CTG Newsletter – 1 November 2017

Charity Tax Group change of bank details

Thank you to everybody that contacted us to check that the e-mail about CTG’s change of bank details was not a scam. We can confirm that this is genuine and would you be grateful if you would update your records for all future transactions.

If required, a letter on headed paper, confirming the changes can be downloaded at https://www.charitytaxgroup.org.uk/wp-content/uploads/Charity-Tax-Group-–-Change-of-Bank-Details.docx and there is notification of the change on the website here.

If you require any additional information or would like to discuss this further, please contact us at info@charitytaxgroup.org.uk or on 020 7222 1265.

We are very grateful to all members that have made a financial contribution towards our work in 2017 – this has been vital in ensuring we can continue to represent your interests to Government on important charity tax related issues. If you have not yet made a contribution, please consider doing so – more information and a donation form can be found here.

Littlewoods case on compound interest

The Supreme Court today released its judgment in the case of Littlewoods and others ([2017] UKSC 70). The case concerns the availability of compound interest on refunds of overpaid VAT, in circumstances where the VAT was paid and collected in breach of EU law. The Court of Appeal had previously held that the Littlewoods claimants were entitled to compound interest where VAT had been overpaid.

The Supreme Court has disagreed with the Court of Appeal and held that the Littlewoods claimants are not entitled to compound interest.  The Supreme Court considered that the payment of simple interest in this case cannot realistically be regarded as having deprived Littlewoods of an adequate indemnity.

This is obviously a disappointing outcome as a positive decision on compound interest would have benefited charities and universities that have protected/stayed High Court compound interest claims in respect of Fleming/Conde Nast claims on which compound interest may yet be payable going back as far as the inception of VAT in 1973 (and worth significant amounts).

In 2015 the Government announced new rules introducing a special 45% rate of Corporation Tax to be applied to payments made by HMRC of certain awards of restitution interest (which would have covered these compound interest claims). Following discussions with HMRC officials, CTG was able to secure an exemption for charities from this new tax and while charities will not in practice be able to make compound interest claims, the protection of charities in this context was an important precedent and recognition of the unintended consequences of legislation on the sector.

Tax Updates in Cardiff and Manchester

CTG has organised tax update meetings for charities and advisers this November, in Cardiff and Manchester. Both sessions will review recent policy developments and providing practical tax updates and will include a presentation on recent Gift Aid developments, by Steve Carroll, from HMRC’s Charities Outreach team.

Other topics to be covered will include: Implications of Brexit for the sector, review of recent VAT case law, Making Tax Digital, Business rates developments and Autumn Budget 2017.

Both seminars will take place from 14:00 to 16:00, with a sandwich lunch available from 13:00. You can register for each event by following the link below:

• 16 November 2017, in Cardiff, in association with Deloitte
• 27 November 2017, in Manchester, in association with EY

Round-up of other topical developments

• Social Investment Tax Relief: HMRC has published the latest Social Investment Tax Relief statistics, with the main point of note being that 25 social enterprises have raised funds of £2.8 million through the scheme between 2014 and 2016.
• VAT refund scheme for museums and galleries: The list of museums and galleries eligible for VAT refunds (in VAT Notice 998) has been updated due to an amendment to the VAT (Refund of Tax to Museums and Galleries) Order 2001.
• Resolving Tax Disputes: HMRC has published an updated version of ‘Code of governance for resolving tax disputes’. The document sets out HMRC’s internal governance arrangements for decisions on how tax disputes (including Alternative Dispute REsolution (ADR)) should be resolved. Governance processes are in place to ensure that HMRC deals with all cases fairly and in an even-handed manner. If there is disagreement between HMRC and the taxpayers, they are able to ask us to review the decision or appeal through the Tribunal and Court processes.
• Litigation and settlement strategy (LSS): HMRC has published an updated version of ‘Resolving tax disputes: Commentary on the litigation and settlement strategy‘, which replaces the 2011 version. The LSS is the framework within which HMRC resolves tax disputes through civil law processes and procedures in accordance with the law. It applies irrespective of whether the dispute is resolved by agreement with the customer or through litigation.
• Insider fraud: The Charity Commission has launched a consultation to identify ways to reduce insider fraud in charities. The deadline for responses is 8 December 2017.

CTG Newsletter Archive

Members can catch up on CTG’s recent newsletters using the links below:

• CTG Newsletter – 26 October 2017
• CTG Newsletter – 25 October 2017
• CTG Newsletter – 17 October 2017
• CTG Newsletter – 10 October 2017
• CTG Newsletter – 4 October 2017

CTG Commentaries

Read our expert commentary pieces and leave your comments and queries:

• Definition of a ‘sport’ for VAT purposes – English Bridge Union case (Graham Elliott)
• Relevant Residential and Relevant Charitable buildings: Clawback provisions – Balhousie Holdings case (Graham Elliott)
• Proposed new penalties for participation in VAT fraud (Edd Thompson and Juliet Bailey)
• Summary of recent VAT cases on partial exemption, sports supplies & charitable annexes (Graham Elliott)
• Benefits of joining the CTG Gift Aid practical issues working group (Keren Caird and Donna Perry)
• Iberdrola VAT case – Implications for Sveda? (Dermot Rafferty)
• Is a CASC a Charity (for Tax Purposes)? (Graham Elliott)
• Charity VAT Recovery – The Road Not Taken (Graham Elliott)
• VAT recovery for holding companies – MVM case and HMRC guidance (Dermot Rafferty)
• Professional negligence and failed tax avoidance schemes (Sonia Ferreira)
• Definition of a ‘sport’ for VAT purposes – new AG opinion (Graham Elliott)
• Business rates valuations for museums (Colin Hunter)
• First experience of submitting a Common Reporting Standard (CRS) return (CTG)
• Construction of Relevant Charitable Purpose (RCP) buildings – position of sub-contractors (Les Howard)
• Supplies to local authorities – Healthwatch Hampshire VAT case (Graham Elliott)
• Brockenhurst College VAT case – implications for charities (Graham Elliott)
• Filing charity trading subsidiary tax returns and charity accounts (Justin Bevan)
• Adecco appeal on the VAT treatment of temporary workers dismissed (Graham Elliott)
• Have you paid enough tax to cover your Gift Aid donations? (Kevin Russell)
• Off-payroll working: Major changes from April 2017 (Susan Ball)
• Update on “Economic Activity” and the fate of the Lord Fisher test (Graham Elliott)
• Durham Cathedral VAT case and Sveda – implications for charities (Graham Elliott)
• Hire fees for stalls at fairs – implications of the Kati Zombory-Moldovan case (Graham Elliott)
• Common Reporting Standard – Top 10 tips for charities (Alana Petraske)
• Charity Authorised Investment Fund (CAIF) launched (Grania Baird)
• Longridge on the Thames VAT case – implications for charities (Graham Elliott)
• Implications of Brexit for charity tax (John Hemming)
• Implications of the Hallé case for the philanthropic exemption (Graham Elliott)
• Helping you find your way – the new Charity Tax Group website (John Hemming)

Please contact us at info@charitytaxgroup.org.uk if you would be interested in contributing a commentary piece.

Website, newsletters and supporting CTG

Charity and Observer Members are reminded that their membership is on an organisational basis and that there is no limit of the number of subscribers to the website per organisation. If you think a colleague would benefit from getting access to the website and newsletters directly, please encourage them to register online at www.charitytaxgroup.org.uk/join-us/ selecting your organisation from the drop-down box.

CTG relies on donations from its charity members to fund the work it does on behalf of the sector. If your organisation has not yet made a contribution to our work in 2017, please consider doing so – further information and a donation form can be found here.