Lenders must not extend this treatment more widely in accounting for VAT within their businesses. The easement is strictly for the purposes of allowing a measure of relief for VAT on bad debts and depends crucially on HMRC taking a relaxed view of the supply position. In the circumstances, HMRC believe that the finely balanced nature of the legal advice allows some freedom of choice and introduced a form of easement.
#Svat power suply free#
They face more difficulty with s105 of the Law of Property Act, as it may override the order of attribution in the BDR Regulations, but again the matter is not free from doubt. However, HMRC believe they can rely on a wider interpretation of “agent” in maintaining their current view on agency. Having taken Counsel’s advice, HMRC are of the view that there is a good argument that in arranging the sale of repossessed property, mortgagees act under rights conferred by the mortgage agreement, and not as agents of the borrower. Customs and Excise therefore issued a further Business Brief 5/94 suspending the processing of claims, until such time as they could take legal advice and examine more fully the issues involved Current position This is because under s105 the proceeds of sale are allocated first to costs such as those incurred in selling the property, which threw some considerable doubt over whether a bad debt was created on which relief could be claimed.ĭoubts arose also about the status of lenders as agents and there was concern that some claims had included costs which went beyond the terms of the Business Brief. However, Customs and Excise subsequently became aware that the order of attribution of the proceeds of sale under s105 of the Law of Property Act 1925 might override the Bad Debt Relief Regulations. Business Brief 20/93 indicated that Customs and Excise were prepared to see lenders as agents of the borrower in arranging the sale of repossessed property, and hence allow them to claim bad debt relief (BDR), where appropriate, on the VAT incurred on selling costs.
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