Business entertainment - foreign customers

Hot off the press, for once - HMRC have taken notice of a European Court of Justice judgement in the case of Danfoss and Astrazeneca (Case - 371/07).

Historically, the VAT Office allowed UK businesses to reclaim VAT on entertainment of foreign customers. Then they didn't, and that's the way it has remained for a large number of years. Following the above mentioned case, HMRC have invited retrospective claims from businesses that have not reclaimed it. Act now though - if you can put together the figures quickly enough (by 31 March 2009), you can submit a claim back to 1 August 1988. If the claim is submitted after 1 March 2009, you will be limited to three years' worth.

VAT - option to tax office move

HMRC have announced that their National Option To Tax Unit is moving, with effect from 4 February 2009, to:

Option to Tax National Unit
Cotton House
7 Cochrane Street
GLASGOW G1 1GY

Tel: 0141 285 4174/4175
Fax: 0141 285 4454

During the relocation period, they would prefer to receive emails rather than letters or faxes. Unbelievably, they don't give an email address - just a link on the web-site. So, first you have to find the website - not too difficult; then, try the link for "VAT". Then - this looks good - "Latest VAT Updates". But, no, there is no mention of it there. OK, let's start again, put "Option to tax" in the search facility at the top of the page. Yes there is mention of it, but in Victor Meldrew mode I'll admit to murmuring the well used "I don't believe it". Under the fourth link, there is the start of a sentence about the option to tax unit moving, but the sentence stops after the word "Cochrane" in the address. No link, no way of accessing the rest of the contact details.

OK, HMRC, you've got me, I give up.

PS - nope, I don't give up that easily. I went back to HMRC home page and thought I'd try (at the bottom of the page) "What's new". Nothing at first, but please persevere, scroll down to 26 January 2009 and you will find the announcement, with link to the relevant page, which in turn has a link to a comments box. I'd have to suggest that it would be difficult to lodge an option to tax notification using a comments box, as it would appear to be a tad difficult to attach a document to it. But at least we've got the address...

Could do better, methinks.


www.davebrownvat.co.uk

VAT return admin changes

In a remarkable burst of penny-pinching, HMRC have announced that they are no longer issuing pre-paid envelopes with VAT returns. They will still enclose an addressed envelope, but it will be up to the taxpayer to put a stamp on the envelope. They have not commented on whether an unstamped envelope will be put to one side, and therefore be dealt with as a late arrival, but I guess there is a possibility that it might count as a 'default'.

In a similar vein, they have also announced that VAT returns will no longer be input manually, but instead will be scanned and input automatically. This, of course, is dependent on the taxpayer writing neatly in all the relevant boxes. For those of you who submit repayment VAT returns, please be aware that if the machine can't read your writing, it will doubtless mean that your refund will be delayed. You have been warned...

Guidance published for letting of new domestic properties

The downturn in the property world has various effects. Not only are properties failing to sell, but there is a hidden sting in the tail. The reason for this is that when a developer constructs a new house for sale, he is entitled to reclaim the VAT that has been spent out on materials. If the new house cannot be sold, the developer might be tempted to let the property on a short-time basis – say, on an assured short-hold tenancy. Therein lies a bit of a problem, as the ability to reclaim VAT on expenditure depends on there being a freehold sale at the end of it, or else a leasehold sale exceeding 21 years. Letting of property is exempt from VAT, which means that the VAT on the expenditure is not, in principle, claimable.

So if you sell the house, you can claim the VAT; if you let it, you can’t. That could perhaps be regarded as rubbing salt into a wound. However, thanks to a High Court case some sixteen years ago, HMRC were forced to admit that developers should be able to reclaim the majority of the VAT on costs, with a potential disallowance proportionate to the length of time the property remains let.

In the current climate, HMRC have re-issued their guidance in the shape of an Information Sheet, as below, which gives reasonably clear guidance on what developers ought to be doing now, if they choose to let rather than sell, albeit on a temporary basis. The guidance also covers the situation where they are currently letting properties, without having made any earlier adjustment for this problem.

I won’t bother re-printing the entire guidance as I am sure that you are quite capable of reading it for yourself. What I would say, though, is that expert assistance might be useful – anyone who has had to deal with partial exemption will be aware that it can involve highly complex calculations.


VAT Information Sheet 07/08
September 2008