The sale of a dead horse is VAT free, but a live horse is standard-rated.
(This is not a recommended tax planning scheme).
Category Archives: Planning
VAT Road Fuel Scale Charges from 1 May 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
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:
- Changes to the DIY Housebuilders’ Scheme
- DIY Housebuilders’ Scheme – deadline for claims extended
- The Spani case
- The Dunne case
- The Ellis case
The following article provides help with Scheme claimants:
New centralised HMRC website to manage imports and VAT
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)
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.
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.
VAT and influencers
A Warning
There has been a great deal of debate on the subject of VAT and influencers, with HMRC issuing assessments for underdeclared output tax on “gifts” received by them.
What is an influencer?
An influencer is someone who has certain power to affect the purchasing decisions of others because of their; authority, knowledge, position, or relationship with their audience. These individuals are social relationship assets with which brands can collaborate to achieve their marketing objectives.
In recent years the growth of social media means that influencers have grown in importance. According to recent statistics, the projected number of global social media users in 2023 was 4.89 billion. This is a 6.5% rise from the previous year.
What is the VAT issue?
Business gifts to influencers
A business is not required to account for VAT on certain dealings if they meet certain conditions. For free gifts, the condition is that the total cost of all gifts to the same person is less than £50 in a 12-month period. Further, if the goods are “free samples” – used for marketing purposes and provided in a quantity that lets potential customers test the product, then the £50 rule does not apply. If an influencer receives free gifts or samples, there are no VAT implications for them.
HMRC Action
However, we understand that HMRC has decided that, in the majority of cases, the supply of goods to influencers were not ‘free gifts” but rather consideration for a taxable supply of marketing or advertising. They were also not considered free samples as, generally, influencers would not be in the position to test the goods, having no expertise in the field. It is also concluded that influencers, in most cases were “in business“.
The payment for the marketing, promotion or advertising services (the VAT treatment is similar, regardless of how the services are categorised) is by way of the supply of goods, rather than monetary consideration. That is; consideration is flowing in both directions. Consequently, output tax is due on this amount if the influencer is, or should be, VAT registered.
What is the value of the supply?
Non-monetary consideration
Non-monetary consideration includes goods or services supplied as payment, for example in a “barter” (including part exchange) agreement. If the supply is for a consideration not consisting or not wholly consisting of money, its value shall be taken to be such amount in money as, with the addition of the VAT chargeable, is equivalent to the consideration. Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply is deemed to be for such part of the consideration as is properly attributable to it.
In determining the taxable amount, the only advantages received by a supplier that are relevant are those obtained in return for making the supply should be recognised. Non-monetary consideration has the value of the alternative monetary payment that would normally have been given for the supply.
VAT Registration
If an influencer receives gifts valued at over £90,000 in any 12-month period, or these gifts plus other monetary consideration, VAT registration is mandatory.
More on business promotions here.
New report finds HMRC performance the worst ever
A report by the Public Accounts Committee (PAC) has found that HMRC’s services continue to deteriorate and are now at an “all time low”.
In summary, Anne Olney MP who sits on the committee said of the new report:
- PAC expressed disappointment over the five-year decline of service levels
- Taxpayers are “exasperated”
- In 2022/2023 the number of callers waiting ten minutes or more for HMRC to answer has increased from 46.3% in 21/22 to 62.7%
- HMRC stated that it “did not have the resources to meet rising demand for its phone and post services at expected standards”
- HMRC agrees that it will not now require digital interaction until a service is of a suitable standard
- Criminal prosecutions fell from 691 in 2019/20 to 240 in 2022/23 which “sends the wrong message” (my comment: although this could partly be due to backlogs in the criminal justice system)
- The report results were “quite predictable” and were a “letdown for taxpayers”
- It is “distressing” to find people who “want to get it right, and who have no intention whatsoever of defrauding the Exchequer, but just find it really, really difficult to access the right support”.
- In failing to access the right support, taxpayers are liable. It is not on HMRC – even if the services are difficult to access, it is still the responsibility of the taxpayer to pay the right amount of tax
- There is “probably” a need for more investment and recruitment
- A smarter allocation of the resources HMRC has could see a better return for taxpayers
- Finally: “It really is important that HMRC get this right.”
In terms of VAT, we can confirm from personal experience that HMRC’s performance is at an unacceptably inferior level; from telephone responses, to written replies and a generally poor “attitude”. This is supported anecdotally by clients and colleagues’ experiences.
VAT registration HMRC update
HMRC has updated VAT Notice 700/1 – Who should register for VAT. The publication explains when a business must register for VAT, and how to do it.
The changes are to para 2.7 – Specified Supplies which sets out what needs to be included during the application process when describing business activities.
Businesses affected
Those that supply; finance, insurance services, or investment gold to customers in countries outside the UK, or make supplies of insurance or finance services which are directly linked to the export of goods outside the UK.
Specified Supplies
These are supplies which would be exempt from VAT if they were made in the UK, but are treated as taxable if made outside the UK.
Benefit to business
A business making Specified Supplies may register for VAT on a voluntary basis and claim UK input tax incurred in making those supplies. We strongly recommend that all businesses in the above categories consider registering in the UK.
The amendment
If a business is registering because it makes Specified Supplies, it must ensure that it clearly states ‘SPECIFIED SUPPLIES’ in the free-text box when asked to describe the business activities during the application process. Failure to do this will likely cause delays and create additional HMRC queries.
A VAT Did you know?
Where goods are located in a shop can affect the VAT treatment. Nuts sold in the bakery aisle are VAT free, but those sold with snacks or confectionary are standard rated.