When deciding how VAT applies to a transaction I always start with asking ‘what is it?’ In theory this tells you whether there’s any VAT relief and generally points to a clear ‘yes’ or ‘no’ answer. However we recently saw a rare event when the tribunal decided the answer was ‘yes yes’.
The appeal was by Jigsaw Medical Services Ltd (TC 05986) who argued that their emergency ambulance services were zero-rated whereas HMRC had ruled they were exempt. In either case the customer would not be charged VAT; the impact of the argument was on Jigsaw’s VAT claims. Zero-rating meant Jigsaw could make claims, exemption meant they couldn’t.
HMRC argued that the vehicles had started out as vans and therefore had not been designed or adapted to be used as public transport, whereas Jigsaw argued that this was not the right test. The tribunal agreed with Jigsaw – the correct test is whether the vehicle could be converted and used as public transport i.e. carry 10 or more people.
So was it zero-rated or exempt? The tribunal decided it was both, which I’ve only seen happen before in education. What this means is that as the zero-rating schedule comes before the exempt schedule in the VAT Act, zero-rating applies and Jigsaw can claim VAT back.