a biscuit, and basically it is a biscuit, the courts thought otherwise. And a VAT fact was established: cakes go hard when stale whereas biscuits go soft. FACT.

And Jaffa’s are not alone. Various interpretations of the tax law on food have lead business to make some quite bizarre claims about their own products. Pringles were so keen to get away from the 20% VAT charged on “potato crisps and similar products” that they went all the way to the Court of Appeal to claim that Pringles are not made from potato. Which makes you wonder what they are made from; I think “oil” featured heavily in the discussions. And Lucozade are currently of the view that Lucozade Sport is not, as might be thought, a beverage, but in fact a “functional food”. Watch this space for more news on that battle.

Because, you see, the watchful eye of VAT encompasses all we do. There is really no escape. Just look to the judgment in R&J Polok t/a Supreme Escorts; establishing the VAT FACT that just because what someone is doing is illegal, it doesn’t mean it’s not subject to VAT. In its summary the High Court surmised that to not charge VAT on Supreme Escorts’ services would give a competitive advantage over escort and introductory agencies that did not provide sexual services. You can’t argue with logic like that.

So think fondly and muse on VAT over the Christmas period. And next time you enjoy a Toasted Sub, you can ponder on whether Subway were correct when they maintained that it is not a “hot food”. And as you slurp its fruity goodness give a thought to whether your Innocent Smoothie is really, in fact, a “liquefied fruit salad”?

VAT Fact - Liz Taylor Auction

You may have seen the news about the record breaking €115m auction of Elizabeth Taylor’s jewellery in New York last night. So no doubt you’re wondering what the VAT implications are of bring some of these beautiful items back to the UK? So...

Generally you’d expect jewellery to attract 20% import VAT;

But if you snapped up the $11m pear-shaped 16th-century pearl, once owned by England's Mary Tudor, this would qualify as an antique and an reduced effective VAT rate of 5%;

And similarly, if you could successfully argue that the $4.2m tiara (a birthday gift in 1957) is an item of historical significance, the 5% could also apply.