Dave Brown VAT Consultancy Blog

BUDGET 2010 - VAT changes

dave@davebrownvat.com (Dave Brown) — Thu, 25 Mar 2010 10:30:00 +0000

As ever, the Budget didn’t appear too interesting in terms of VAT changes. Indeed I came across a headline indicating that there would be no changes to VAT.

Look a bit further though, and there were quite a few changes, although admittedly nothing to get anybody terribly worked up about.

• VAT registration limit goes up to £70,000 from 1 April 2010 and the Fuel Scale Charge rates have been increased again, for VAT periods starting on or after 1 May 2010.

• Zero rating will no longer be available for aircraft on the basis of weight. From 1 September 2010, aircraft (and spares/repairs) will only be zero rated where used by airlines “operating for reward chiefly on international routes”.

• ‘Place of supply’ of gas, heat and cooling will change from 1/1/2011. The detail is a bit tedious, but if you want to know all about it please ask.

• Certain postal services provided by Royal Mail will become liable to VAT from 31/1/2011, chiefly in the realms of parcel deliveries. ‘Domestic mail’ remains exempt.

• From 1/11/2010, a reverse charge will be introduced to combat ‘Missing Trader’ fraud by certain miscreants buying or selling emissions allowances. If you’re doing it, you know who you are..

• From 1/1/2011, the rules surrounding the use of the “Lennartz” procedure are changing, such that businesses hoping to utilise it (or who have already) will be adversely affected. In essence, the Lennartz treatment allows a business to reclaim VAT in full on an asset that has both business and private use, at the time of purchase. Then, as time progresses, any private use is subject to output VAT, as and when it takes place. HMRC have never liked it, but as it emanated from a European Court ruling, they have been obliged to allow it. They are now restricting it somewhat, and also making certain aspects of it retrospective. I just love the following phrase: “ The legislation will ensure that this position is treated as having always had effect.” A quick Google on the words “retrospective taxation” suggests that this might be in breach of Article 1 of Protocol No.1 to the ECHR. Further digging, however, suggests that this topic is well beyond the scope of this blog, and I don’t intend to get into legal argument on this point – I’ll leave this to those better equipped to consider the matter.

Like I said, nothing too dramatic, but if you require further information about any of the items, please let me know.

http://www.davebrownvat.com

Mr Angry is let loose again

dave@davebrownvat.com (Dave Brown) — Sun, 21 Mar 2010 20:42:00 +0000

Yes, here it comes again - a vitriolic attack on HMRC. And no apologies for this.

A few weeks ago, I was asked to help out a client who was getting some grief from HMRC about some outstanding returns - and about £70k allegedly owing. I duly wrote to HMRC, on 19 February 2010, but received no reply. I then tried phoning the National VAT Advice Line. I should have known better, as all I got was an answering machine telling me they were busy. I tried on numerous occasions, at different times of the day, for the next week or two. No joy, still the same supercilious woman apologising that they were busy. How can they be too busy at 7.30 pm? I later emailed, twice, but again, at the time of writing this, I have still not had a reply.

Over the past few years I have become increasingly irritated at the refusal by HMRC to provide sensible written advice to taxpayers and I have all but given up on this, despite enlisting the help of various accountancy bodies - the CIOT and the IIT to name but two. I was even invited to a meeting at the Treasury by HMRC, but soon realised that those in charge of telling the front line staff how to respond were on a different planet from the rest of us.

I am sure that HMRC acknowledge that most taxpayers are anxious to get it right - to declare the right amount of tax at the right time. However, there is also an acknowledgement that VAT law is quite complex, but sadly they seem to forget that not every businessman is a VAT expert. Just occasionally, therefore, it would be nice to think that when someone asks for help, that help could be given.

Nope, sorry they don't.

It is either "Sorry you haven't covered the 20 points on the checklist" that are required before you can even ask, or else "We are not obliged to provide an answer when the topic is covered in our published guidance." OK, but do you really expect a builder to find your website? Then find the requisite publication? Then find the appropriate paragraph in that publication? And then be confident enough with the answer to be able to apply whatever the answer is? Well, sorry, this is the real world, and you are sadly deluded if you think that this is acceptable behaviour for civil servants to adopt. You might be able to find and understand the guidance. I might be able to find the answer, but do you really expect a builder to be able to find and apply the answer without a little help?

Oh, and another thing - when I write to you seel=king confirmation of something, why do you bother telling me where to look in the guidance? Do you not think that when a VAT consultant writes to HMRC, they have not already looked there?

Sunday Times article about listed buildings

dave@davebrownvat.com (Dave Brown) — Fri, 05 Mar 2010 12:30:00 +0000

I've thus far resisted the temptation to turn this blog into a Mr Angry column, but I've got to record an element of displeasure about an article about listed buildings that appeared in the Sunday Times a couple of weeks ago. It contained an incorrect statement about VAT, attributed to me.

A few days before it appeared, I had a call from one Rosie Millard who is apparently a journalist and media person. She wanted to know about VAT and listed buildings, and I duly obliged with answering her questions. The scenario she asked me about was refurbishing a derelict building that had been empty for a number of years. I told her that this would be zero rated for 'alterations' and 5% VAT for repairs. She was in a bit of a rush and I wasn't confident that she had understood what I was saying, so I asked her to let me see what she was going to write. She refused.

Yes, you guessed, she got it wrong and blithely told the world that repairs to listed buildings are liable at 5% VAT. And since then I have had a large number of calls from listed building owners asking me if I really meant what I allegedly said. Needless to say, I have pointed out who the real culprit was.

I did email Ms Millard to point out her error, but she has not replied.

Rant over. [Until the next time someone annoys me...]

VAT return payments post 1 April 2010

dave@davebrownvat.com (Dave Brown) — Fri, 05 Mar 2010 12:28:00 +0000

For most businesses, VAT returns have to be completed and submitted together with electronic payment after 1 April 2010. Existing VAT registered businesses with turnover less than £100k can continue to submit paper returns, and can still pay by cheque. However, HMRC are going to make this a touch more difficult, as they now insist that payment must be received and cleared to their bank by the due date for the return. This can take up to a week, or longer, depending on the quality of the postal service.

Penalties WILL be imposed for payments that are cleared late. No longer can you simply post the return the day before and get a Certificate of Posting. Returns will have to be sent at least a week before the due date and although it might not help, I recommend that you still get a Certificate of Posting. [Or even send it recorded delivery, so that you can tell what date it was received by them.]

I find this new measure somewhat petty, if not draconian. Clearly, they want everyone to pay electronically but if you are at the mercy of the Post Office there is going to be little comeback if the letter takes three or four days to reach HMRC. Even then, it could take a couple of days to be processed before hitting the banking system.

Listed Property Show - 20th and 21st February 2010

dave@davebrownvat.com (Dave Brown) — Mon, 18 Jan 2010 15:49:00 +0000

Once again I am headed off to Olympia in London for the Listed Property Show, for two days of providing one-to-one advice to those who perchance own a listed building. In addition, I will be giving a couple of talks about the riveting subject of VAT, which will doubtless provoke interest, boredom, or even sleep in equal measure amongst the audience. If you wish to enjoy the other delights on show please do not be put off by the VAT angle. It is an interesting show, including talks, demonstrations and displays by craftsmen and others with a particular interest in listed buildings - and it's free!

www.davebrownvat.com

VAT changes - Pre-Budget Report

dave@davebrownvat.com (Dave Brown) — Wed, 23 Dec 2009 17:00:00 +0000

Once again, changes announced by HMRC left me totally unmoved, as they announced the proposed changes some months ago. In short:

A revised electronic means of reclaiming VAT incurred in other EU countries.

Changes to the "time of supply" rules for intra-EU supplies.

Changes to the "place of supply" rules for intra-EU supplies of services.

Introduction of EC Sales Lists for intra-EU supplies of services - hitherto only required for supplies of goods.

If you consider that you might be affected by any of these changes, please ask.

Intrastat Changes

dave@davebrownvat.com (Dave Brown) — Tue, 01 Dec 2009 11:33:00 +0000

There is a reasonably good chance that you will not have heard the expression "Intrastat", let alone know what to do with it! In short, the EU demand that each Member State collects statistical information on trade going between Member States. For certain levels of trade, this is collected using the "intrastat" procedure. Hitherto, the level for both sales ('dispatches') and purchases ('arrivals') was £270,000 annually. The levels are now changing, from 1 January 2010 to £600,000 for arrivals and £250,000 for dispatches. If your sales or purchases exceed those levels, you are then roped into the system with no chance of escape - well, not for a while anyway. Please contact me if you need a more detailed explanation.

www.davebrownvat.co.uk

New Year 2009/10 - VAT rate change

dave@davebrownvat.com (Dave Brown) — Tue, 08 Sep 2009 13:37:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Sun, 02 Aug 2009 13:37:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Mon, 08 Jun 2009 13:37:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Thu, 16 Apr 2009 16:05:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Wed, 18 Mar 2009 12:14:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Fri, 20 Feb 2009 20:23:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Fri, 30 Jan 2009 11:03:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Mon, 12 Jan 2009 16:30:00 +0000

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

VAT rate changes to 15%

dave@davebrownvat.com (Dave Brown) — Fri, 28 Nov 2008 08:57:00 +0000

Well, here it is - the announcement in the Pre-Budget Report of the VAT rate being reduced to 15%. The first VAT rate change since 1991, if I'm not mistaken. Personally, I don't see it making a big difference to the man in the street but it will have an effect on many businesses, unfortunately only from an administrative point of view. Changing computer systems, re-pricing goods on shelves and trying to find good answers to when or how the VAT rate should be applied to work in progress. These all have to be done, and it is unfortunate that my first anecdotal experience of how the VAT Office are dealing with it is not good. A client had received a VAT leaflet about the change through the post on Wednesday morning, couldn't really understand it, but he needed assurance that what he thought it said was correct. Phoned the VAT Office National Helpline, and was told something contradictory. Upon pointing this out, he was transferred to another operative, who gave him a third different answer. How is the average businessman supposed to deal with that? Hmmm.

www.davebrownvat.com

VAT return admin changes

dave@davebrownvat.com (Dave Brown) — Sat, 22 Nov 2008 15:26:00 +0000

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

dave@davebrownvat.com (Dave Brown) — Tue, 07 Oct 2008 19:06:00 +0000

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