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Storm in a teacake
Storm in a teacake
Marks & Spencer has finally won its long running VAT battle against Customs at the European Court of Justice. While Customs admitted incorrectly charging VAT on various goods, including teacakes, they claimed it was right for them to keep most of the VAT, due to a three-year capping rule on VAT repayments. This rule was introduced by Customs after Marks & Spencer had made its claim. However, the European Court of Justice has confirmed that the capping rule should not be applied retrospectively. The Court also agreed that businesses that had overpaid VAT, but which had not put in claims before the introduction of the rule, should also be allowed to recover their money from Customs.
Tony McClenaghan, head of VAT at Deloitte & Touche, who advised Marks & Spencer, added: 'The decision by the Court to strike down the three-year capping rule in this case will open the floodgates for similar cases where Customs has refused to repay money to which they were never entitled in the first place. Any businesses which may have wrongly paid VAT in similar circumstances should immediately file a claim with Customs to get their money back'.
Lifetime transfer
The settlor appointed herself and two others to be the trustees of a settlement on 20 December 1988. This settlement provided that the income of the trust fund should be paid to the settlor's husband during his life, and after his death on certain discretionary trusts including the settlor. The settlor conveyed a property to the trustees to hold on trusts as to five per cent for the settlor absolutely, and as to 95 per cent on the trusts of the settlement. The husband occupied the property as life tenant with the settlor until he died in 1992.
The trustees sold the property, and with the proceeds bought another property (Meadows) and an investment bond. The settlor lived in this property, and paid all the expenses relating to it, until she died in 1998.
On her death, the trust fund comprised the 95 per cent interest in Meadows, and the 95 per cent interest in the bond.
The executors' appeal against a notice of determination was allowed by the Special Commissioner. The Revenue therefore appealed to the High Court.
The Revenue said that section 102(3), Finance Act 1986 deemed the trust fund to form part of the settlor's estate, because on her death, the fund was held upon discretionary trusts which included the settlor as a beneficiary. The executors argued that the beneficial interests of the other beneficiaries were 'enjoyed to the entire exclusion or virtually to the entire exclusion' of the settlor and of any benefit to her within the meaning of section 102. Furthermore, section 102(5)(a) (spouse exception) prevented any charge arising under section 102(3).
Mr Justice Lightman said that the settlor's entitlement to be considered as a potential recipient of benefit by the trustees precluded the trust fund being enjoyed to the exclusion of benefit to her under the settlement. However, the trustees conferred on the settlor the right occupy Meadows for an indefinite period rent free. The settlement had been arranged for that purpose, and she enjoyed the benefit, effectively to the exclusion from benefit of the beneficiaries under the settlement. On a true construction, section 102(5) looked at the disposal when it was made, and the character of the disposal had to be determined then; it was a transfer between spouses. If the gift answered that character at that date, section 102 as it related to property subject to a reservation did not apply.
The Revenue's appeal was dismissed.
(Commissioners of Inland Revenue v Eversden and another, Chancery Division, 10 July 2002.)
Football club's success
Southampton Leisure Holdings plc, owners of Southampton Football Club, has recently been told by the tribunal that it can claim back the VAT on the costs it incurred when it acquired the football club as a general business overhead in its partial exemption calculation. Normally, Customs do not allow companies to recover the VAT charged on the costs of an acquisition or reorganisation. The tribunal in this instance, however, ruled that the services on which the VAT was incurred related to both the issue of Southampton Leisure Holdings shares and the acquisition of the club.
Deloitte & Touche, which challenged Customs' original decision denying the claim, said that the decision could lead to a review of Customs' approach to such expenses.
