Friday, December 09, 2011

CVAs – are they actually VAT exempt? We need your help!

You will recall that on 10 November HMRC issued an amended VAT notice 701/49 which indicated that CVAs qualify for exemption of VAT. Shortly after that R3 issued an urgent bulletin saying that CVAs and Trust Deeds were VAT exempt. We joined in and trumpeted the news from the roof tops as well, but is that actually correct?

We have now heard on the grapevine that the VAT notice, which only refers to IVAs and CVAs, may have been reissued without the agreement of all the relevant sections of HMRC and that the consensus of opinion within HMRC may now be that VAT should in fact continue to be charged on CVAs. Indeed the original VAT Brief (35/11 issued in September 2011) is still online and confirms that claims for refunds in respect of CVAs and PVAs will be rejected.

Similarly, although we have nothing in writing that we can rely on, we are seeing commentary on Trust Deed forums and blogs suggesting that because the debtor’s assets vest in the trustee when the deed is signed then trust deeds do not comprise “a single, composite, supply consisting of debt negotiation and payment transfers”. The feeling among some Scottish contacts is that an IP’s work on trust deeds may not be exempt supplies.

We are trying to get confirmation of the true position, but if you have any further knowledge about this please could you let us know? If you have any contacts within HMRC you can ask for clarification, please could you do so and let us know what you find out? We need clarification as soon as possible supported by enough evidence for IPs to be able to rely on it. Clearly, if there is doubt about the CVA-related content of notice 701/49 which has actually been published, then there has to be even more doubt around Trust Deeds, where nothing has yet been published formally by HMRC.

If you have submitted a request for a VAT reclaim to HMRC in either CVAs or Trust Deeds, could you let us know how the reclaim was treated?