Making Tax Digital – Non Established Taxable Persons and VAT online

4 Eyes Ltd represents numerous international clients, acting as UK VAT agent, handling UK VAT registration and submitting returns on their behalf.

With effect from 1 April 2019, all UK VAT registered businesses trading above the VAT registration threshold have had to move to electronic record keeping and adopt software to submit future VAT returns.

With effect from 1 October 2019, HMRC are extending this requirement to non-UK companies also.

4 Eyes Ltd will use bridging software to enable its clients to submit VAT returns after the implementation deadline in each instance.

There has previously been confusion as to whether the extension to 1 October 2019 is automatic or not for non-UK registered businesses using a UK VAT agent – HMRC had advised that in this instance the 1 April date would apply unless the business received an extension letter, but when we then tried to register all our clients for MTD, we were unable to do so because the system will not currently recognise non-UK companies. As a result of the failure of the online system at this time to recognise non-UK companies, all non-UK businesses affected by these changes will have to wait until the system is changed to allow for this. For now, HMRC have now confirmed that the extension must de facto apply and that non-UK businesses may continue to use the current manual input system to complete their VAT returns.

Car parking overpayments

National Car Parks Ltd – CoA

The taxpayer operates pay and display car parks. A person parking their car in one of the taxpayer’s car parks is required to purchase and display a ticket. The customer is notified by the instructions on the front of the pay and display ticket machine that the machine does not give change - “No change given, overpayment accepted”. If the customer does not have the correct change and inserts coins to a value above the tariff displayed, the machine will not recognise any additional parking time. The hypothetical example used is a tariff of £1.40 for up to one hour and a customer with limited change who pays £1.50. The taxpayer submitted a claim based on the fact that it should only account for VAT on the £1.40. HMRC refused the claim and the taxpayer appealed. The earlier FTT dismissed the taxpayer’s appeal concluding that there was a link between the full payment and the service provided. The FTT added that the customer knew what they were paying for the service and had just made a bad bargain. The FTT noted the similar Kings Lynn FTT where overpayments in local council car parks were found to be outside the scope of VAT. However, the FTT effectively distinguished this on the basis Kings Lynn’s charges were fixed by Statutory Order. On appeal, the UT focused on Article 73 of the VAT Directive, which provides that the ‘the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party,’. In finding again for HMRC, the UT concluded that the contract is formed when the customer inserts the money into the machine and if a customer pays £1.50 that is the amount received by the supplier and that is the taxable amount for VAT purposes.

The CoA differed slightly on the contract point, concluding that the contract was entered into when the customer clicked the green button. The pressing of the green button would represent acceptance by the customer of an offer by NCP to provide an hour's parking in return for the coins that the customer had by then paid into the machine whether this was the exact £1.40, £1.50 or another combination of coins. The CoA determined that if a customer chooses to pay £1.50, that amount is the value given by the customer and received by the supplier in return for the right to park for up to an hour. On this basis the taxpayer’s appeal is dismissed.


Whilst some of the reasoning and comments has varied, the taxpayer has now lost at every stage of litigation. Whilst an appeal is likely, the Supreme Court may refuse permission to appeal meaning this is the end of this piece of litigation. The earlier UT stated that the earlier similar King’s Lynn FTT decision was wrong. This concerned overpayments in council run car parks. The CoA did not hear arguments on this point but indicated that it would have been unlikely to have ‘endorsed’ it.

Residual VAT recovery on construction services

The Glasgow School of Art – UT decision

The dispute concerns input tax on the construction works at the taxpayer’s Garnethill campus. The project was the demolition of two buildings and partial demolition of and refurbishment of another, with the construction of a new building (used for education purposes) on the site of the demolished ones. The new building would be wrapped around and above the refurbished building. The refurbished building was the Student Union.

The taxpayer had recovered input VAT in full on the basis the VAT incurred only related to taxable supplies (rent of the opted refurbished building, which it said was a separate building from the new one, to the Student Union). HMRC assessed on the basis that the input tax was mixed use and should be recovered in line with the taxpayer’s business / non-business recovery rate.

The earlier FTT concluded that there was a single supply of all the work carried out on the site and that the ultimate result was a single building. However, even if there was a separate supply of the works to the building that was let to the Student Union, the FTT concluded that this letting was not an economic activity. Whilst noting that a low level of rent is not an automatic bar to deduction, the FTT considered the lease was not an economic activity. The FTT added it would take the taxpayer more than 500 years to recoup its capital outlay and that is not allowing for the fact that it incurs the insurance and some other costs. The taxpayer appealed to the UT.

The UT began by agreeing with the FTT that the question as to whether there were two separate buildings is of no real importance. The UT saw no reason to interfere with the FTT’s conclusion that there was a single building. Turning to the two separate supplies point, the UT considered that the FTT applied the correct legal test and agreed with the conclusion that there was a single supply. The UT noted that whilst the taxpayer wanted and obtained two separate premises with different functions, this does not mean it received two supplies. The original invoicing arrangement appeared to reflect the economic and commercial reality of a single supply. These were only amended and separated after the VAT issued had been identified. For these reasons the UT noted that the taxpayer’s appeal must fail. For completeness, the UT went on to consider whether the taxpayer was making taxable supplies to the Union. Again the UT agreed with the FTT that there were no taxable supplies being made, as the letting to the Union was not an economic activity, so even if there had been a separate supply of services in relation to the work done on the let Assembly building the VAT on that separate supply would not have been recoverable.


This is a useful reminder in relation to the concept of single versus multiple supply, as well as the meaning of economic activity. Just because there were two premises that does not infer the taxpayer received separate supplies in respect of each. Economic activity is a complex area, as generally any charge by a taxable person, where there is a contract and reciprocity, is brought within the scope of VAT, unless the charge to each customer is individually calculated and based on the customer’s means and ability to pay rather than the value provided, but here the charge was just too low by comparison to the costs, to represent any sort of return on the asset.