Peter Smallwood & Co Limited
Newsletters
Peter Smallwood & Co
Ltd
VAT Consultants
Newsletter 1/03
Self employed hair stylists, supply to
customer or salon operator?
Newsletter 2/03 Takeaway
caterers targeted (again!) and input tax without tax invoice.
Newsletter 2/03
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1. Customs targeting takeaway caterers
2. Input tax recovered without “tax invoice”
Customs targeting takeaway caterers
The VAT leaflet concerning Catering and takeaway food has been amended a
number of times in recent years. Many business in this sector whose supplies
are a mixture of standard rated and zero rated operate the catering
adaptation retail scheme to simplify the accounting process for calculating
VAT on sales. In simple terms the scheme allows for an estimation of zero
rated sales to be applied to the total sales. In November 1997 a requirement
for a sampling exercise in each period in which the catering adaptation
retail scheme is used was introduced. We have received information that, in
certain parts of the country at least, Customs are targeting such
businesses. It would appear that a number of businesses in this sector who
operate the adaptation scheme are not aware of the requirement introduced in
November 1997 consequently those businesses have been receiving VAT
assessments. You may wish to ensure that any of your clients who trade in
this way are aware of the changes introduced and review. We would be happy
to review any assessments received free of charge and without obligation
with a view to establishing if the assessment can be reduced or withdrawn.
Input tax recovered without “tax invoice”
A client recently received a VAT assessment disallowing input tax on a
significant amount of purchases. The reason for the assessment was that the
purchase invoices the client held did not include the suppliers VAT number
and was consequently not a proper tax invoice. To exacerbate the problem the
supplier had since the invoices were issued gone into liquidation. After
detailed negotiations with Customs we successfully negotiated the withdrawal
of the assessment and obtained the recovery of our clients costs with regard
to our fees from Customs. If you have a client in a similar situation
careful consideration should be given to the assessment rather than
accepting the assessment without question.
For further information please contact
vat@petersmallwood.co.uk or contact Peter Smallwood on his direct
line 0161 374 2846.
This newsletter is designed to update readers, but no liability is accepted
for any errors, omissions, or opinions contained in nor generally for any
reliance placed on this newsletter.
Newsletter 1/03
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Hairdressers – Kieran Mullin Ltd – High Court finds in favour of Kieran
Mullin Ltd and reverses the decision of the Tribunal.
The decision of the High Court in the case of Kieran Mullin Limited (KML)
was released on 15 January 2003, following a hearing on 11 and 12 December
2002. This case has a history going back to a decision from HM Customs &
Excise (Customs) dated 13 April 1999, since which time the individuals
providing advice to KML have been Andrew Young, of Counsel, and Peter
Smallwood.
Working in the salons operated by KML are a number of employed stylists and
a number of self-employed stylists. The dispute concerned only the
self-employed stylists and the issue was whether their services were
supplied to the customer by KML or by the stylist. If the hairdressing
services were supplied by KML then KML would have to account for VAT on the
income whereas if the services were supplied by the self-employed stylists,
who are not generally VAT registered, no VAT would be due. KML charges the
self-employed stylists for renting a chair and other services on which VAT
is accounted for.
Each self-employed stylist had entered into a “rent a chair agreement” with
KML. Customs argued “that the self-employed stylists do not exercise control
over their own actions” and “as a consequence” KML was required “to account
for tax on the total value of the supplies to the public”. Factors
considered important by Customs in reaching their decision included the
appointment of locums, holiday arrangements, sick leave arrangements, etc.
Customs also issued questionnaires to a number of self-employed stylists
raising further questions on prices, insurance, keys, etc.
In finding for KML Mr Justice Park placed reliance on the “Rent a Chair
contract” saying “I hope that questionnaires will not start to develop into
regular substitutes for witness statements. Peter Smallwood & Co Ltd is
currently acting for 15 hairdressers who have lodged appeals to the VAT and
Duties Tribunal (and it is anticipated that this number will increase) where
questionnaires could be seen as important by Customs. Customs have been
granted until 12 February 2003 to lodge any appeal to the Court of Appeal
meanwhile any hairdresser who has encountered similar issues with Customs
may wish to review their position.
For further information please contact
vat@petersmallwood.co.uk or contact Peter Smallwood on his direct
line 0161 374 2846.
This newsletter is designed to update readers, but no liability is accepted
for any errors, omissions, or opinions contained in nor generally for any
reliance placed on this newsletter.