Zero rating applies

A charity housed abandoned animals until permanent homes could be found. New owners made a payment when they adopted an animal.

The charity treated the payments as non-business receipts until 2008 after which time the organisation reviewed its treatment of the money and concluded it should be classed as income for zero-rated supplies.

The change of view came in light of Gables Farm Dogs and Cats Home (20519) in which the VAT tribunal decided sales of animals constituted sales of donated goods and met the requirements of zero rating in VATA 1994 Sch 8 group 15 item 1.

The traxpayer in this case submitted a retrospective error correction claim for input tax which HMRC refused.

The First-tier Tribunal found the Revenue had “wholly failed to consider the claim against the background of the tribunal decision in Gables Farm”.

The money paid for an animal represented a...