Wednesday June 2, 2010
8th and 13th Directive Procedures
The VAT tribunal have recently heard a test case concerning the rejection of VAT refund claims submitted to HMRC in the UK and processed under HMRC’s FACEVET procedures (the procedure used for overseas refund claims). (more…)
Wednesday April 28, 2010
Med Hotels operates a website through which hotel accommodation in the Mediterranean and Caribbean is marketed. In the recent case Med Hotels argued that it was an agent of the hotels. HMRC argued that Med Hotels was acting as a principal and that it should be accounting for VAT using the tour operators margin scheme. (more…)
Tuesday April 6, 2010
This is a reminder that from 1st April:
· VAT-registered traders with annual turnovers of £100,000 or more (excluding VAT) will have to file their VAT returns online and pay their VAT electronically;
· All businesses registering for VAT from April will have to file their returns online and pay electronically;
· All VAT cheque payments sent by post will be treated as being received by HMRC on the date when cleared funds reach HMRC’s bank account – not the date when it receives the cheque. Businesses must allow enough time for their cheque to reach HMRC and to clear its account no later than the due date shown on their VAT return, or they may be liable to a surcharge for late payment. However, this change does not affect any cheque payments made by Bank Giro; and
· Anyone issuing an invoice that includes VAT, when they are not entitled to charge it, will be subject to a new VAT wrongdoing penalty. The penalty charged will be a percentage of the amount charged as VAT on an unauthorised invoice.
Thursday March 25, 2010
Despite speculation, there was no change to the standard rate of VAT or the scope of the reduced rate. There were a number of minor changes which are detailed below.
Changes to zero-rating of qualifying aircraft
With effect from 1 September 2010, the definition of zero rated aircraft will apply only where the aircraft is used by airlines operating for reward chiefly on international routes. Supplies to State institutions are not affected by the change. This brings the UK definition into line with EU legislation and follows infringement proceedings being taken by the Commission.
Place of supply of gas, electricity, heat and cooling
The place of supply rules for natural gas and electricity rules are to be amended from 1 January 2011 to:
· cover supplies in all types of natural gas pipeline;
· limit the scope to pipelines located in the EU and only to pipelines outside the EU if they are linked to EU pipelines;
· provide relief from VAT at importation for all natural gas imported via a network (including liquefied natural gas by tanker); and
· extend the scope to include heat and cooling supplied through networks.
Postal Services
Following the TNT case in the European Court of Justice last year, the VAT exemption for postal services will be restricted to the supply of public postal services by a universal service provider (USP), which in the case of the UK is the Royal Mail. This change will have effect from 31 January 2011. This will increase the cost of using Royal Mail for businesses that cannot recover their VAT in full where they have negotiated specific prices for contracts.
Reverse Charge for Emissions Allowances
A reverse charge will be introduced for supplies of emissions allowances from 1 November 2010 to combat Missing Trader Intra-Community (MTIC) fraud. This will mean that a VAT registered business purchasing allowances will account for the VAT due instead of the supplier. This will replace the zero-rate introduced in July 2009 which was an interim measure pending agreement within the EU.
There will be no requirement for reverse charge sales lists for emissions allowances but HM Revenue & Customs will in the future have an option for the introduction of reporting requirements to deal with fraud in the services sector.
Recovery of VAT on assets used for business and private purposes
This change deals with VAT recovery on immoveable property, boats and aircraft where there is private use of the asset. It confirms that the use of Lennartz accounting arrangements which allowed full recovery of VAT on the purchase of the asset with VAT being due on the private use over the life of the asset is to be removed with effect from 1 January 2011. HM Revenue & Customs had recently announced that the arrangements could only be used in limited circumstances following a case in the European Court of Justice.
Increased Registration and Deregistration Thresholds
The registration threshold will increase from £68,000 to £70,000 from 1 April 2010. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000. The registration limits for acquisitions from other European Union Member States will also be increased from £68,000 to £70,000.
Late payment of VAT and filing of returns
The system that penalises late payment of VAT and filing of returns is to be changed to align it with other taxes. The date of the change has not been announced and legislation will be introduced after the election.
Changes in Fuel Scale Charges
The VAT fuel scale charges tax the private use of business fuel have been amended in line with average fuel costs.
Cost sharing exemption
Whilst there were no specific details, it was announced that the Government will work with charities and other affected sectors to consider options for implementing the EU cost sharing exemption, which has not previously been implemented in UK law.
Simplification of the partial exemption and option to tax rules
Following consultation, HMRC has announced two changes to simplify the partial exemption de minimis rules and some minor changes to simplify the option to tax legislation. All the changes take effect from 1 April 2010. These changes were not part of the Budget announcements as they have already been made.
Change to place of supply of transport services
Another announcement recently made changes the place of supply of transport services when they take place wholly outside of the EU. This easement changed the place of supply of these services from the UK on a temporary basis until a permanent solution is implemented.
In addition, if a business has previously recovered VAT by using the Lennartz accounting arrangements, revenue protection legislation will be introduced to ensure that any VAT that is due in the future is accounted for by the business.
Monday March 22, 2010
HMRC have announced in Revenue & Customs Brief 13/10 an administrative easement regarding B2B freight transport services which are used and enjoyed outside the EU. This is a useful measure for businesses making or receiving supplies of freight transport services that are physically performed outside the EU.
Until 1 January 2010, the place of supply of freight transport and associated services was the country where they were physically performed. That meant that supplies physically performed outside the EU were outside the scope of VAT. Transportation related to imports to and exports from the EU could have a place of supply both within and outside the EU and, to the extent they were performed within the EU, the VAT liability was at zero rate.
From 1 January 2010, B2B supplies of freight transport and associated services became subject to the new B2B general rule for place of supply of services – where the business customer belongs – regardless of the place of physical performance. This means that, where the customer is in the UK, the place of supply is the UK even if the supply physically takes place wholly outside the EU. As zero rating only applies to supplies in connection with EU imports and exports, the liability of supplies wholly outside the EU is standard-rated. That means that either the UK-based customer must perform a reverse charge for the supply (if the supplier is outside the UK) or the supplier needs to account for UK VAT on the supply.
HMRC have been made aware that this change has had a real impact, either in terms of increasing administrative burdens (with no revenue impact for the UK) or, in some cases, resulting in a real VAT cost. HMRC accept that this change in law has produced an unintended anomaly in the treatment of supplies wholly enjoyed outside the EU, which may also be taxed locally in the place of performance.
With immediate effect, where a supply of freight transport (or services closely associated with freight transport) would be treated as supplied in the UK, it will not be treated as supplied in the UK if the use and enjoyment of the services is outside the EU. This administrative easement is being introduced as a temporary measure to allow time for consideration of a more permanent legislative solution.
This treatment applies from 15 March 2010; it is not retrospective.
Thursday March 18, 2010
A recent ruling means that companies involved in mergers or acquisitions where VAT recovery had previously been refused by HMRC might now be able to make a claim.
The First tier tribunal has released a decision in BAA Limited v HMRC [2010] UKFTT 43 finding that the company set up to acquire the BAA Group was able to recover input tax on costs related to the acquisition. The tribunal held that the costs went beyond acquisition and that the company was involved in the management of the BAA group. As the acquisition company joined the BAA VAT group it as able to use the taxable supplies made by other group members in deciding whether it carried on an economic activity and so were able to recover VAT.
HMRC argued that the deal costs related to the raising of finance for the acquisition and that the VAT did not relate to taxable supplies made by the group.
The decision is very good news for taxpayers. The ability to recover input tax incurred in corporate takeovers is a complex area and HMRC has often disputed VAT recovery. The costs involved in restructuring are frequently significant (£6.7 million in this case) so it is welcome to get confirmation that the costs are recoverable. However given the amounts of tax involved it is likely that HMRC will appeal the decision.
What should you do?
If you have had a restructuring in recent years where HMRC refused VAT recovery you should consider making a claim for VAT refused. The decision in BAA was based on specific facts but could apply in other cases. We would be happy to advise and to calculate and make claims on your behalf if appropriate.
Thursday March 18, 2010
HMRC has announced some changes to the Intrastat system for 2010. Most of the changes are minor. The threshold for intra-EU purchases of goods (arrivals) has been increased to £600,000 and the threshold for intra-EU sales (dispatches) has been reduced to £250,000.
In addition sales of new means of transport by VAT-registered businesses to private individuals in other Member States are no longer excluded from Intrastat reporting.
There are other minor changes that are detailed in the updated HMRC Notice 60 which include:
Monday February 1, 2010
The UK’s VAT rates play a part in attracting investment from a range of multinational firms around the globe.
According to Tony Dolphin, senior economist at the Institute for Public Policy Research, the UK’s government policy of keeping corporate taxes down and making it easy for foreign firms to operate in the country makes Britain an attractive place for international firms.
He added that other factors such as language have also played a crucial part in making the UK a favourable destination, although the economic downturn has stemmed the flow of incoming businesses.
“Over the last couple of years of recession the whole level of this type of activity has just dropped off,” Mr Dolphin said.
“As confidence grows, trends in this area will pick up again and when it does, the UK needs to be as competitive as it was back then before the recession.”
HM Revenue and Customs recently unveiled new fines, set to come into force on April 1st 2010, for non-compliance of VAT rules.
Thursday January 28, 2010
UK tax authority HM Revenue and Customs (HMRC) has announced the imminent introduction of new penalties for non-compliance of VAT rules.
From April 1st 2010, issuing an invoice charging VAT when not registered for VAT and handling goods which have not had excise duty paid on them will attract a fine.
Those who deliberately use or supply products at a lower rate of excise duty will also be liable to penalties.
Fines will be levied depending on whether the contravention was deliberate and concealed; deliberate but not concealed or done unknowingly.
The penalty levels are graded at between ten per cent and 100 per cent of the potential lost revenue, such as the amount of VAT on an authorised invoice.
Those who contravene VAT regulations but have a “reasonable excuse” will not be charged a fine and reductions will be available based on whether a disclosure of wrongdoing is provided.
Speaking at the European Parliament, Elena Salgado, Spain’s second deputy prime minister recently reaffirmed the Spanish EU presidency’s commitment to combating VAT fraud.
Tuesday January 26, 2010
Experts believe that a further rise to the current 17.5 per cent VAT will be inevitable.
Analysts at consultancy Oxford Economics said that after the next general election, the UK Treasury will have to increase VAT to 20 per cent in order to tackle rising debt levels, the Daily Mail reports.
The VAT hike would generate an extra £12 billion a year in revenue, which could go towards battling the UK’s biggest debt crisis since the Second World War, the firm said.
Neil Blake, of Oxford Economics, said the VAT hike would help fund spending cuts in other areas, which are necessary to help plug the budget shortfall.
“There appears to be a political consensus that spending cuts should form the bulk of the tightening but we can’t see how the necessary adjustments can be made without further tax rises too,” he told the Daily Mail.
A recent Accountz survey found that more than half (61 per cent) of consumers are content with the current VAT rate.