HMRC hails VAT ruling against university
HMRC has welcomed the Upper Tribunal’s decision that a university’s leaseback arrangement should be ignored for VAT purposes.
The Upper Tribunal allowed HMRC’s appeal against a First-tier Tribunal decision that a leasing scheme did not constitute an “abuse of right” under EU law. The University of Huddersfield claimed £612,000 of VAT in 1996, in relation to the refurbishment of a derelict mill.
“As a supplier of education, much of the university’s activity was exempt from VAT, so it would only have been able to recover a small proportion of VAT on construction costs. To mitigate this, it set up a complex leasing scheme,” HMRC said.
The Upper Tribunal found that “the tax mitigation scheme … was an abuse of right in so far as it entitled the university to claim a greater deduction of input tax paid on the refurbishment work on [the mill] than it would have been entitled to if that refurbishment work had been regarded as directly and immediately linked to its general, largely exempt, supplies”.
Jennie Granger, director general of enforcement and compliance at HMRC, said the ruling backed a key argument used by HMRC to tackle abusive VAT avoidance. “Anyone tempted by avoidance schemes should think long and hard because we have a great record in defeating them in the courts,” she added.
Source: accountingweb- HMRC hails VAT ruling against university
