HM Revenue & Customs has decided not to appeal a judgment that ordered it to repay almost £260,000 in incorrectly charged VAT to an adviser.
Bloomsbury Wealth Management won its case after a two-year battle with HMRC. Partner Jason Butler applied to HMRC for repayment of VAT totalling £258,592 which Bloomsbury said it had accounted for in error between 1 October, 2005 and 30 September, 2009.
The firm had applied VAT on its advice services but argued it now believed these should have been treated as exempt from VAT. HMRC rejected the claim in July 2010, which Bloomsbury then appealed.
A tax tribunal heard the case on 4 May.
HMRC argued Bloomsbury was introducing clients to collective investment fund managers which it deemed to be a taxable service. It also submitted that advice and management formed the predominant supply.
Bloomsbury argued in response advice was ancillary to introducing clients to fund managers.
In his judgment, published in June, tribunal judge Greg Sinfield said: “We consider the fact there was no fee for the advice if clients decided not to invest shows it was not the most important part of the service to Bloomsbury or its clients. The evidence showed the focus of Bloomsbury’s services was the creation and maintenance of a portfolio of units for its clients which is an exempt supply of intermediary services.
“In our view, the initial advice was an ancillary service to the principal supply of intermediary services relating to the acquisition, maintenance and disposal of the portfolio of units.”
HMRC said last month it was considering whether or not to appeal the tax tribunal’s decision. It had until 8 August to apply for permission to appeal. A spokesman has today confirmed HMRC does not plan to appeal the judgment.
An HMRC spokesman says: “HMRC will not be appealing the Bloomsbury decision.
“The tribunal found that Bloomsbury did not provide portfolio management services, as considered by the European Court of Justice in Deutsche Bank. Bloomsbury was merely acting as an IFA in the provision of advice leading to the intermediation of exempt financial products. As such, the VAT treatment as found by the tribunal is entirely consistent with that laid out in our current guidance.”
The ECJ ruled last month that the entire discretionary fund management service is VATable, in a case brought by a German court against Deutsche Bank. The judgment followed an opinion statement published in May.
Bloomsbury Wealth Management partner Jason Butler says: “I am pleased to hear HMRC is not appealing, though I am not surprised. It gives heart to taxpayers that when there is a dispute with HMRC, there is an independent tribunal service that sifts through the rhetoric and delivers fairness to taxpayers. We can now put this behind us and get on with what we do best, which is serving clients.”