United Kingdom
20 July 2011 - HMRC concedes that insolvency practitioners' fees re IVAs are VAT-exempt
HMRC has conceded that fees charged by insolvency practitioners (IPs) in relation to individual voluntary arrangements (IVAs) may be exempt from VAT.
HMRC Brief 27/11 confirms that HMRC is not appealing the First Tier Tribunal decision in the Paymex Ltd case that, in relation to IVAs, IPs provide a single supply of debt negotiation and payment handling services, which are exempt from VAT.
This is a very significant development, and all IPs can now submit repayment claims for VAT charged over the past four years. HMRC has confirmed that it will pay such claims, subject to the normal capping, partial exemption and unjust enrichment rules. What this means is that IPs will be able to claim refunds of VAT charged from HMRC, but HMRC will expect this VAT to be passed to the IP’s customer and the IP will then have to apply the partial exemption rules, which may result in a repayment to HMRC of input tax claimed in the past. Therefore, although IP’s may be able to claim refunds from HMRC they may ultimately be worse off by making such claims.
Please contact Stephen James for further assistance, or for assistance in making a repayment claim.