VAT: Latest News & Developments Neil Owen BA CTA(Fellow) FBIAC - - PowerPoint PPT Presentation
VAT: Latest News & Developments Neil Owen BA CTA(Fellow) FBIAC AIIT Brexit VAT law written in Brussels Little flexibility in UK E.g. no extension of zero rate But, European Court makes decisions favourable to UK taxpayers
VAT law written in Brussels Little flexibility in UK
E.g. no extension of zero rate
But, European Court makes decisions
Independence in VAT policy a two-edged
Practical effect in cross-border situations
Sale of goods to EU will be exports
Evidential requirements Duty on imports to EU
Purchases of goods from EU = imports
Cash flow implications
No boxes 2, 8 or 9 on VAT return No Intrastat Triangulation an issue MOSS an issue Benefit for tour operators (no TOMS?)
Pre-registration VAT not input tax
Recoverable as if it were Provided relates to making taxable supplies
Six months for services
Provided not absorbed into supplies made prior
E.g. car repairs, accountancy, phone bills, rent
Services = all types of service
Including intangible assets and building works
Four years for goods
Provided still on hand at date of registration
HMRC began insisting on depreciation
Controversial Conflicted with public notice Only came to HMRC’s attention in some cases Subject to challenge in tribunal Meanwhile full claims were still recommended Now HMRC have conceded
R&C Brief 16(2016)
Letters from HMRC
Reviewing tax return (personal or company) Turnover above threshold, no VAT number Prompted disclosure
Infrequent in the past Now more frequent but not (yet?) routine Other desk-based “trawls”
Charity Commission, Land Registry
1 April 2017 New concept of “limited-cost trader” Flat rate of 16.5%
“Flat rate” for normal VAT accounting is 16.67%
Perceived abuse
Change to prevent “aggressive abuse”
Makes scheme pointless for most service-
Triggered by increase in applications
Marketing of scheme Purely to make money 30,000 additional applications Construction sector agencies
Change will have wider effect
HMRC say 30% of users Experience suggests possibly two-thirds
“Limited-cost trader” is any registered
less than 2% of FRS turnover, or less than £1,000 p.a., whichever is the greater
“Goods” means goods, not services
Physical, tangible items
Test applied to every return
Qualifying goods means goods that are not:
food or drink for consumption by the trader
vehicle-related costs – road fuel, car parts, etc
goods for resale or hire if not main activity goods for disposal – promotional items, gifts,
“capital expenditure goods”
“Capital expenditure goods”
Do not qualify “Any goods of a capital nature” unless
Potentially qualifying
Stationery, printer cartridges Gas and electricity (for business) Cleaning materials Goods purchased to supply services
E.g. electrician
Few service-based businesses will escape
Most will need to apply 16.5% or leave scheme
frsapplications.vrs@hmrc.gsi.gov.uk
Consultants, engineers, actors, solicitors,
Only certain businesses will still benefit
Those dealing in goods, e.g. retailers Selected service providers
Consult Notice 733 when leaving
Esp. cash basis to cash accounting
Zero-rating applies, inter alia, to
Zero-rating also applies to “books” HMRC say adult colouring books etc are
Not “books” since they are not “designed
Consequently, they are standard-rated
However, most also suitable for children
Especially as this means up to 18
For clothing it is 14th birthday of course!
So zero-rated after all
Well, except those which are
marketed specifically for adults held out for sale with other adult-only books contain images reflecting profanity,
Reduced number of visits Risk-based approach Desk-based checks of single returns Unusual repayment likely to trigger Write to explain
Details in letter Enclose copy invoices Enclose full purchase listing
New procedures Standard letter
Edinburgh, Cardiff, Manchester, Newcastle
Request for copious information
Unfocused National database not checked
Initial letter may help focus enquiries
Formerly voluntary disclosures
VAT652 or letter
Apparent £50,000 threshold for detailed
Repayment and payment Occasional mention of penalties
Supporting documentation essential
Unless >£10,000?
Penalty on HMRC
Failure to repay within 30 days VAT return claims only
5% of tax repayable
Time for enquiries excluded
Vogrie Farms
2 hours = 1 day
Opportunity for discussion and
Application required
Best where middle ground But sometimes for technical issues Make case for acceptance
Dispute must be live
Tribunal appeal may be necessary
Mediation not arbitration
HMRC trained staff, genuinely independent
Open forum with breakout
Two rooms needed Allow whole day Taxpayer and adviser HMRC caseworker and manager
No records kept Aim is agreement on the day
Yarburgh Children’s Trust St Paul’s Community Project Limited Nursery and/or crèche for local
Charges to parents Subsidised by other income sources Not in competition with commerce Not run on fully commercial lines
High Court in England
Intrinsic nature of enterprise Not carrying on a business Provision of social welfare In a manner lacking commerciality
Consequently not in business Customs disagree but do not appeal Self-evidently a principle at stake Has taken years for another case
Longridge on the Thames
Activity centre Furtherance of charitable aims Reduced or waived fees High reliance on volunteer labour No resources for capital projects
First-Tier and Upper Tribunal say not in
Overturned by CoA
No Supreme Court appeal
The charity is therefore in business On European criteria
Economic activity Direct link
Status quo ante Easier than the alternative Calls into question Yarburgh and St Paul’s
Pitch fees historically seen as exempt Shift of policy
Now seen as provision of selling opportunity But no formal announcement or legal change
IACF loses in FTT Craft Carnival wins in FTT but loses in UT Distinct from arcades
Antiques Within
Similar issue for bespoke wedding venues
Contractors’ services Non-residential to dwelling(s) Dwellings to dwelling Dwelling to dwellings Different no of dwellings
but not any part remaining unchanged
Dwelling unoccupied > 2 years Relevant residential ditto Multiple occupancy ditto
Converting non-residential to
relevant residential use multiple occupancy
Converting between
dwelling(s) multiple occupancy use relevant residential use
Constructing a garage
in connection with r/rated project
Applies to work on fabric of building Also some works in curtilage
Bringing in utilities Providing drainage and Providing security
Walls, fences, gates, etc
Providing means of access
Paths, drives, etc
Other works in grounds standard-rated
Supply and installation Prefabricated furniture
except kitchen units
Electrical or gas appliances, except
if part of heating, ventilation or alarm systems lifts and hoists
Carpets and carpeting material Any item not ordinarily installed by a
E.g. soft furnishings List in Notice 708
5% rate, where, broadly
change of use or > 2 years unoccupied, and resultant use residential, or change of number of dwellings within a building
Word of caution
Definition of qualifying dwelling No prohibition on separate use or disposal Prohibition = no reduced-rating