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Weekly VAT News - 03/03/2014

Court of Appeal confirms that arrears of gym club fees are subject to VAT
The Court of Appeal has dismissed an appeal by Esporta Limited against
the Upper Tribunal's decision that arrears of fees collected from members who defaulted on payments to the club were subject to VAT.  

The First-tier Tribunal agreed with Esporta that, since members in default were denied access to the club premises unless and until the arrears of fees were paid, there was no supply during the period of default
, and hence no VAT on the arrears when paid.  

However, the Upper Tribunal then decided that the F-tT had been wrong to conclude that the withdrawal of a member's access rights during a period of default made a difference, and that the arrears were subject to VAT when collected.  

Whilst the Court of Appeal disagreed with the Upper Tribunal's reasoning that the "late" payments represented additional consideration for the period when membership was "live" (i.e. the period before the member defaulted), it concurred with the end result.  

As Lady Justice Arden put it "... [t]here was a continuing supply of a conditional right to use the premises throughout the period of membership, that is, the Commitment Period and the period up to the date of expiry of the notice period.  

That supply takes place even if the member does not exercise his right to make a payment in order to gain actual access ...".  

For further information about the case, and to discuss the implications of it, please contact
Oliver Jarratt on 0121 695 5722.    

EU Parliament backs “standard” VAT return for all Member States
The European Parliament has voted to support the European Commission’s proposal to introduce a “standard” VAT return to be used in all Member States.  

The proposal is intended to reduce burdens on businesses operating in several jurisdictions by introducing a common format for their VAT returns in each country that they operate in.  

Whilst the concept, and the Parliament’s support for it will be widely welcomed, it seems clear that the conflicting requirements of those countries that rely on VAT returns to collect a wide range of data and those (like the UK) that currently use very short forms and do not wish to impose additional burdens on businesses there, pose difficulties that will need to be overcome before the proposal is finally adopted.  

The Commission still hopes to reach a conclusion and adopt the new form of return by the end of 2014.  For further information about the proposal, and to discuss its implications, please contact
Aili Nurk on 0207 007 8392.  

VAT grouping to be abolished in Sweden?
The Swedish Ministry of Finance has announced a proposal to abolish the Swedish VAT grouping rules.  

No details of the proposal have been published yet but it has been suggested that the Ministry of Finance would like the change to take effect as early as 1 January 2015.  

Businesses that are currently VAT grouped in Sweden should analyse the effect – and potential costs – of this proposal.  

Wholesale telecom and gas/power markets affected by “missing trader” frauds?

HMRC has recently detected VAT losses occasioned by “missing trader” fraud in the wholesale telecoms and gas/power markets and active investigations are ongoing.  

Some businesses operating in these markets have been contacted by HMRC with long and very detailed lists of questions.  

A key step to protect against liability for lost VAT is to demonstrate that relevant staff members have been appropriately trained to recognise missing trader fraud risk.  

In addition, post-trade data analytics can help demonstrate that a business has taken all reasonable steps to avoid connection to fraud.  

For further information about this development, and to discuss the issues posed by missing trader fraud generally, please contact
Helen Thompson on 0207 007 3713.

This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

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