JULY 2016 - VAT Case Study | Sibcas Limited
VAT is a complex tax which can have a significant impact on a company’s cash flow operations.
With VAT legislation becoming more restrictive and HMRC becoming increasingly aggressive in its approach towards business tax compliance, French Duncan works with clients to ensure their VAT affairs are in order – maximising VAT savings and minimising VAT costs where possible.
Our VAT team has extensive experience in all areas of VAT planning, VAT investigations work and general compliance matters. Our dedicated experts bring practical, tailored, commercial solutions to improve compliance and maximise available reliefs without compromising on integrity.
French Duncan’s client Sibcas Limited supply temporary modular units to customers throughout the UK - often for use as temporary offices, classrooms, changing rooms and medical units. The company manufactures the pre-fabricated units and subsequently hires them to other organisations, with VAT charged at 20 per cent for the length of the hire period.
In 2012, Sibcas supplied a large number of units to a school in England for a period of three years, whilst the existing school was demolished and rebuilt. The school agreed to the price quoted, including the VAT chargeable, and asked Sibcas to proceed as soon as possible with the supply.
After the units were installed, the school contacted Sibcas and argued that VAT should not have been charged on the supply. Initially the school believed the supply should have been zero rated, on the basis that a new building had been supplied which would be used for a charitable purpose. It then went on to argue that the VAT should not be charged as Sibcas were making a supply of immovable property and therefore were, essentially, making a supply of land.
When Sibcas refuted the school’s arguments, the school appealed direct to HMRC. Sibcas also went on to make its own appeal to HMRC. HMRC repeatedly changed its mind as to the correct VAT treatment of the supply, resulting in Sibcas taking the case forward to the Tax Tribunal. The key issue in determining whether the supply of the temporary units was in fact an exempt supply of land was whether they were fixed into the ground and whether they could be easily dismantled or easily moved.
French Duncan assisted Sibcas to draft its many appeal letters to HMRC, arguing against the school’s contention that the supply should have been treated as exempt. Our expert team of tax advisers ultimately assisted the business to take its case to the Tax Tribunal, resulting in Sibcas successfully arguing that the supply was subject to VAT at the standard rate, as agreed in the initial contract.
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