First-tier Tribunal (Tax)

[2010] UKFTT 237 (TC)

TC00536

Appeal number: TC/2009/09780

VAT – Disallowance of Input tax – Whether VAT on services supplied more than six months before registration – Yes – Appeal dismissed – Regulation 111 VAT Regulations 1995

FIRST-TIER TRIBUNAL

TAX

GLAMORGAN PRESTIGE DEVELOPMENTS LIMITED                                                       Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

                        TRIBUNAL: JOHN BROOKS (TRIBUNAL JUDGE)

                                                WILLIAM HAARER (MEMBER)                                                                                                 

Sitting in public at Eastgate House, Cardiff on 10 May 2010

Mr N Bevan, accountant for the Appellant

Mrs G Orimoloye of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.        Glamorgan Prestige Developments Limited (the “Company”) appeals against a decision of HM Revenue and Customs (“HMRC”) to disallow £1,916.83 claimed as input tax in respect of various items in the Company’s first VAT return on the basis that it related to VAT on services supplied to the Company over six months before it was registered for VAT.

2.        Until such time as a person is registered, or required to be registered, for VAT there is no entitlement to a credit for input tax on supplies received. However, Regulation 111 of the VAT Regulations 1995 provides for an exception to this general rule and allows for VAT on the supply of goods and services provided to a person, within 4 years in the case of goods and within six months in the case of services, before the date from which he was registered, or required to be registered, for VAT to be treated “as if it were input tax”.

3.        As it was accepted, by Mr Bevan on behalf of the Company, that the various items had been supplied more than six months before it was registered for VAT, the issue for us to determine was whether these items were goods or services.

4.        The facts which gave rise to this appeal are not disputed.

5.        The Company, which was registered for VAT from 1 December 2008, was established to develop a single property, a barn conversion, for resale. As its first VAT return, for the period to 31 January 2009, was a ‘repayment’ return it was referred to the Local Compliance Small and Medium Enterprises office of HMRC for verification where it was dealt with by Mrs Karen Govier, who gave evidence before us.

6.        Mrs Govier explained that she requested and received further information from the Company which she found to include items that related to services provided to the Company more than six months before it was registered for VAT. She therefore disallowed the Company’s input tax claim made in respect of these items.

7.        The items on which the claim for input tax was disallowed are as follows:

Supplier            Detail    Date                 Ref       Total    VAT     Net

CBL                 Hire      19/09/07           111       536.53    79.91  456.62

A Davies           Travel   19/09/07           116       202.53    30.10  172.03

Davies Skips     Waste   19/09/07           118       621.58    92.58  529.00

O2                    Phone   23/10/07           130         29.00      4.32    24.68

Davies Skips     Waste   23/10/07           133       739.08  110.08  629.00

O2                    Phone   11/11/07           140         30.29      4.51    25.78

CBL                 Hire      12/11/07           141     1931.70  287.70  1644.00

Brandon Hire    Hire      29/11/07           144       204.88    30.51    174.37

Davies Skips     Hire      29/11/07           145       235.00    35.00    200.00

O2                    Phone   09/12/07           147         28.00      4.17      23.83

Swalec              Power   20/12/07           150       184.39      8.78    175.61

O2                    Phone   08/01/08           154         28.00      4.17      23.83

CBL                 Hire      25/01/08           156     1719.95  256.16  1463.79

Davies Skips     Waste   25/01/08           157       188.00    28.00    160.00

Brandon Hire    Hire      25/01/08           158       978.56  145.74    832.82

O2                    Phone   07/03/08           164         31.03      4.62      26.84

Swalec              Power   13/03/08           166       364.63    17.36    347.27

CBL                 Hire      03/04/08           172       834.25  124.25    710.00

Brandon Hire    Hire      03/04/08           173       408.77    60.88    347.89

Davies Skips     Waste   03/04/08           174       405.38    60.38    345.00

O2                    Phone   12/04/08           177         28.47      4.24      24.23

CBL                 Hire      18/04/08           179     2179.65  324.63  1855.02

CBL                 Hire      13/05/08           184     1305.93  194.50  1111.43

O2                    Phone   13/05/08           185         28.44      4.24      24.20

Total disallowed                                               1916. 83

8.        Mr Bevan, for the Company submitted that these items, which he described as “not tangible moveable property”, were not services but “costs ancillary to goods” or “expenditure ancillary to goods that have been incorporated into a single stock asset held at the [VAT] registration date and not services related to any output made prior to the registration date.” He sought to clarify his submission by way of an example, contending that a person who fits wheels to car is not providing a service to the car manufacturer as the fitting of the wheels is part of the production of the car.

9.        Mrs Orimoloye, for HMRC, contended that the items concerned were not goods but services supplied to the Company more than six months before the date of its VAT registration and therefore it should not be treated as input tax. She referred us to s. 5(2) VAT Act 1994 which provides that “anything which is not a supply of goods but is done for a consideration … is a supply of services.”

10.     Having carefully considered the evidence and submissions made on behalf of the parties we find that the items in respect of which the claim for input tax was disallowed to have been services. As these were supplied to the Company more than six months before the date of its registration for VAT they cannot be treated as input tax and were correctly disallowed.

11.     The appeal is therefore dismissed

12.     This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN BROOKS

TRIBUNAL JUDGE

RELEASE DATE: 24 May 2010