Let’s get this straight
There’s an interesting VAT dispute involving the Align group, who supply Invisalign clear aligners. Align historically treated these as VAT-exempt considering them "dental prosthesis." HMRC challenged this as they believed Align did not provide orthodontic services, which was crucial for the aligners to be eligible for the exemption, leading to VAT assessments for Aug 2022 to May 2023.
Align began accounting for VAT on the supplies of aligners from Sep 2023 but also initiated proceedings to challenge this, including a statutory review of the VAT assessments. Despite the review being upheld in HMRC's favour, Align appealed to the First Tier Tribunal (FTT). This appeal was set for a hearing this month, but before it could happen, HMRC withdrew the assessments, stating this was not a concession that the decisions were wrong in law. This resulted in the FTT advising that the case would be struck out.
Align sought clarification from HMRC if this meant they accepted the treatment of the aligners as legally correct, but HMRC maintained they had not made any legal concessions. Align then requested the FTT hearing to continue to determine if HMRC, by withdrawing the assessment, had confirmed a decision on the aligners' VAT liability. The FTT concluded that although the assessments had been withdrawn, the appeal should be heard to resolve the issues of Align's liability moving forward.
If you’d like to read more about this including our thoughts check out our blog by clicking here.
There’s an interesting VAT dispute involving the Align group, who supply Invisalign clear aligners. Align historically treated these as VAT-exempt considering them "dental prosthesis." HMRC challenged this as they believed Align did not provide orthodontic services, which was crucial for the aligners to be eligible for the exemption, leading to VAT assessments for Aug 2022 to May 2023.
Align began accounting for VAT on the supplies of aligners from Sep 2023 but also initiated proceedings to challenge this, including a statutory review of the VAT assessments. Despite the review being upheld in HMRC's favour, Align appealed to the First Tier Tribunal (FTT). This appeal was set for a hearing this month, but before it could happen, HMRC withdrew the assessments, stating this was not a concession that the decisions were wrong in law. This resulted in the FTT advising that the case would be struck out.
Align sought clarification from HMRC if this meant they accepted the treatment of the aligners as legally correct, but HMRC maintained they had not made any legal concessions. Align then requested the FTT hearing to continue to determine if HMRC, by withdrawing the assessment, had confirmed a decision on the aligners' VAT liability. The FTT concluded that although the assessments had been withdrawn, the appeal should be heard to resolve the issues of Align's liability moving forward.
If you’d like to read more about this including our thoughts check out our blog by clicking here.
TOMS Torment
HMRC have won the highly anticipated Upper Tribunal against Sonder. As we’ve covered previously, Sonder were successful at the FTT in arguing that its supplies of holiday accommodation fell under TOMS. Sonder bought in furnished and unfurnished accommodation on two to ten year leases, and repackage those into short-term lets. The TOMS scheme allowed them to reduce the VAT payable, by only declaring output tax on the margin – i.e. the selling price, less the exempt rental costs to the owner.
Whilst the FTT agreed with Sonder the Upper Tribunal did not. They found that “the services supplied by the landlord to Sonder were not for the direct benefit of Sonder’s own customers and the services were not supplied by Sonder for the benefit of the traveller without material alteration and further processing. In short, the services supplied by Sonder to the traveller were its own in-house supplies, which therefore fall outside the ambit of TOMS.” In summary VAT should be due on the full selling price for all short-term Airbnb style accommodation.
If you’d like to read more about this including our thoughts check out our blog by clicking here.
Whilst the FTT agreed with Sonder the Upper Tribunal did not. They found that “the services supplied by the landlord to Sonder were not for the direct benefit of Sonder’s own customers and the services were not supplied by Sonder for the benefit of the traveller without material alteration and further processing. In short, the services supplied by Sonder to the traveller were its own in-house supplies, which therefore fall outside the ambit of TOMS.” In summary VAT should be due on the full selling price for all short-term Airbnb style accommodation.
If you’d like to read more about this including our thoughts check out our blog by clicking here.
Knowing Is Half The Battle
HMRC’s One-To-Many team have issued an educational email to small VAT registered charities with turnover under £2m due to HMRC discovering a large number are not aware of their obligation to complete a business/non-business apportionment calculation.
The aim of these emails is to raise awareness to those charities carry who out non-business activates - i.e. those which are free of charge - and ensure they know they are required to complete these calculations and apportion their input tax accordingly.
If you or one of your clients are concerned about the implications, we would be happy to have engage and support in reviewing the charities income and activities to confirm if such calculation are necessary.
HMRC’s One-To-Many team have issued an educational email to small VAT registered charities with turnover under £2m due to HMRC discovering a large number are not aware of their obligation to complete a business/non-business apportionment calculation.
The aim of these emails is to raise awareness to those charities carry who out non-business activates - i.e. those which are free of charge - and ensure they know they are required to complete these calculations and apportion their input tax accordingly.
If you or one of your clients are concerned about the implications, we would be happy to have engage and support in reviewing the charities income and activities to confirm if such calculation are necessary.
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