New Year 2009/10 - VAT rate change

As you may be aware, the VAT rate is going back up, from 15% to 17.5% with effect from 1 January 2010 - that is, from 00.01 on New Year's morning. So do pubs and clubs and hotels have to 'cash up' when they hear the bells? Should they take a "Z" reading in the midst of Auld Land Syne?

Thankfully not.

The Financial Secretary to the Treasury stated that HMRC will allow "a few hours grace" to businesses such as pubs and clubs, to allow them to charge 15% "for a session that goes beyond midnight into the early hours of 1 January."

Needless to say, I was unable to find anything about this on HMRC website, nor was I inclined to phone the National VAT Advice Helpline for confirmation. I'll settle for the wording within Hansard instead.

www.davebrownvat.com

National Home Improvement Show - Earls Court

I have been asked to participate in the National Home Improvement Show at Earls Court in London, which takes place between the 2nd and 4th of October 2009. I will be part of the Listed Property Owners Club stand, in the Period Living Pavilion, and also presenting a short talk about VAT relief for heritage properties on the 2nd.

I will also be available to answer technical questions for part of the Friday and Saturday and look forward to seeing you there.



www.davebrownvat.com

Budget 2009

Ah, yes, the Budget. I was in the Highlands of Scotland on Budget Day, and was fortunate to be able to find Internet access in a pub, an hour or two after the Chancellor sat down. The fact that it's taken me several weeks to comment on it might give you a clue as to how exciting I found it.

Even now it's difficult to get eloquent about the VAT registration limit going up (to £68k) or a change in the fuel scale charge. For the record, though, here's the merest flavour of the other changes:

Option to tax – a new "Automatic Permission Condition" being brought in. This will allow many more businesses to "opt to tax", without having to seek permission first.

5% rate for children’s safety seats extended to include bases from 1 July 2009

There was an announcement about a few changes to happen in 2010, including minor changes to the "Place of supply" rules and the intra-EU VAT refund system. The latter change should make it easier for UK businesses to achieve refunds of VAT incurred in other Member States.


www.davebrownvat.com

VAT - partial exemption changes

HMRC have announced changes to the basic partial exemption rules, most of which will have a beneficial effect on businesses afflicted by this concept. Affected businesses are those that have exempt income as well as taxable income, and who are obliged to disallow a certain amount of VAT on expenditure. In simple terms, those changes are:

• Instead of doing a quarterly calculation, based on that quarter’s figures, the business can utilise the previous year’s annual average and apply it to this year’s figures. An annual adjustment is then carried out at the year end, and that percentage is used for the next 12 months.
• Presently, when the obligatory annual adjustment is carried out, the resulting VAT adjustment has to be made on the next VAT return of the new year. HMRC are now proposing that the business can make the adjustment in the last VAT return of the previous year instead.
• A potential ‘use – based’ method can be utilised for new businesses, where the normal trading pattern has not yet established itself. Thus the first year, with heavy expenditure, might otherwise fall to have a very low VAT recovery rate.

The above three measures are voluntary and the decision whether or not to adopt them will very much depend on individual circumstances.

The fourth change is compulsory, but as it is specific to the following types of supplies I will not bore everyone else with the detail:

• supplies of services to customers outside the UK
• certain financial supplies such as shares and bonds
• supplies made from establishments located outside the UK

If you consider that you may be affected by any of the above, please ask for further details.

NB: although the changes are effective from 1/4/09, the fine print points out that this means VAT returns commencing on or after 1 April 2009.

www.davebrownvat.co.uk

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.

Listed Property Show - 21/2/09 and 22/2/09

For the third year running, I have been asked to participate in the Listed Property Show at the Olympia Exhibition Centre in London. I will be manning a stand at the show, and also presenting a lecture each day, on the subject of (you guessed) VAT and listed buildings.

Apart from the obvious joys of VAT, the hall is packed with exhibitors who are engaged in pretty much all aspects of historic house restoration and maintenance. It is well worth a visit.

After the event: yes, an interesting couple of days, and if you missed it make a point of considering it next year - undoubtedly around the third week in February.

www.davebrownvat.com

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

2009 Intrastat Threshold increased

At the start of every new year, HMRC revise the threshold applying to the Intrastat regulations, and this year is no exception. The threshold has been increased from £260,000 to £270,000.

You may be wondering what Intrastat is, and why anyone should be interested. At the risk of getting technical, this is an intra-EU statistical exercise, designed to let someone, somewhere know what goods are being sold across Europe. If your sales or purchases of goods, to or from other EU Member States, in a calendar year exceed the £270,000 figure, you are thenceforth obliged to render unto HMRC a monthly form, detailing all manner of useful information – what the goods are, what value, what weight, ad nauseum. Now you know…

www.davebrownvat.co.uk

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