VAT Current Issues Rebecca Benneyworth MBE BSc FCA 2020 Group - - PowerPoint PPT Presentation

VAT Current Issues

Rebecca Benneyworth MBE BSc FCA 2020 Group Webinar

Place of supply changes

 1 January 2015  Change in place of supply for EBT

services to consumers

• Electronic
• Broadcasting
• Telecommunications

 Cross border, INTRA – EU

• Home supplies unaffected
• Non EU supplies unaffected
• B2B supplies unaffected

Electronic services

 Supplied over the internet or a similar

network

 Usually downloaded  No or very little human intervention in

the supply

 A growing range of supplies

What is not an electronic supply

 Where a person is needed to complete

the supply

• Advice etc given in writing delivered

electronically

• Webinars presented live

 But download pre-recorded probably is

• Electronic examinations which are marked by

a person

 But if marked by the machine it is an e-service

Who makes the supply?

 Selling through an app store or other

portal?

 Is the supply to the portal operator?

• Probably yes, so not MOSS implications

 Or the customer/consumer?  Most of the big portals are making the

consumer supply so your client is OK

• A business reason for choosing to supply

through a portal in spite of the reduced income

Advice regarding distribution

 Where the platform operator:

• Sets general T’s & C’s for the consumer
• Authorises payment or delivery
• Does not clearly state the name of the

supplier on the receipt or invoice to the customer

 Then the platform operator is making the

supply

 Your client is making B2B and not affected

Is the customer a consumer?

 Safest test is that provision of a

VAT number is NOT a consumer

 Could assume that all others are

consumers

• Remember that VAT limits everywhere else in

the EU are very low

 Can rely on other evidence that someone

is a business customer

• But may need to satisfy the

VAT authorities in the member state concerned

Place of supply : B2C

 Before the change : where the supplier

belongs

 From 1 January : where the customer

belongs

• Permanent address, or
• Where they normally reside

HMRC presumptions

 Phone box, internet café, wifi hotspot

• Where the place making the supply is located

 On transport in cross border travel

• Point of departure

 T

elephone landline

• Where the landline is situated

 Mobile phone

• Country code of SIM card

 Decoder

• Where decoder is located

Determining where the supply is made

 If one of the presumption cases you need

evidence of location (a single piece of evidence)

 If not one of the presumptions

• Two pieces of non contradictory evidence

 If rebutting a presumption

• Three pieces of non contradictory evidence

 Transitional rule – for first 6 months –

• ne piece of evidence

What sort of evidence?

 Billing address of customer  IP address of customer’s device  Location of their bank  Country code of SIM card  Location of fixed landline  Other commercial information

VAT Invoices and rates

 Need to use the Europa website  HMRC dubious about preparing a list of

rates

• Europa is regarded as the “source”
• BUT MOSS pages do include a list of rates

and link to europa

 Table of rates and details about tax

invoices in the notes but as of Feb 2015

VAT invoices

 Follow the rules for the member state of

supply

 Member states cannot require the issue

• f full tax invoices for cross border B2C

supplies

 But some may require a less detailed tax

invoice to be provided

 Table on page 6 helps

Supplies made in currency

 You will be reporting for MOSS in home

currency (£ sterling)

 Translate transactions undertaken in

• ther currencies into sterling at the ECB

rate on the last working day of the reporting period

 MSI – Member state of Identification –

home state of the supplier

The Union Scheme - MOSS

 UK

VAT registered businesses only

• But extended – see below
• The non union scheme is for countries
• utside the EU

 If client is not UK

VAT registered, they need to register for UK VAT

• They will not be required to account for UK

VAT on their supplies

• Do not recover UK input tax unless it relates

directly to the cross border electronic supplies

MOSS registration

 A voluntary or optional scheme  The “long hand” is to register in individual

member states and make returns direct to them

 If choose to leave MOSS then cannot re-

join until two calendar quarters have passed

MOSS registration - dates

 Register for MOSS by 10th day of month

after relevant supplies started

 Registration will be backdated to date of

first relevant supply

 If late then registered from next

VAT MOSS quarter

 So register today for supplies from 1 July

– effective 1 July 2015

Chucked out of MOSS?

 Practical disaster for business making

supplies across EU

 Submit returns and payments on time  Reminders for payment sent out for three

successive quarters which are unpaid after 10 days

• Persistent failure to comply
• Excluded

Moss returns

 Calendar quarter returns

• Due 20 days after end of quarter

 Return in sterling (end of quarter date)  Shows each member state  Value of supplies at standard and lower

rate

 Amount of

VAT

 Payment due at the time the return is due

Payment of MOSS VAT

 Due by the end of the submission period

• That is, within 20 days

 Quote reference number of return

• Issued when return accepted

 No direct debit facility  No time to pay agreements  Must clear HMRC’s bank by due date

Practicalities

 Register for MOSS (this will enrol you in

• nline system)

 Obtain data  Prepare and submit return  Take note of reference number  Make payment quoting reference number  T

• arrive with HMRC by 20th of month

Other Gems

 Records must be retained for ten years

after 31 December of the year of the transaction

 Correct errors on the original return

• But need to know time period for correction

in each member state

 Penalties arise in individual member states  Cross border agreement not to have

inspections in “close succession”

MOSS – other developments

 Think about data protection registration

• May be covered by accounting exemption but

just be aware

 UK lobbying for a threshold to exclude

small suppliers

• Will have to be a unanimous approval
• Many member states do not see it as a

problem

• Suggested level €1,000 or €5,000

Prompt payment discount

 New requirement to raise invoice for

gross amount from 1 April 2015

 Either issue credit note for prompt

payment discount (PPD)

 Or adjust in accounting records – but see

the detailed requirements to permit this

 Sample invoice as an appendix to the

Brief

Construction services - Zero

New Construction

Dwelling Relevant residential use Relevant charitable use Charity Annexe

Adapting

Home for disabled person

Construction services – 5%

Installation

Energy saving materials Aids for disabled Support for over 60’s

Conversion

Empty dwellings Different number Non residential

Relevant residential

 Childrens’ home  Residential care home with personal care for

the elderly, disabled, mental health condition, drug or alcohol addiction

 Hospice  Students and school pupils  Armed forces accommodation  Monastery or nunnery  Institution – sole or main home of at least 90%

• f residents

Construction services

 Zero rate new construction of “relevant

residential property”

 Includes accommodation for school pupils

and students

 Change of interpretation

• Generally recognised academic or

professional qualification

• Maintaining existing professional qualification

for which accreditation is received

• High level of academic content

T ermination of concessions

 Disregard use during vacations in

determining use

• Big change for new build halls of residence

 Kitchen and dining rooms to count as

residential accommodation if predominantly used by live-in students

 Both ended 1 April 2015

Golf club bonanza?

 Bridport and West Dorset Golf Club

successful at CJEU

 Green fees to non members are also

exempt

• Not permitted to discriminate between

recipients of the supply

 Reclaims possible  Unjust enrichment – so repay non

members

 Adjust input tax claims

Road fuel

 Road fuel private use – the third way!  Changed in 2013  Now three choices

• Recover 100%

VAT and pay scale charge

• Recover 0%

VAT

• Recover x% of

VAT based on detailed mileage record (of ALL miles travelled)

 In practice the third option is probably

unworkable

Entertaining overseas customers

 Reasonable in the circumstances  Non UK = not UK or IoM resident  Avails himself of the goods or services

supplied by the business or is likely to do so

Retention of small interest

 If there is a sale and a tiny interest is

retained can the sale still be a TOGC?

 Robinson case – a property business  Grant a sublease of 125 years – 3 days

from a primary lease of 125 years

 Was this still a TOGC  Tribunal – yes it is

• So no output tax due, and reduced SDLT

Sale of business with property

 Extends the Robinson decision  In that decision the TOGC was of a rental

business

 R & C Brief 27/14 looks at wider TOGC

issues

 Also at surrender of a lease which can

now be a TOGC (this is new)

 VAT and SDLT refunds?

Flat rate scheme

 Taxable supplies net of

VAT of no more than £150,000 expected in next 12 months

 Choose flat rate from list  If mixed supplies use the predominant

turnover

 Apply flat rate to all business income

• Even exempt income

FRS - reminders

 1% discount for first year from date of

registration (not first year of flat rate scheme)

 Capital items > £2,000 including

VAT – recover and charge VAT as normal

 Review rate and turnover every year on

anniversary

 Limit is £230,000 (including

VAT) to leave – last 12 months

Rental income

 Regarded as business income  If registered as self employed and single

• wner of property this will go on FRS

return

 “Business entity” solution

• Business is a partnership or limited company?
• Property is jointly owned?

Inaccuracies on returns

 Penalty rises according to behaviour  No penalty for mistake made despite

reasonable care

 Issue of disclosure is the key aspect for

VAT

 Disclosure is statutorily defined

• And is considerably more than putting the

error right!

 Remember – overpaid

VAT cannot attract a penalty

The range of penalties

Disclosure

 Unprompted = a disclosure made when

the taxpayer has no reason to believe that his affairs are under investigation

• That is, not under fear of discovery

 All others are prompted  Quality of disclosure determines whether

maximum discount is available

What is disclosure?

 TELLING HMRC about the mis-

statement

 Giving HMRC reasonable help to

establish the amount of the inaccuracy (HELPING)

 ALLOWING HMRC access to the books

and records to check that all is in order

Errors by tax agents

 Taxpayer is not liable to a penalty in

relation to something done or not done by the agent if HMRC is satisfied that the taxpayer took reasonable care to avoid inaccuracy

Reasonable care by the client

“Reasonable care in this context would include appointing an agent competent to deal with the person’s tax affairs, giving the agent all relevant information and checking the return, as far as possible, before its submission.”

Mr & Mrs Lewis

 Purchase of a property carrying VAT  Deposit paid in May on exchange of

contracts

 Total purchase price £250,000

• 10% on exchange
• Balance on completion

 Mistakenly believed that the taxpoint was

exchange of contracts

 Penalty raised for careless error  15% of the £33,750 claimed too early =

£5,062

 BUT this should have been calculated on

the “delayed tax” rule

• The potential lost revenue would then

have been £421.88

• Leaving a 15% penalty at £63.28

 Change in HMRC policy announced

subsequently

Timing differences - policy

 The potential lost revenue when the

inaccuracy self corrects is only 5% of the amount of tax

 Reduces the potential penalty to 1/20th  HMRC had been insisting that the second

return has been filed already

Correcting errors on returns

 Errors of up to £10,000 can be corrected

• n return by any trader

 Limit is 1% x box 6 up to £50,000  Error – not deliberate mis-statement  Correct on return = no interest charge

• May still want to make a disclosure
• Form VAT 652

 Assessment raised = interest charge