Spring 2011 Newsletter Content Leading article... Anything up his sleeve? General tax... Relaxed association File under 'e' Research costs? Give early A tax on houses Pension changes Holiday entitlement EISy money VAT... 20:20 vision Horses for courses? Do it yourself That's entertainment All in the contract? Where am I? Law items... What's in a title? The privileged few Called to account Don't mince words

All in the contract? If you pay a contractor to convert your loft, every penny you pay is VATable (as long as the builder's honest). Often the workers who do the plastering, plumbing and electrics are self-employed sub-contractors who wouldn't charge you VAT because their business as individuals isn't big enough. So the contractor takes the non-VATable labour and makes it one big VATable supply. A company tried to get around this by saying in its contracts that it was only a 'project manager'. It still collected all the money from the customer, but didn't put it all on its VAT returns – it reckoned the customer now had separate contracts with all the labourers, and when the company paid them, it was just handing on the customer's money. It didn't belong to the project manager. If that had worked, it would have saved a lot of money. The trouble is, it didn't work. The taxman argued that nothing had changed: the customer still believed he was getting a loft from the company, not a series of separate contracts with different people. The argument has gone through several levels of appeal in the courts, but at the moment HMRC are winning – the tax tribunal confirmed an assessment of well over £1m. The correct VAT and tax may change if the contract is different, but it's not just what's written in the small print – it's what everyone believes the agreement is. Here, the tribunal didn't think the company's contract reflected the true bargain between the parties, and agreed with HMRC that it should be charged to VAT in the normal way – as a single contract to supply a loft conversion. If you are in doubt about the VAT or tax treatment of your contracts, we will be happy to advise you.