INDIVIDUAL VOLUNTARY ARRANGEMENTS – VAT FREE FEES!
The successful recent appeal by Paymex Limited against an HMRC ruling regarding output tax charged has resonance throughout the insolvency sector, and to some extent, the financial services sector too. We understand that HMRC will not be appealing the decision of the Tribunal.
Case Details:
Paymex VAT group made supplies in connection with the establishment and supervision of individual voluntary arrangements – IVA’s- for consumers. HMRC issued a ruling that the VAT group should account for VAT on these supplies.
Paymex appealed on the grounds that the services supplied were exempt, because the supplies were “financial services concerned with debts”.
The Tribunal proceeded to establish in detail the roles of the company in question, Blair Endersby Ltd ( “Blair Endersby”), and its well-known sister company, Baines & Ernst Ltd (“Baines & Ernst”). Baines & Ernst provides debt management services, and the group of companies has used the name to attract business generally, and advertised extensively on television in the early 2000’s. This company was the initial point of contact for individuals seeking advice on debt matters. However, Baines & Ernst also helped to create new clients for Blair Endersby, making them aware of the best route to take and then, if the IVA option was considered advisable, setting up the case, getting signed application forms and passing the client on at that point to Blair Endersby.
An administration fee was chargeable by Baines & Ernst for this service to Blair Endersby, which was duly VATable and correctly treated as such by the VAT group, however, that is where Baines & Ernst’s involvement then ceased.
From then on, Blair Endersby carried out its own role as licensed Insolvency Practitioner, setting up the IVA for the individual in question and liaising with its client’s creditors, arranging a creditors’ meeting and generally supervising the whole process.