helping you help your clients VAT Update Neil Owen BA CTA(Fellow) - - PowerPoint PPT Presentation

helping you help your clients VAT Update Neil Owen BA CTA(Fellow) FBIAC AIIT

Brexit

• HMRC guidance published re no deal
• Confirms main points
• No change to most services

– But no EC Sales Lists (or narratives on invoices)

• Acquisitions become imports

– Postponed accounting

• EC sales and distance sales become exports

– Evidential requirements

• MOSS – overseas registration required

Place of Supply

• Where a supply is seen as taking place

– Where VAT is chargeable on a sale – Only place where VAT chargeable – Not quite only place where VAT may need to be brought to account

• Rules differ for goods and services
• For goods, where they start their

journey to the customer

• For services, more complex

Place of Supply of Services

• Land-related

– Taxed where land is located – Hotel accommodation – Construction services – Architects, estate agents, etc – Conveyancing solicitors – Supplies of land – Holiday accommodation – Direct link with specific site

Other Services

• Passenger transport

– Mile for mile, where journey takes place

• Admission to events

– Where event takes place – Wide definition – Services ancillary to admission

Other Services 2

• Restaurant services and catering

– Where services consumed – Hopefully self-explanatory

• Short-term hire of a means of transport

– Period of hire no more than 30 days – 90 days for a vessel – Where made available, not where used

• Freight transport outside EU

Other Services 3

• Services affected by the override

– Hire of goods – Telecoms and broadcasting – Electronically-supplied services

• Electronically-delivered files
• Web-hosting
• Automated web services
• Taxed where ‘use and enjoyment’ occurs if

different from customer location

– Only if one EU and one non-EU

B2B Services: the General Rule

• Default position B2B for all other services
• Known as ‘general rule’
• VAT due in customer’s location
• All services bar designated exceptions
• ‘Business’ includes VAT-registered
• No VAT chargeable if customer overseas
• Reverse charge due if supplier overseas
• So nothing changes post-Brexit

General rule services B2B

• UK supplier

– No VAT chargeable if customer overseas and in business (or otherwise VAT- registered in EU)

• UK customer

– VAT due in UK – Customer liable to account – Reverse charge must be applied

The Reverse Charge

• Applies where place of supply is

customer’s location

• VAT must be brought to account there
• Avoids need for supplier to register
• Customer accounts for VAT

– Treats services as both supplied and received

The Reverse Charge 2

• Applies to services received into UK
• Supplier may be EU or non-EU
• Account in boxes 1 and 6 of return, as well

as 4 (to extent claimable) and 7

• From 1 January 2010, all services except

exclusions

• Applies only to taxable services

B2C Services

• Many “where performed” so no change

post-Brexit

• Many where supplier established so no

change post-Brexit

• Some where customer belongs if non-EU

– Accountancy, consultancy, provision of information, supplies of staff

• Some where customer belongs if in EU

– BTE services (MOSS accounting)

Imports

• Shipment of goods non-EU to EU
• VAT a tax on importation
• Chargeable as a duty of customs
• Payable on goods subject to VAT
• Normal input tax
• C79 certificate evidence
• Not agent's invoice

Exports

• Shipment of goods EU to non-EU
• Zero-rated regardless of customer
• Ship and get evidence within 3 months
• Supplier must ship

– Except indirect exports

• Indirect exports

– Customer not established in UK – Caution with evidence

Export Evidence

• Required by law
• Official – C88
• Commercial

– Primary or secondary

• For sea, sea waybill of bill of lading
• For air, air waybill
• For post, certificate of posting
• Within three months

Timing of Export Evidence

• Musashi Autoparts Europe Limited
• Sales to Germany
• Insufficient evidence of shipment
• C&E assess
• Company obtains evidence
• C&E refuse to withdraw asst, saying next

return can be adjusted

• Tribunal allows appeal
• Overturned by High Court

EORI Numbers

• All importers and exporters require EORI

number

• Application made on first import or export
• Those dealing with EU need post-Brexit

– Only if none already

• Separate method of application

– No evidence needed

• HMRC were sending letters

Acquisitions 1

• Purchase by VAT-registered trader of

goods from EU

• Goods must move across border
• VAT accounted for by customer

– on standard- and reduced-rated goods

• Claimed as input tax subject to normal

rules

– Caution where input tax irrecoverable

Acquisitions 2

• Customer provides VAT number to

supplier, including country prefix

• Acquisitions over threshold can cause

registration

• High values give rise to statistical
• bligations

EC Sales

• Goods sold to a VAT-registered

customer elsewhere in the EU

• Goods must move
• Customer must be registered in MS of

acquisition (except triangulation)

• Supplier must obtain customer VAT no.

and quote on invoice

• Evidential requirements
• Transfer of own goods counts

Distance Selling

• Sales to unregistered customers in EU
• Initially as UK
• If threshold exceeded in any MS,

registration required

• Higher threshold (€100k): Austria,

Germany, Luxembourg, the Netherlands, the UK

• Lower threshold (€35k): all others

MTD for VAT

• HMRC VAT Notice 700/22

– Revised May 2019 – Also “stakeholder information pack”

• Monthly and annual returns

– Confirmed will continue

• Ditto non-standard tax periods
• Loss of seven-day extension?
• Will accommodate FRS

MTD for VAT 2

• Principles are threefold

– Digital retention of records – Digital links between accounting records – Digital submission of VAT returns

• Liability exists if trading above VAT

threshold

– Taxable supplies only

Liability to MTD

• Taxable supplies >£85,000

– i.e. standard-, zero- and reduced-rated – Same threshold for overseas businesses

• Those voluntarily registered not liable
• Intending traders not liable
• Exclude exempt supplies and supplies
• utside scope of UK VAT

– E.g. sales of services to businesses outside UK

Liability to MTD 2

• First VAT period beginning after 31.3.19

– For 96.5% (per HMRC) of those liable

• First VAT period beginning after 1.10.2019

– Trusts and unincorporated not-for-profit bodies – Group VAT registrations (and divisional) – Overseas businesses – Annual accounting scheme users – Public corporations – Local authorities and public sector bodies

Liability to MTD 3

• If below at 1 April 2019, must

commence wef beginning of first period after t/o exceeded

– On historical basis – Need to monitor – Cannot get back out of t/o decreases

• Those below threshold can participate

voluntarily

– Can get back out if still below

Digital Records

• Certain records must be kept digitally

– List in notes – Manual records only will be illegal

• Cash accounting permissible

– Payment date may be used as supply date – Issues with cash book records – Single entry for multiple purchases permissible but conditions

• No requirement for electronic invoicing

Digital Records 2

• Many will use standardised accounting

packages

– May be HMRC’s unpublished aim

• Spreadsheets count as digital records
• Manual entry of transactions

– Prime entry into digital records – Invoices, cash payments, etc – Results of specialised calculations

Digital Records 3

• For retailers, DGT item of prime entry

– No requirement for digital record of individual transactions – EPOS will not need to link to other digital records

• Also, where intermediary agents

arrange transactions

– Summary of transactions may be entered into digital accounting system

Digital Records 4

• Other records may be manual

– Includes specialised computations, such as

• partial exemption calculations
• margin scheme records
• error correction computations
• FRS calculation
• scale charge records
• employee expenses
• petty cash records (monetary limits)

– Result entered manually (by journal)

• But will need to be prior to submission

Digital Links

• Links between accounting systems

must be digital

• This element postponed for 12 months

– From main entry date

• Will require systems to talk to each
• ther

– Export, upload, etc – Pages of an Excel spreadsheet – No manual intervention

Digital Links 2

• Issues for VAT groups, academy

schools, large businesses with multiple accounting systems, etc

• All parts must link digitally

– Often a spreadsheet is used

• No legislative definition of “digital link”

– HMRC insist “copy and paste” not a digital link

Digital Submission of Returns

• Software must talk to HMRC’s systems

– Both to submit and to receive data

• API (application program interface) or

bridge required

– Main software providers will facilitate – Others will need bridging program

• Older versions of accounting software

– Download to Excel and submit from that?

Digital Submission of Returns 2

• Nine boxes only

– More in years to come?

• Facility to send more if wanted

– Including in advance – Who will?

• Requirements likely to increase
• Analytical review, exception reports, etc?

Digital Submission 3

• Must actively sign up
• Signing up switches off old portal

– No forcible switch-off by HMRC

• Do not sign up until after submission of

last VAT return through existing portal

• Payment by direct debit

– Must wait five working days – Must sign up at least seven working days before next return

Return Submission by Agents

• Using client login from client’s software

– Should be straightforward

• Bureau accounting

– Will need new agent login for MTD – Will accommodate MTD for other taxes later – Same as trust registration

• HMRC step-by-step guide

– Two-stage process

• Step-by-step guide updated

MTD and Penalties

• Soft landing

– Has become deferral of digital links

• No official light touch

– Until publication in Feb 2019 of “mythbusters”

• Penalties exist already for failure to

keep records

• Default surcharge unchanged

– Until rollout of MTD for other taxes?

Construction Sector Reverse Charge

• From 1 October 2019
• HMRC Guidance Note 7 November 2018
• VAT Notice 735
• Fraud elimination measure
• Supplier charges no VAT, but identifies VAT

liability

• Customer accounts for output tax

– But not net value as an output

Reverse Charge 2

• Contractor to contractor

– No VAT charged by subcontractor at 20% or 5% – Receiving contractor accounts for output tax and claims as input tax

• Only applies where within CIS
• Does not apply where supply to end user

– Property developer or individual – Or person connected with end user

• Repayment/FRS/wrongly charged VAT

Verifying an Option to Tax

• Uncertainty
• Check with HMRC Glasgow
• Taxpayer or agent can write
• Request confirmation
• Do not specify address

– Errors have arisen

• General request
• NB On opting, omit Land Registry no.

• No responsibility for loss occasioned to any person

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