Category Archives: HMRC Publications

VAT DIY Housebuilders’ Scheme Top 10 Tips

By   9 May 2024
If you build your own home, there is a scheme available which permits you to recover certain VAT incurred on the construction. This puts a person who constructs their own home on equal footing with commercial housebuilders. There is no need to be VAT registered in order to make the claim. As always with VAT, there are traps and deadlines, so here I have set out the Top Ten Tips.

An in-depth article on the DIY Housebuilders’ Scheme here

It is also possible to claim VAT on the construction of a new charity building, for a charitable or relevant residential purpose.

The following are bullet points to bear in mind if you are building your own house, or advising someone who is:

  1. Understand HMRC definitions early in your planning

Budgeting plays an important part in any building project. Whether VAT you incur may be reclaimed is an important element. In order to establish this, it is essential that your plans meet the definitions for ‘new residential dwelling’ or ‘qualifying conversion’. This will help ensure that your planning application provides the best position for a successful claim. One point to bear in mind, is the requirement for the development to be capable of separate (from an existing property) disposal. 

  1. Do I have to live in the property when complete?

You are permitted to build the property for another relative to live in. The key point is that it will become someone’s home and not sold or rented to a third party. Therefore, you can complete the build and obtain invoices in your name, even if the property is for your elderly mother to live in. However, it is not possible to claim on a granny annexe built in your garden (as above, they are usually not capable of being disposed of independently to the house).

  1. Contractors

Despite the name of the scheme, you are able to use contractors to undertake the work for you. The only difference here will be the VAT rate on their services will vary depending on the nature of the works and materials provided.

  1. What can you claim?

A valid claim can be made on any building materials you purchase and use on the build project. Also, services of conversion charged at the reduced rate can be recovered. However, input tax on professional services such as architect’s fees cannot be reclaimed.

  1. Get the VAT rate right

It is crucial to receive goods and services at the correct rate of VAT.  Services provided on a new construction of a new dwelling will qualify for the zero rate, whereas the reduced rate of 5% will apply for qualifying conversions. If your contractor has charged you 20% where the reduced rate should have been applied, HMRC refuse to refund the VAT and will advise you go back to your supplier to get the error corrected. This is sometimes a problem if your contractor has gone ‘bust’ in the meantime or becomes belligerent. Best to agree the correct VAT treatment up front.

  1. Aid your cash flow

If you wish to purchase goods yourself, it will be beneficial to ask your contractor to buy the goods and combine the value of these with his services of construction. In this way, standard rated goods become zero rated in a new build.  If you incur the VAT on goods, you will have to wait until the end of the project to claim it from HMRC.

  1. Claim on time

The claim form must be submitted within six months of completion of the build, usually this is when the certificate of practical completion is issued, or the building is inhabited. although it can be earlier if the certificate is delayed. More details of when a building is complete here. Recent changes to the scheme here

  1. Use the right form

HMRC publish the forms on their website.

Using the correct forms will help avoid delays and errors. Claims can now be made online.

  1. Send everything Recorded Delivery

You are required to send original invoices with the claim. Therefore, take copies of all documents and send the claim by recorded delivery. Unfortunately, experience insists that documents are lost…

  1. Seek Advice

If you are in any doubt, please contact me. Mistakes can be costly, and you only get one chance to make the claim. Oh, and don’t forget that this is VAT, so any errors in a claim may be liable to penalties.

More on the DIY Housebuilders’ Scheme here, here, here, and here and Tribunal cases on claims here, here, and here

VAT: Business Brief on Tour Operators’ Margin Scheme B2B

By   22 April 2024

HMRC have issued a BB 5(2024) on Tour Operators’ Margin Scheme (TOMS) for business to business (B2B) wholesale supplies.

  • sets out the VAT accounting for TOMS B2B wholesale supplies
  • explains that businesses may choose whether to apply TOMS to B2B wholesale supplies
  • details a technical change to the treatment of B2B wholesale supplies in relation to TOMS

Ultimately, the policy allowing businesses to choose whether to apply TOMS to B2B wholesale supplies remains unchanged.

VAT Road Fuel Scale Charges from 1 May 2024

By   22 April 2024

HMRC has issued its 1 May 2024 to 30 April 2025 Road Fuel Scale Charges (RFSC)

RFSC

A scale charge is a way of accounting for output tax on road fuel bought by a business for cars which is then put to private use. If a business uses the scale charge, it can recover all the VAT charged on road fuel without having to identify specific business and private use. The charge is calculated on a flat rate basis according to the CO2 emissions of the car.

More on motoring expenses here.

A business will need to calculate the correct RFSC based on a car’s CO2 emissions, and the length of its VAT accounting period. This will be either one, 3, or 12 months. The CO2 emissions figure may be found here if the information is not available in the log book.

Alternatives to using RFSC

  • use detailed mileage records to separate business mileage from private mileage and only claim for the business element
  • claim no input tax

Business/private mileage calculation example:

  • Total mileage: 4,290
  • Business mileage: 3,165
  • Cost of fuel: £368.
  • Business mileage: £368 × (3,165 ÷ 4,290) = £271.49
  • Claimable input tax: £271.49 × VAT fraction = £45.25

VAT: DIY Housebuilder Scheme updated

By   16 April 2024
HMRC has updated its guidance for DIY Housebuilders.
The scheme enables people who build, or convert properties into dwellings for their own use to recover VAT incurred on the project.
More on the Scheme here.
Information about filling in a schedule of invoices before starting a self-build project has been added. This follows other changes to, and cases on, the Scheme which are set out below:

The following article provides help with Scheme claimants:

New centralised HMRC website to manage imports and VAT

By   15 April 2024

HMRC guidance

HMRC has published a website Manage your import duties and VAT accounts, which provides a centralised place from which businesses importing goods can manage payment and guarantee accounts, manage and view authorities, and download duty deferment statements, import VAT certificates, postponed import VAT statements, and notification of adjustment statements. The website can only be accessed via the Government Gateway.

From this site a business can:

  • view and manage its cash account (top up and withdraw funds)
  • set up a Direct Debit for, and top up a duty deferment account
  • request older statements and certificates
  • view and manage a general guarantee account
  • manage the email address linked to an account
  • access secure messages from HMRC related to the account
  • set up, manage or view account authorities

Downloads are also available for:

  • duty deferment statements
  • import VAT certificates (C79)
  • postponed import VAT statements
  • notification of adjustment statements

To use the service a business must be subscribed to the Customs Declaration service.

VAT Registration – New guidance for Non-Established Taxable Persons (NETP)

By   8 April 2024

HMRC has published an updated version of Notice 700/1: Who should register for VAT.

Information about non-established taxable persons (NETPs) has been updated to include guidance on when they need to apply for VAT.

Other updates include:

  • a definition of what a UK establishment is
  • when and how NETPs registers for VAT
  • how NETPs who are overseas sellers register for VAT
  • what happens when NETPs do not comply with VAT requirements
  • guidance for when NETPs can register voluntarily has been removed
  • guidance for Making Tax Digital (MTD) for VAT Returns
  • penalties for late notification to HMRC
  • new European threshold for distance selling into an EU Member State

HMRC plans to make permanent cuts to VAT helpline now reversed.

By   19 March 2024

The VAT helpline will be open for five days every month ahead of the deadline for filing VAT returns – outside of this time, customers will again be directed to use HMRC’s online services.

CIOT stated that:

“We are deeply dismayed that, so soon after the criticisms levelled at them by the Public Accounts Committee, and in the light of an inconclusive evaluation, HMRC have decided to make these big, permanent cuts to the help they provide to taxpayers”.

This again illustrates that HMRC cannot cope and that the service provided to businesses is truly awful.

Update! One-day later…

HMRC has now reversed the above planned cuts less than 24 hours after they were announced!

After strong criticism from many sources HMRC said that while “making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity”, the pace of this change “needs to match the public appetite for managing their tax affairs online”.

“We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.”

A statement on behalf of the Treasury Committee noted it was “extremely pleased to see that common sense has prevailed”, called the planned cuts “mismanaged from the beginning” and commented that the announcement was “ill-advised”.

“We welcome the decision to reverse yesterday’s  announcement. While we do not oppose expansion of digital services for those who want to use them, we remain entirely unconvinced that HMRC is adequately prepared to impose such a significant change in how it serves taxpayers. It further pondered over the extent to which the department is prioritising its own needs over those of law-abiding and vulnerable taxpayers.

Customs: Example declarations for exports from GB updated

By   19 March 2024

This Guidance provides examples to help with the completion of declarations on the Customs Declarations Service for exports. It has been updated with the addition of a standard pre-lodged export declaration document.

HMRC videos and seminars for new businesses on VAT basics

By   18 March 2024

HMRC has updated its guidance to businesses on VAT. The helpful instruction includes: email updates, videos and seminars which cover such subjects as:

  • VAT basics
  • registration
  • registering and joining webinars
  • accounting Schemes
  • late submission and payment penalties and interest changes
  • error corrections
  • the reverse charge for construction services
  • accounting for VAT on the sale of cars on finance
  • HMRC community forums

VAT: Forthcoming changes to HMRC services: GOV.UK One Login

By   5 March 2024

HMRC has published guidance on changes to logging into its services. GOV.UK One Login is a new way of signing in to government services. It is said to provide a simple way for you to sign in and prove the user’s identity using an email address and password.

Over time it will replace all other sign in routes including Government Gateway that many businesses currently use.

A user will automatically be asked to create a GOV.UK One Login. It will not happen for everyone at the same time, and you do not need to do anything unless HMRC ask you to.

When you are asked to create a GOV.UK One Login you may need to go through a new authorisation and identity verification process, so will need to have some identification documents ready such as a passport or driving licence.

If you are a tax agent, or an organisation with a business tax account, you will continue to use Government Gateway until you’re asked to create a GOV.UK One Login.

At the moment, you can only use GOV.UK One Login to access some government services, which currently does not include VAT. In the future, you will be able to use it to access all services on GOV.UK.