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Connells beat the taxman in VAT ruling

publication date: Oct 22, 2009
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ConnellsConnells have won a VAT Tribunal Ruling in respect of local press advertising with significant implications for all estate agents.

David Livesey, Connells Group Chief Executive (pictured right) says, “The issue in this VAT Tribunal was whether we could reclaim the full amount of VAT on our local press advertising or not. HMRC were trying to establish that our property ads were actually general in nature, and hence were also aimed at trying to sell Mortgage Services (a VAT exempt supply) as well as properties. If this principle had been established we would not be able to reclaim the full amount of VAT on the cost of the advert, ie on a £200 local press ad, we would not have been able to reclaim the full £30 of VAT. Multiply this by the number of pages in local press taken across the country by all estate agents, and the HMRC’s argument could have cost our profession millions of pounds!”

Connells argument was that the local press ad is simply a block of 24 properties for sale and is no more designed to sell mortgages than a ‘For Sale’ board. The Tribunal Judge agreed. There was also vital clarification.

“Where our press ad refers to mortgages either in the margins or by use of a drop-in ad, then the whole page will be deemed ‘residual’ for VAT purposes and we would not be able to claim all of the VAT back. On the basis that no one has ever responded to a press ad by walking into your office and asking to do a mortgage, you might want to recheck your ads and remove any reference to the M-word!” says David.

This result for Connells pales into insignificance next to the damage this could have done across UK estate agency. So three cheers for Connells!