Category Archives: EU

VAT: eInvoicing Glossary

By Marcus Ward 1 September 2023

Further to my article on eInvoicing, I thought it may be helpful if I compiled a Glossary of terms used in connection with the subject. These definitions have been compiled from various sources and I have tried to keep them as “non-techy” as possible.

Accounts Payable Automation (APA)

An automated management of accounts payable by dealing with invoices received and payments sent. It requires integration of the invoicing process with accounting software.

Accounts Receivable Automation (ARA)

As APA but for accounts receivable (dealing with invoices sent and payments received).

Acknowledgement Of Receipt

The acknowledgement of receipt of an EDI message – the syntax and semantics are checked, and a corresponding acknowledgement is sent by the receiver.

Advanced Electronic Signature

A digital signature based on an advanced certificate uniquely identifying the signer. The signature keys are used with a high level of confidence by the signatory, who has sole control of the signing key.

Agreed Format

The electronic data format that businesses have agreed to treat as the data format of the original electronic invoice for tax purposes.

Audit Trail

The system which traces the detailed transactions relating to any item in an accounting record.

Authentication

The process of verifying a claim that a system entity or system resource has a certain attribute value.

Authenticity Of Origin

Assurance of the identity of the supplier or issuer of the invoice and that the document is the true original.

B2B

Business to business.

B2C

Business to consumer

Biller Portal

Invoice providers’ web portal where invoice receivers can log on with a username/password to check and manage their invoices.

Billing Service Provider

A provider offering services to senders and receivers which involves the sending, collection and administrative processing of eInvoices.

Certification Service Provider

An entity which issues digital certificates or provides services related to electronic signatures.

Clearance

A tax authority approval being a precondition for the validity of a document.

Clearance Model

A tax authority is involved in the invoice data exchange between the vendor and the customer as a third party. It allows the tax authorities a real-time insight into the business transactions. The eInvoice must be approved by the tax authority before being sent to the recipient.

Continuous Transaction Controls (CTC Reporting)

Obligations requiring a taxpayer to submit relevant data to the relevant tax authority before, or shortly after, a transaction.

Data Integrity

Checks that data has not been changed, destroyed, or lost in an unauthorised or accidental manner.

Digital Certificate

A file or electronic password that proves the authenticity of a device, server, or user via cryptography and the public key infrastructure.

Digital Reporting Requirements (DRR)

The obligation for a taxable person to submit digital data on their transactions to HMRC.

Digital Signature

A technique used to validate the authenticity and integrity of a digital document, message or software.

eAccounting

The requirement for a taxable person to submit digital business records to a tax authority platform.

eArchiving

Storing electronic documents as evidence for a prescribed period of time according to the relevant HMRC regulations.

Electronic Data Interchange (EDI)

An intercompany communication of business documents in a standard format. EDI is a standard electronic format that replaces paper-based documents such as purchase orders or invoices.

eInvoice

Details here.

eReceipt

Electronically issued customer receipts.

EU eInvoicing

Details/how to here.

Format

The method of presentation of electronic data in an electronic document.

Four Corner Model

A process where suppliers and customers have one or several service providers that ensure the correct processing between them.

Invoicing Directive

The eInvoicing Directive which requires EU entities to receive and process all electronic invoices – compliant with the European standard.

Mandatory eInvoicing

The obligatory use of eInvoicing by business which is imposed by the country’s authorities. Around 80 countries mandate eInvoicing.

Pan-European Public Procurement On-Line (Peppol)

An EDI protocol, designed to simplify the purchase-to-pay process between government bodies and suppliers. It facilitates electronic ordering, invoicing and shipping between government organisations and businesses.

Periodical Transaction Reporting

An obligation for a taxpayer to submit transactional data on a monthly, quarterly or annual basis.

QR Code

eInvoice verification which allows users to verify the authenticity of an eInvoice based on the QR code appearing on it. The QR code is used to provide information related to a particular invoice.

Qualified Electronic Signature

An electronic signature which is compliant with EU Regulation 910/2014 for electronic transactions within the internal European market. It enables verification of the authorship of a declaration in electronic data exchange over long periods of time.

Post Audit eInvoicing

An invoice is sent to the tax authorities only after the transaction has been completed. The business must guarantee the authenticity and integrity of the invoice and archive the document to satisfy audit requirements. This is being overtaken by the Clearance Model (above).

Readability

The ability of a tax administration to interpret the content of an eInvoice.

Real-time reporting

An obligation for a taxpayer to submit fiscal data to a tax authority platform immediately, or shortly after, a transaction.

Transactional Data

Information that is captured from transactions. It records the time of the transaction, the place of supply, the value of the supply, the payment method, discounts if any, and other quantities and qualities associated with the transaction.

Three Corner Model

A process where invoice senders and receivers are connected via a single service provider for the sending and receiving of messages.

Two Corner Model

A process where invoice senders and receivers are connected directly for the sending and receiving of messages.

UN/CEFACT

The United Nations’ Centre for Trade Facilitation and Electronic Business has a global remit to secure the interoperability for the exchange of information between private and public sector entities.

Unstructured Invoice Document

An invoice that is created manually or automatically from a system and is not in a database. An Unstructured Document may contain data, but the data is not organised in a fixed format. Consequently, it is difficult to find and capture the data for use.

VAT Listing

An obligation for a business to submit VAT transactional data according to a domestic format. The data includes: information on values and recipients, as well as data which is required to be included on an invoice. The data are submitted on a periodic basis, often jointly with the VAT return.

Web Payment

An online service that manages the transfer of funds from a customer to the merchant of an e-commerce website.

Web Publication

A method of exchanging invoices with a buyer by placing an original electronic invoice on an agreed web site, in a secure closed environment operated by the supplier.

VAT: Land related services

By Marcus Ward 21 August 2023

Whether a service is “related to land” is important because there are distinct rules for this type of supply compared to the General Rule. The place of supply (POS) of land related services is where the land is located, regardless of where the supplier or recipient belong.

The rule applies only to services which relate directly to a specific site of land. This means a service where the land is a central and essential part of the service or where the service is intended to legally or physically alter a property.

It does not apply if a supply of services has only an indirect connection with land, or if the land related service is only an incidental component of a more comprehensive supply of services.

What is land?

For the purpose of determining the POS, land (also called immoveable property in legislation) means:

a specific part of the earth, on, above or below its surface
a building or structure fixed to, or in, the ground above or below sea level which cannot be easily dismantled or moved
an item making up part of a building without which it is incomplete (such as doors, windows, roofs, staircases and lifts)
items of equipment or machinery permanently installed in a building which cannot be moved without destroying or altering the building

What services directly relate to land?

HMRC provide the following examples:

construction or demolition of a building or permanent structure
surveying and assessing property
valuing property
providing accommodation in hotels, holiday camps, camping sites or timeshare accommodation
maintenance, renovation and repair of a building
property management services carried out on behalf of the owner
arranging the sale or lease of land or property
drawing up of plans for a building or part of a building designated for a particular site
services relating to the obtaining of planning consent for a specific site
on-site security services
agricultural work on land
installation and assembly of machines which, when installed, will form a fixture of the property that cannot be easily dismantled or moved
the granting of rights to use all or part of a property (such as fishing or hunting rights and access to airport lounges)
legal services such as conveyancing and drawing up of contracts of sale or leases, including title searches and other due diligence on a specific property
bridge or tunnel toll fees
the supply of space for the use of advertising billboards
the supply of plant and equipment together with an operator
the supply of specific stand space at an exhibition or fair without any related services

What services are only indirectly related to land?

The following HMRC examples are not deemed to be land related services:

management of a property investment portfolio
drawing up of plans for a building that do not relate to a particular site
arranging the supply of hotel accommodation or similar services
installation, assembly, repair or maintenance of machines or equipment which are not, and do not become, part of the building
accountancy or tax advice, even when that relates to tax on rental income
the supply of storage of goods in property without a right to a specific area for the exclusive use of the customer
advertising services including those that involve the use of a billboard
marketing, photography and public relations
the supply of equipment with an operator, where it can be shown that the supplier has no responsibility for the performance of the work
general legal advice on contractual terms
legal services connected with fund raising for property acquisitions or in connection with the sale of shares in a company or units in a unit trust which owns land
stand space at an exhibition or conference when supplied as part of a package with related services, eg; design, security, power, telecommunications, etc.

These examples are mainly derived from case law and the department’s understanding of the legislation and they are not exhaustive.

The Reverse Charge

If an overseas supplier provides land related services in GB, the POS is GB and the reverse charge applies if the recipient is GB VAT registered.

If a GB supplier provides services directly related to land where the land is located outside GB, the POS is not GB. This means that there is a supply in another country. VAT rules in different countries vary (even across the EU) – some countries use the reverse charge mechanism, but others require the GB supplier to VAT register in the country of the POS (where the land is physically located).

VAT: B2B and B2C – The distinction and importance

By Marcus Ward 1 August 2023

A key feature of the place of supply rules is the distinction between B2B (business to business) and B2C (business to consumer) supplies. The distinction is important because it determines, inter alia, whether GB VAT is applicable to a supply made by a GB supplier.

Status of the customer:

B2C: A supply is B2C when the customer is a private individual, an organisation with only non-business activities or the supply is wholly for private use (eg for the private use of a business owner)
B2B: A supply is B2B when the customer has any level of business activity (though if a supply is wholly for private use it remains B2C). It does not matter if the supply is for a non-business activity of the customer or if the customer is not VAT registered. All that matters is the customer has some level of business activity – this includes VAT exempt activity and taxable activity below the VAT registration threshold VAT place of supply.

To apply the B2B treatment a GB supplier must obtain evidence that the customer has business activities. If the supplier cannot obtain any evidence, they should apply B2C treatment.

If the customer is VAT registered, the customer’s VAT number is evidence of status and it is good practice to quote this on the supplier’s invoice. A GB supplier should check the customer’s VAT registration number is in the correct format for the country concerned. This can be done via the EC Vies website. for EU customers. NB: Special evidence rules apply to electronically supplied services.
If the customer is not VAT registered, a GB supplier should obtain and retain evidence that the customer has business activities. HMRC state “If your customer is unable to provide a VAT number, you can accept alternative evidence.This includes certificates from fiscal authorities, business letterheads or other commercial documents indicating the nature of the customer’s activities”.

A supplier needs to identify where his customer belongs in order to establish the place of supply.

VERY broadly, depending on the nature of the supply, the rule of thumb is that a B2B service is GB VAT free (it is subject to a reverse charge by the recipient as it is deemed to be “supplied where received”) but a B2C service is generally subject to GB VAT, regardless of the place of belonging of the recipient. There are exceptions to these rules however, such as the use and enjoyment provisions, land related services, hire of transport and admission to events.

VAT: How to characterise a supply – The tests

By Marcus Ward 27 June 2023

In the age-old matter of whether a supply is separate/composite/compound for VAT purposes which and what is the nature of that supply, the Court of Appeal case of Gray & Farrar International LLP has provided very helpful guidance. A background to facts of the initial hearing here (although this decision was overturned by both the UT and the CoA).

I have previously considered these types of supply here, here, here, here, and here. Although not specifically concerning composite/separate supplies, the case sets out a hierarchy of tests to be applied in characterising a single supply for VAT purposes which now sets the standard. These test are:

The Mesto predominance test should be the primary test to be applied in characterising a supply for VAT purposes.
The principal/ancillary test is an available, though not the primary, test. It is only capable of being applied in cases where it is possible to identify a principal element to which all the other elements are minor or ancillary. In cases where it can apply, it is likely to yield the same result as the predominance test.
The “overarching” test is not clearly established in the ECJ jurisprudence, but as a consideration the point should at least be taken into account in deciding averments of predominance in relation to individual elements, and may well be a useful test in its own right.

Comments

The Mesto Test

CJEU Mesto Zamberk Financini (Case C-18/12)

The primary test to be applied when characterising a single supply for VAT purposes is to determine the predominant element from the point of view of the typical consumer with regard to the qualitative and not merely the quantitative importance of the constituent elements.

Principal/ancillary

If a distinct supply represents 50% or more of the overall cost, it can not be considered ancillary to the principal supply. In such cases an apportionment will usually be required.

Overarching

A generic description of the supply which is distinct from the individual elements. In many cases the tax treatment of that overarching single supply according to that description will be self-evident.

CPP

One must also have regard to the Card Protection Plan Ltd case. This has become a landmark case in determining the VAT treatment for single and multiple supplies. In this case the ECJ ruled that standard rated handling charges were not distinct from the supply of exempt insurance. It was noted that ‘a supply that comprises a single service from an economic point of view should not be artificially split’. Notably many subsequent court decisions have since followed this outcome thereby suggesting a general lean towards viewing cases as single supplies where there are reasonable grounds to do so.

Digital Euro introduction delayed

By Marcus Ward 21 June 2023

The European Commission’s proposal for the introduction of a digital Euro has been delayed.

The adoption was planned for 28 June 2023, but this has now been postponed. There is currently no news on a new date.

What is digital Euro?

As a digital form of central bank money, the digital Euro will offer greater choice to consumers and businesses in situations where physical cash cannot be used. However, the digital euro would be a complement to cash, which should remain widely available and useable.

A digital Euro would offer an electronic means of payment that anyone could use in the euro area. It would be secure and user-friendly, like cash is today. As central bank money issued by the ECB, it would be different from “private money”, but you could also use a card or a phone app to pay with digital euro. It is intended to provide an anchor of stability for our money in the digital age.

Further details here.

VAT: Place of supply – The Sports Invest case

By Marcus Ward 5 May 2023

Latest from the courts

In the First-Tier Tribunal case of Sports Invest UK Ltd the issue was the place of supply (POS) of a football agent’s services (commission received for a player’s transfer).

The POS is often complex from a VAT perspective and depends on the place of belonging (POB) of the supplier and the recipient of the supply. These rules determine if VAT is charged, where VAT is charged and the rate of VAT applicable, additionally, they may impose requirements to register for VAT in different jurisdictions.

Background

Sports Invest was a football agent based in the UK. It received fees in respect of negotiating the transfer of a player: João Mário from a Portuguese club: Sporting Lisbon to an Italian club: Internazionale (Inter Milan). The appellant signed a representation contract with the player which entitled it to commission, and a separate agreement with Inter Milan entitling it to a fee because the player was permanently transferred.

The Issues

To whom did Sports Invest make a supply – club or player? What was the supply? Was there one or two separate supplies? What was the POS?

As appears normal for transactions in the world of football the contractual arrangements were complex, but, in essence as a matter of commercial and economic reality, Sports Invest had agreed the commission with the player in case it was excluded from the deal. However, this did not occur, and the deal was concluded as anticipated. Inter Milan paid The Appellant’s fee in full, but did this affect the agreement between Sports Invest and the player? That is, as HMRC contended, did Inter Milan pay Sports Invest on the player’s behalf (third party consideration) such that there were two supplies; one to the player and one to the cub?

The FTT stated that there was no suggestion that the contracts were “sham documents”.

VAT Liability

The arrangements mattered, as pre-Brexit, a supply of services by a business with a POB in the UK to an individual (B2C) in another EU Member State would have been subject to UK VAT; the POS being where the supplier belonged. HMRC assessed for an element of the fee that it saw related to the supply to the player. The remainder of the fee paid by the club was accepted to be consideration for a UK VAT free supply by the agent to the club (B2B).

Decision

The court found that there was one single supply by The Appellant to Inter Milan. This being the case, the supply was B2B and the POS was where the recipient belonged and so that the entire supply was UK VAT free. There was no (UK) supply to the individual player as that agreement was superseded by the contractual arrangements which were actually put in place and the player owed the agent nothing as the potential payment under that contract was waived.

The appeal against the assessment was upheld.

Commentary

The court’s decision appears to be logical as the supply was to the club who were receiving “something” (the employment contract with the player) and paying for it. The other “safeguarding” agreement appeared to be simple good commercial practice and was ultimately “not required”. This case highlights the often complex issues of; establishing the nature of transactions, the identity of the recipient(s), agency arrangements, the POS and the legal, commercial and economic reality of contracts.

VAT: Charging EVs ruled to be goods not services

By Marcus Ward 24 April 2023

Latest from the courts

In the Court of Justice of the European Union (CJEU) it was ruled that electric vehicle charging via public charging points, was a supply of goods, regardless that some elements of the supply were services, ie; access technical support, reservation of a charging point, and a parking space while charging. The overriding supply was the provision of electricity which is classified as goods.

The full P. In W. case here.

It is unlikely that the UK authorities will form a different view.

Although in most cases there is unlikely to be a significant difference, although there could be issues with the time of supply (tax point).

VAT: The Windsor Framework

By Marcus Ward 1 March 2023

While we await the fine details, trade between GB and Northern Ireland is likely to be subject to new rules. These are set out under the heading of The Windsor Framework published by HM Government.

(Very) General

Via the Northern Ireland Protocol (NIP), Northern Ireland operated under the EU VAT rules. There are revised VAT rules set out in The Windsor Framework. The EU rules on VAT rates will not apply to a list of goods for consumption in Northern Ireland in certain circumstances.

The Windsor Framework amends the legal text of the NIP to ensure that Northern Ireland will be subject to the same VAT and excise rules that apply in the rest of the UK.

The Framework means that legislation to apply the zero-rate of VAT to energy saving materials can be introduced. A number of other flexibilities should enable UK-wide VAT changes to apply in Northern Ireland. It is anticipated that future VAT issues can be addressed in order to manage any divergences in policy between GB and Northern Ireland.

A bit more detail

The Windsor Framework sets up a new UK internal trade scheme, based on commercial data-sharing rather than traditional international customs processes.

Under the NIP, a framework exists that allows goods to move from GB to Northern Ireland tariff-free. If the goods do not fall within that framework, they are treated as if moving across an international border and full customs declarations are required.

This Framework introduces arrangements through a new UK internal market system (colloquially called the “Green Lane”) for internal trade. Goods being sold in Northern Ireland will not be subject to “unnecessary paperwork, checks and duties”.

The new scheme will significantly expand the number of businesses able to move goods using the Green Lane by being classed as internal UK traders.

The Changes

To ensure that internal UK trade is protected, the agreement expands the number of businesses able to be classed as internal UK traders and move goods as ‘not at risk’ of entering the EU through three changes:

businesses throughout the UK will now be eligible – moving away from the previous restrictions that required a physical premises in Northern Ireland.
the turnover threshold below which companies involved in processing can move goods under the scheme which they can show stay in Northern Ireland is increased from the current £500,000 limit up to £2 million (this means that four-fifths of manufacturing and processing companies in Northern Ireland who trade with GB will automatically be in scope).
if businesses are above that threshold, they will be eligible to move goods under the scheme if those goods are for use in the animal feed, healthcare, construction and not-for-profit sectors.

Businesses in the scheme that can show their goods will stay in Northern Ireland will gain access to a simplified process for goods movements, using ordinary commercial data rather than customs data.

Goods moving to the EU will be subject to normal third-country processes and requirements.

Reduction in so-called frictions

The Framework seeks to address a range of issues that added frictions or costs for internal UK trade:

safeguarded tariff-free movements of all types of steel into Northern Ireland .
a forward process for ensuring that Northern Ireland businesses can access other goods subject to Tariff Rate Quotas in the future, dealing with the unique disadvantages under the existing system.
where businesses cannot be certain of the end destination of their goods when first moving them into Northern Ireland, a new tariff reimbursement scheme for those who can show the goods were ultimately not destined for the EU.

VAT: Exemption of fund management services

By Marcus Ward 8 February 2023

HM Treasury has published a consultation paper on the treatment of the service of management of special investment funds (SIFs).

SIF meaning in VAT terms

There is no definition of a SIF in existing legislation.

Morgan Fleming Claverhouse Trust plc (case C-363/05) ruled on the interpretation of the term ‘Special Investment Funds as defined by Member States’.

The key points in this judgment are:

the term ‘special investment funds’ is capable of including closed-ended investment funds, such as investment trust companies (ITCs)
Member States have a discretion to define ‘special investment funds’ for the VAT exemption but, in doing so, must pay due regard to:
the purpose of the exemption
the principle of fiscal neutrality.

According to the Court, the purpose of the exemption is to facilitate investment in securities for investors through investment undertakings. This requires there to be VAT neutrality between the direct investment in securities and investment through collective investment undertakings, as the latter incurs a management charge. Furthermore, there must be equality of VAT treatment for funds which are similar to, and in competition with, funds falling within the scope of the exemption.

As a result of the case, the exemption was extended so that there was a level VAT playing field for all similar collective investment undertakings which compete in the UK retail market. This includes closed and open-ended collective investment undertakings, umbrellas and sub-funds, as well as some pension schemes.

The fund management exemption is limited to the management of SIFs. Consequently, the management of other investment funds will generally be standard-rated.

Legislation

The current VAT fund management regime is provided for by UK legislation, retained EU law and case law. The VAT Act 1994 implemented the Directive. Schedule 9, Group 5, Items 9 and 10 of the Act lists specific types of funds, the management of which is exempted from VAT.

Place of supply

This is important for SIFs management as if the supply is in respect of overseas funds the services are excluded from the exemption (they are outside the scope of UK VAT) when received overseas. This means that there is no output tax on the supply, but unlike exemption, it affords full recovery on input tax incurred in the UK. The perfect VAT outcome.

HMRC Consultation

The technical consultation sets out proposed reform of the legislation that provides for the VAT treatment of fund management. This is required because the fund management industry continues to innovate and introduced new types of funds to the marketplace, and the existing approach has struggled to keep pace with the evolution of the industry and proliferation of fund types.

The purpose of the exercise is to improve the legislative basis of the current VAT treatment of fund management.

Danger?

It is proposed that the following criteria for a fund to be considered a SIF would be legislated for:

a) the fund must be a collective investment

b) the fund must operate on the principle of risk-spreading

c) the return on the investment must depend on the performance of the investments, and the holders must bear the risk connected with the fund; and

d) the fund must be subject to the same conditions of competition and appeal to the same circle of investors as a UCITS (Undertakings for Collective Investment in Transferable Securities), that is funds intended for retail investors

There is a danger that if the exemption is broadened, fund managers which can now recover input tax may be denied so in the future.

If you have any queries, please contact us.

VAT: What are split payments?

By Marcus Ward 9 January 2023

The term “split payment” is increasingly cropping up in conversations and in the media, so I thought it would be a good time to look at the concept.

Split payments, sometimes called real-time extraction, uses card payment technology to collect VAT on online sales and transfer it directly to HMRC rather than the seller collecting it from the buyer along with the payment for the supply, and then declaring it to HMRC on a return in the usual way.

Clearly, HMRC is very keen to introduce such a system, but there are significant hurdles, the biggest being the complexity for online sellers, payment processors, input tax systems, agents, advisers and HMRC itself.

Where are we on split payments?

At the end of the year HMRC published a Prior Information Notice (PIN) and associated Request for Information (RFI), seeking views on the outline requirements and proposed procurement process split payments. This should, inter alia, assist HMRC in:

identifying where it is intended that the purchased goods or services are to be delivered and/or consumed
the possibility to apply a split only above or below a certain value threshold
the feasibility for the splitting mechanism to calculate a composite VAT total across a mixed basket of goods and/ or services, each potentially with a different rate of VAT.

This builds on previous information gathering/consultations/discussions carried out a number of years ago.

Background

The expansion of the online shopping market has brought unprecedented levels of transactions. The results of digitalisation have also brought challenges for tax systems. Jurisdictions all over the world are currently grappling with the question of how to prevent large VAT losses, which can arise from cross-border online sales. This happens when consumers buy goods from outside their jurisdiction from sellers who, through fraud or ignorance, do not comply with their tax obligations. It is costing the UK tax authorities an estimated £1 billion to £1.5 billion (figures for 2015-16) a year. The UK government believes that intercepting VAT through intermediaries in the payment cycle, split payment potentially offers a powerful means of enforcing VAT compliance on sellers who are outside the UK’s jurisdiction.

Fraud

The fraud carried out by online sellers is not particularly sophisticated but is difficult to combat. Simply, sellers either use a fake VAT number to collect VAT without declaring it, or even more basically, collect the VAT and disappear.

Proposed spilt payment methods

The way in which payments are split represent difficult technical VAT issues, particularly when sales are at different VAT rates. The three proposals are:

Standard rate split. This assumes that all sales are liable to the standard rate VAT and does not recognise any input tax deduction. Extraction of 20% of tax, regardless of the actual liability (potentially, 5%, or zero) appears unfair and would be very difficult to impose. Cashflow would be negatively affected too.
Flat Rate Scheme (FRS). This is a proposal by HMRC to insist that online sellers overseas to use the FRS using a specific new rate for this purpose. The FRS threshold of £150,000 pa could be increased for overseas businesses, but this would potentially give overseas sellers an advantage over UK businesses, so politically, if nothing else, would prove to be a hard sell.
Net effective rate. This would mean an overseas business calculating its own exact net effective rate, based on its outputs and inputs from the previous year’s transactions (similar to TOMS).
Composite rate. A composite VAT total across a mixed range of goods or services, each potentially with a different rate of VAT. The mechanism for carrying this calculation out is unclear.

There may be more proposals forthcoming, but none of the above proposals appear reasonable and the complexity they would bring would seem to rule them out as matters stand – although this has not previously stopped HMRC introducing certain measures and the obvious benefits to the authorities cannot be ignored.

Overall

The technology for split payments currently exists and is being used in some Latin American countries (and Poland). The concept is part of a larger movement towards real-time taxation and MTD. Our view is that split payments are coming, but we do not know in which form or when.