VAT: a contextual approach (Part 2)
|Category|| Technical Articles
Article by Alan Sinyor, Vice Chairman, CIOT Indirect Taxes Sub-Committee. This article appeared in the April 2005 issue of Tax Adviser. In the first article in this series, Alan Sinyor commented on the contrast between those who do not deal with VAT on a day-to-day basis and who often seem to find the tax almost unintelligible and those who regularly advise on the tax and who frequently derive enormous intellectual pleasure from it. He argued that the key to this apparent anomaly is the fact that VAT demands a contextual approach, and does not lend itself to the mechanistic application of rules to facts. The need for contextual understanding acts as a barrier to those who try to give advice without having an overview of the conceptual structure of the tax.
In that article, he stressed that the first step in giving good VAT advice is to attain an overview of the factual context. Grasping the factual and commercial context of a transaction is an essential first step if one is to determine the nature and the effect of any given transaction as part of a supply chain. A blinkered approach will often lead to superficial, and perhaps inaccurate, VAT analysis and advice.
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