The document summarizes two recent indirect tax cases in the UK: 1) HMRC v Summit Electrical Installations Ltd - The Upper Tribunal dismissed HMRC's appeal and agreed with the First-tier Tax Tribunal's decision that the taxpayer could zero-rate its electrical installation services for a new student accommodation building, as the building qualified as a dwelling under VAT law. 2) Bratt Autoservices Ltd - The Court of Appeal dismissed the taxpayer's appeal and agreed with the Upper Tribunal that the taxpayer's 2009 VAT repayment claim was not valid because it did not allocate amounts to the taxpayer's prescribed accounting periods as required by VAT law.

1. Indirect tax update
[08/2018]
29 MAY 2018
Summary
Welcome to the latest edition of
Indirect Tax Update which looks at
the Upper Tribunal’s judgment in the
case of HMRC v Summit Electrical
Installations Ltd.
HMRC’s appeal was from the First-
tier Tax Tribunal (FTT) which
decided that the taxpayer’s supply of
electrical installation services in
relation to the construction of a new
student accommodation block could
be zero-rated on the basis that the
block qualified as a dwelling (or
number of dwellings).
HMRC had argued that, as the
developer had opted to zero-rate the
building on the basis that it was
intended for use as a relevant
residential building (and not as a
dwelling), Summit was not entitled to
zero-rate its services on the basis
that the building was a dwelling.
HMRC also argued that a term of the
planning consent - imposing a
restriction on occupation of the
building to students attending the
local universities - meant that
separate use or disposal of the
building was restricted and the
building did not, therefore qualify as
a dwelling in any case. The Upper
Tribunal has disagreed with HMRC
and dismissed its appeal.
The Court of Appeal has dismissed
the taxpayer’s appeal in the case of
Bratt Autoservices Ltd. The case
related to a claim for overpaid VAT
submitted in 2009 by the taxpayer’s
Solicitors. Although the FTT
originally decided that the claim was
validly made, both the Upper
Tribunal and now the Court of
Appeal consider that the claim did
not meet the conditions to be a valid
claim.
Finally, we give notice of a “Making
Tax Digital” seminar to be held in
London on 21 September 2018.
Upper Tribunal – Summit Electrical Installations Ltd - Judgment
The Upper Tribunal has issued its judgment in this HMRC appeal from the First-tier Tax
Tribunal (FTT). The case concerns the supply of electrical installation services by the
taxpayer (acting as sub-contractor) to the main contractor of a construction project. The
project was the construction of new student accommodation in Leicester. Under UK VAT law,
the supply in the course of construction of a new dwelling (or number of dwellings) is zero-
rated. A dwelling is defined in the law and, to qualify, it must meet a number of statutory
conditions. One of the conditions is that the separate use or disposal of the building must not
be restricted by the term of any statutory planning consent.
Zero-rating can also apply in cases where the services are provided in connection with a
building that is intended for use for a relevant residential purpose. The provision of student
accommodation is specifically defined in VAT law as meeting that use condition but only
when the service is supplied directly to the person who intends to use the building for the
stated purpose and then, only if the person intending to use the building provides a certificate
to the supplier.
HMRC originally argued on two fronts why Summit was not entitled to zero-rate its supplies.
Firstly, it contended that as the main contractor had received a certificate from the intended
user, a choice had been made to treat the building as a relevant residential purpose building.
As such, it argued that Summit was not then entitled to treat the building as a dwelling even
though, on the face of it, it was clear that the building met the statutory definition of a
dwelling.
Secondly, and as an alternative, HMRC argued that the building did not qualify as a dwelling
because the planning consent issued by Leicester Council stipulated that occupation of the
building was to be restricted to students attending the two main universities in Leicester.
HMRC’s contention was that this planning condition meant that the separate use or disposal
of the building was restricted by that planning condition which, in turn, meant that the building
did not qualify as a dwelling (or number of dwellings).
The FTT allowed the taxpayer’s appeal. Services can be zero-rated if they are provided in the
course of constructing a building that is designed as a dwelling (the design test) even if, as
here, the building also meets the test of being intended for use for a relevant residential
purpose building (the use test). The FTT also decided that the planning condition imposed by
the Council did not have the effect of restricting the separate use or dispoal of the building.
HMRC appealed to the Upper Tribunal only in relation to their second argument relating to
the planning consent. It argued that the FTT had erred in law but the Upper Tribunal
disagrees. The planning consent merely restricts occupation of the student block to students
attending De Montfort University or the University of Leicester. Previous case law dealing with
the point makes it clear that any planning restriction on separate use or disposal of a building
must refer to ‘separate use or disposal’ of specific land or buildings. In this case, the planning
consent did not refer to specific land or buildings but simply referred to the two educational
institutions as being the institutions to which the student occupants must attend. Accordingly,
the planning consent did not restrict the separate use or disposal of the accommodation block
and HMRC’s appeal was dismissed.
Comment – This is a sensible and logical judgment which confirms that services
supplied in the course of constructing a dwelling (or number of dwellings – as defined)
can be zero-rated even if the services also qualify for zero-rating under other
provisions. The case highlights the complexity of VAT law in this area. Summit
originally zero-rated its services on the basis of a certificate it had received from the
main contractor stating that the building was intended for use for a relevant residential
purpose. When HMRC challenged Summit – arguing that a sub-contractor could not
zero-rate its supplies to the main contractor on the basis that the main contractor was
not the intended ‘user’ of the building – Summit argued that the building also qualified
as a dwelling in any case.
HMRC’s first argument – that the sub-contractor had to follow the decision taken by the
intended user – was dismissed by the FTT and was not appealed to the Upper Tribunal.
HMRC’s subsequent argument – that the planning consent restricting occupancy of the
student accommodation to students attending the two universities in Leicester
somehow meant that the separate use or disposal of the accommodation block was
restricted by that consent – was also dismissed.

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accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.
Contacts
Comment
Section 80 of the VAT Act makes it
clear that where a taxpayer has
overpaid VAT for a particular VAT
accounting period (known as a
‘prescribed’ accounting period), he
is entitled to submit a claim to
HMRC.
Section 80(6) of the Act allows
HMRC to make regulations as to the
form and manner of making such
claims.
In this case, the letter setting out
details of the claim did not allocate
the claim to the taxpayer’s
prescribed accounting periods and,
as such, HMRC refused the claim.
Although regulation 37 does not
stipulate that a claim must be made
by reference to prescribed
accounting periods, this requirement
stems from section 80(1). The Court
of Appeal decided on a unanimous
basis that the absence of such
allocation was fatal to the claim.
Comment
The first VAT period affected by
MTD will be the period commencing
on 1 April 2019. At the time of
writing, this gives businesses only
10 months to consider and
implement any system and
accounting changes that will be
required.
In the great scheme of things, 10
months is a blink of an eye that will
pass very quickly. It’s an old saying
but, there is no time like the present
for making sure that businesses are
prepared for these fundamental
changes.
At our seminar, we will go through
the basic requirements of
establishing an MTD compliant
accounting system and HMRC will
update us on the latest
developments.
Places are limited and will be
allocated on a first come first served
basis.
Stuart Brodie
Scotland
T +44 (0)14 1223 0683
E stuart.brodie@uk.gt.com
Karen Robb
London & South East
T +44 (0)20 772 82556
E karen.robb@uk.gt.com
Vinny McCullagh
London & South East
T +44 (0)20 7383 5100
E vinny.mccullagh@uk.gt.com
Court of Appeal
Bratt Autoservices Company Ltd
When is a claim for overpaid VAT validly made? That was the question for
determination in this case. UK VAT law stipulates that where a taxpayer has paid
VAT to HMRC which was not VAT due, the taxpayer can submit a claim for
repayment. However, the claim must meet certain conditions imposed both by
section 80 of the VAT Act and under regulation 37 of the VAT Regulations.
In March 2009, Solicitors acting for the taxpayer submitted a claim by way of a letter
to HMRC. In that letter, the Solicitors set out details of the claim and confirmed the
amount that had been overpaid in relation to a particular calendar year. The claim
did not allocate any amount to any of the taxpayer’s prescribed accounting periods
and HMRC, thus, refused to make any repayment. The taxpayer appealed to the
FTT which, in allowing the appeal, confirmed that, in its view, there was no
requirement under regulation 37 for a claim to be allocated to prescribed accounting
periods. HMRC appealed to the Upper Tribunal which reversed the decision of the
FTT and the case arrived at the Court of Appeal.
The taxpayer argued that the FTT had been correct but the Court of Appeal
disagreed. The requirement to allocate a claim to prescribed accounting periods
stems from section 80 of the VAT Act and not from regulation 37. It is necessary to
allocate the claim to accounting periods to determine whether or not statutory time
limits for making such claims have been met and for the purposes of allowing the
calculation of any interest due to the taxpayer - s80 specifically stipulates that a
claim can only arise where a taxpayer has accounted for VAT for a particular
prescribed accounting period.
Making Tax Digital for VAT
Seminar – London 21 September 2018
Readers will, undoubtedly be aware by now that the Making Tax Digital project is well
under way and is scheduled to be implemented in the UK in April 2019.
Making Tax Digital (hereafter MTD) is a system of tax reporting that will utilise the
electronic / digital capabilities of the internet. The system is to be introduced in a
number of phases the first of which (relating to Value Added Tax (VAT) reporting) is
scheduled to be introduced from April 2019. The new system will mean that entities
(including businesses, charities and public bodies) with a turnover above the VAT
registration threshold (there are few exemptions) will, to a greater or lesser extent,
be required to upgrade their accounting systems in order to report their VAT return
information using a particular form of digital interface.
This is a fundamental change and will require most businesses to change the way they
report their respective VAT liabilities. The regulations stipulating what will be required
are already in place and businesses now have less than 10 months to adapt their
software and accounting systems to be MTD compliant. Many businesses are now
preparing for this change.
Grant Thornton is co-hosting an MTD seminar (with HMRC) to be held in London on 21
September 2018 where the latest developments and requirements will be discussed.
Anyone wishing to attend the event should contact graham.c.brearley@uk.gt.com to
reserve a place (please note that places are extremely limited).