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ALLISON PLAGER reports three recent cases.
Care workers' expenses
ALLISON PLAGER reports three recent cases.
Care workers' expenses
The appellant and his wife ran a business, Pooks Care, which provided care services to local authorities and also acted as an agency to provide carers to private individuals in their own homes. In October 2000, the appellant submitted a claim for mileage allowance paid to employees working on a contract basis for local authorities, which was agreed by Customs. He also made a voluntary disclosure claiming £5,872 in respect of mileage allowances paid to care workers whom he employed as agent. This was disallowed, on the grounds that the 'VAT is not input tax to you'. Customs said that the responsibility for payment of such carers rested with the private individual, even though the money was collected by the appellant as agent.
The tribunal said that the law on employees, self-employed, agents and subcontractors was in an unhappy state with the various Government departments adopting different stances to the similar factual basis for different fiscal objectives. However, from the point of view of Customs, the tribunal had to consider the nature of supplies being made by the appellant to private individuals.
Customs relied on the contract between the carer and the agency which said that there was a contract of employment between the carer and the agency, and that the agency acted at all times as agent for the carer, and assumed no employer responsibilities. Based on this, the tribunal accepted Customs' argument that the carers were working for private individuals on their own account with the agency acting. The appellant could not therefore deduct input tax against travel expenses and mileage allowance.
The appeal was dismissed, although the tribunal sympathised with the appellant's frustration at the uncertain state of the law.
(Alexander John Wood (17518).)
One or two taxable entities?
A father and son were in partnership trading as Skelton Waste Disposal, until the father retired. The business consisted of hiring out skips to industrial customers, and disposing of their contents. Later, the son set up another business hiring out mini and midi skips to householders.
Customs argued that the two businesses were one, but the taxpayers held that they were separate.
The tribunal found for the taxpayers, saying that several features indicated two separate businesses:
separate accounts were prepared for each business;
the profits of each business were dealt with differently;
the mini-skip business had its own invoices and did not charge VAT, whereas Skelton Waste Disposal was VAT registered;
there were separate bank accounts for each business;
the businesses were targeted at different markets;
the mini-skip business paid for any fuel belonging to the other business, and contributed to any shared plant.There were indicators that the businesses could be a single one, such as they both operated from the same premises, used the same telephone numbers, advertisements were not drawn up separately, and the mini-skip business did not contribute directly to the business's overheads.
However, overall the tribunal ruled that the two businesses were separately owned and operated. There may have been an element of the original business subsidising the mini-skip business, but this was not determinative. There was in reality an agreed commercial relationship between the two businesses.
The appeal was allowed.
(Skelton Waste Disposal (17351).)
Charitable partners
The partners of a local firm of solicitors held various offices for a number of charitable bodies. The question before the tribunal was whether or not the services provided by the partners holding these offices were in the furtherance of their business as solicitors.
Customs said that the reason why the partners had been appointed to the offices was precisely because of their legal background. The partnership claimed that the appointments had been made because of the appointee's standing in the community, not because of his legal expertise. Secondly, none of the appointments required the officer to be a solicitor.
The tribunal noted that neither the partnership nor Customs had discussed the meaning of 'in the course or furtherance of any business'. Looking at previous tribunal's consideration of the phrase (in Heart of Variety (103)), it meant part and parcel of the business or a normal incident in the daily activities of the business. The tribunal also pointed out that Customs manual IV Part 6 chapter 3 paragraph 10.4 excluded certain categories of office holder from falling within the conditions in paragraph 11 of Notice 700/34/94 concerning the VAT liability of partnerships. 'Persons appointed on grounds of their personal merit, occupational expertise or experience, or standing in the community as distinct from professional expertise' were among the excluded.
The tribunal accepted the partnership's claim that the appointments were made because of the individuals' local standing, and agreed that while it was not necessarily a requirement, it was very sensible of a charitable body to appoint a solicitor as its secretary, just as it would be advantageous to have an accountant as the treasurer.
The honoraria paid into the partnership accounts were therefore neutral and the partnership should not have to account for output tax on them. The appeal was allowed.
(Oglethorpe Sturton & Gillibrand (17491).)
