I have to charge myself VAT?!

By Marcus Ward 9 July 2019

How comes?!

Well, normally, the supplier is the person who must account to the tax authorities for any VAT due on the supply. However, in certain situations, the position is reversed and it is the customer who must account for any VAT due. Don’t get caught out!

Here are just some of the situations when you have to charge yourself VAT:

Purchasing services from abroad

These will be obtained free of VAT from an overseas supplier. What is known as the ‘reverse charge’ procedure must be applied. Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must account for output tax, calculated on the full value of the supply received, and (subject to partial exemption and non-business rules) include the VAT charged as input tax. The effect of the provisions is that the reverse charge has no net cost to the recipient if he can attribute the input tax to taxable supplies and can therefore reclaim it in full. If he cannot, the effect is to put him in the same position as if had received the supply from a UK supplier rather than from one outside the UK. Thus creating a level playing field between purchasing from the UK and overseas.

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must

1. 1. account for output tax, calculated on the full value of the supply received, in Box 1;
  2. (subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;
  3. include the full value of the supply in both Boxes 6 and 7.

Value of supply: The value of the deemed supply is to be taken to be the consideration in money for which the services were in fact supplied or, where the consideration did not consist or not wholly consist of money, such amount in money as is equivalent to that consideration. The consideration payable to the overseas supplier for the services excludes UK VAT but includes any taxes levied abroad.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

Purchasing goods from another EU Member States

Something similar to reverse charge; called acquisition tax, applies to goods purchased from other EC Member States. These are known as acquisitions (they are imports if the goods come from outside the EU and different rules apply). The full value of the goods is subject to output tax and the associated input tax may be recovered by the business acquiring if the goods are used for taxable purposes. If you are not already registered for VAT in the UK and acquire goods worth £85,000 or more in the UK from other EC countries, you will have to register for VAT in the UK on the strength of the value of the acquisition tax. A business will also have to complete an Intrastat Supplementary Declaration (SDs) if its acquisitions of goods from the EC exceed an annual amount – currently £1.5 million.

More details on Intrastat Supplementary Declarations here

Deregistration

Any goods on hand at deregistration with a total value of over £1,000 on which input tax has been claimed are subject to a self supply. This is a similar mechanism to a reverse charge in that the goods are deemed to be supplied to the business by the business and output tax is due. However, in these circumstances it is not possible to recover any input tax on the self supply.

Flat Rate Scheme

There is a self supply of capital items on which input tax has been claimed when a business leaves the flat rate scheme (and remains VAT registered).

Mobile telephones

In order to counter missing trader intra-community fraud (‘MTIC’), supplies of mobile telephones and computer chips which are made by one VAT registered business to another and valued at £5,000 and over are subject to the reverse charge. This means that the purchaser rather than the seller is responsible for accounting for VAT due.

And not forgetting the new domestic reverse charge for building and construction here.

Land and buildings…. and motor cars

There are certain circumstances where land and buildings must be treated as a self supply… but that is a whole new subject in itself… as is supplies in the motor trade.

Even if the result of a self-supply or reverse charge is VAT neutral HMRC is within its rights to assess and levy penalties and interest in cases where the charge has not been applied; which always seems unfair. However, more often than not simple accounting entries will deal with the matter…. if the circumstances are recognised and it is remembered to actually make the entries!

I have to charge myself VAT?!

By Marcus Ward 1 July 2015

I have to charge MYSELF VAT?!

How comes?!

Here are just some of the situations when you have to charge yourself VAT:

Purchasing services from abroad

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must

1. 1. account for output tax, calculated on the full value of the supply received, in Box 1;
  2. (subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;
  3. include the full value of the supply in both Boxes 6 and 7.

Value of supply: The value of the deemed supply is to be taken to be the consideration in money for which the services were in fact supplied or, where the consideration did not consist or not wholly consist of money, such amount in money as is equivalent to that consideration. The consideration payable to the overseas supplier for the services excludes UK VAT but includes any taxes levied abroad.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

Purchasing goods from another EC Member States

Something similar to reverse charge; called acquisition tax, applies to goods purchased from other EC Member States. These are known as acquisitions (they are imports if the goods come from outside the EC and different rules apply). The full value of the goods is subject to output tax and the associated input tax may be recovered by the business acquiring if the goods are used for taxable purposes. If you‘re not already registered for VAT in the UK and acquire goods worth £82,000 or more in the UK from other EC countries, you will have to register for VAT in the UK on the strength of the value of the acquisition tax. A business will also have to complete an Intrastat Supplementary Declaration (SDs) if its acquisitions of goods from the EC exceed an annual amount – currently £1.5 million.

More details on Intrastat Supplementary Declarations here

Deregistration

Flat Rate Scheme

There is a self supply of capital items on which input tax has been claimed when a business leaves the flat rate scheme (and remains VAT registered).

Mobile telephones

In order to counter missing trader intra-community fraud (‘MTIC’), supplies of mobile ‘phones and computer chips which are made by one VAT registered business to another and valued at £5,000 and over are subject to the reverse charge. This means that the purchaser rather than the seller is responsible for accounting for VAT due.

Land and buildings…. and motor cars

There are certain circumstances where land and buildings must be treated as a self supply… but that is a whole new subject in itself… as is supplies in the motor trade.

VAT Invoices – A Full Guide

By Marcus Ward 9 September 2024

VAT Basics

The subject of invoices is often misunderstood and can create serious issues if mistakes are made. VAT is a transaction tax, so primary evidence of the transaction is of utmost importance. Also, a claim for input tax is usually not valid unless it is supported by an original valid invoice. HMRC can, and often do, reject input claims because of an inaccurate invoice. There are a lot of misconceptions about invoices, so, although a rather dry subject, it is very important and I thought it would be useful to have all the information in one place, so here is my guide:

Obligation to provide a VAT invoice

With certain exceptions, a VAT registered person must provide the customer with an invoice showing specified particulars when there is a supply of goods or services in the UK (other than an exempt supply) to a taxable person.

Exceptions

The above does not apply to the following supplies.

• Zero-rated supplies

• Supplies where the VAT charged is excluded from credit under VATA 1994, s 25(7) eg; business entertaining and certain motor cars although a VAT invoice may be issued in such cases.

• Supplies on which VAT is charged but which are not made for a consideration. This includes gifts and private use of goods.

• Sales of second-hand goods under one of the special schemes – any invoices for such sales must not show any VAT.

• Supplies that fall within the Tour Operators’ Margin Scheme (TOMS). VAT invoices must not be issued for such supplies.

• Supplies where the customer operates a self-billing arrangement.

• Supplies by retailers unless the customer requests a VAT invoice.

• Supplies by one member to another in the same VAT group.

• Transactions between one division and another of a company registered in the names of its divisions.

• Supplies where the taxable person is entitled to issue, and does issue, invoices relating to services performed in fiscal and other warehousing regimes.

Documents treated as VAT invoices

Although not strictly VAT invoices, certain documents listed below are treated as VAT invoices either under the legislation or by HMRC.

(1) Self-billing invoices

Self-billing is an arrangement between a supplier and a customer in which the customer prepares the supplier’s invoice and forwards it to him, normally with the payment.

(2) Sales by auctioneer, bailiff, etc.

Where goods (including land) forming part of the assets of a business carried on by a taxable person are, under any power exercisable by another person, sold by that person in or towards satisfaction of a debt owed by the taxable person, the goods are deemed to be supplied by the taxable person in the course or furtherance of his business.

The particulars of the VAT chargeable on the supply must be provided on a sale by auction by the auctioneer and where the sale is otherwise than by auction by the person selling the goods. The document issued to the buyer is treated as a VAT invoice.

(3) Authenticated receipts in the construction industry.

(4) Business gifts

Where a business makes a gift of goods on which VAT is due, and the recipient uses the goods for business purposes, that person can recover the VAT as input tax (subject to the normal rules). The donor cannot issue a VAT invoice (because there is no consideration) but instead may provide the recipient with a ‘tax certificate’ which can be used as evidence to support a deduction of input tax. The tax certificate may be on normal invoicing documentation overwritten with the statement:

“Tax certificate – No payment is necessary for these goods. Output tax has been accounted for on the supply.”

Full details of the goods must be shown on the documentation and the amount of VAT shown must be the amount of output tax accounted for to HMRC.

Invoicing requirements and particulars

A VAT invoice must contain certain basic information and show the following particulars:

(a) A sequential number based on one or more series which uniquely identifies the document.

The ‘invoice number’ can be numerical, or it can be a combination of numbers and letters, as long as it forms part of a unique and sequential series.

(b) The time of the supply, ie tax point.

(d) The name, address and registration number of the supplier.

(e) The name and address of the person to whom the goods or services are supplied.

(f) A description sufficient to identify the goods or services supplied.

(g) For each description, the quantity of the goods or extent of the services, the rate of VAT and amount payable, excluding VAT, expressed in any currency.

(h) The unit price.

This applies to ‘countable’ goods and services. For services, the countable element might be, for example, an hourly rate or a price paid for standard services. If the supply cannot be broken down into countable elements, the total VAT-exclusive price is the unit price.

(i) The gross amount payable, excluding VAT, expressed in any currency.

(j) The rate of any cash discount offered.

(k) The total amount of VAT chargeable expressed in sterling.

(l) Where the margin scheme for second-hand goods or TOMS is applied, either a reference to the appropriate provision of The VAT Act 1994 or any indication that the margin scheme has been applied.

The way in which margin scheme treatment is referenced on an invoice is a matter for the business and but we recommend:

• “This is a second-hand margin scheme supply.”

• “This supply falls under the Value Added Tax (Tour Operators) Order 1987.”

The requirement only applies to TOMS invoices in business to business transactions.

(m) Where a VAT invoice relates in whole or in part to a supply where the person supplied is liable to pay the VAT, a reference to the appropriate provision of The VAT Act 1994 or any indication that the supply is one where the customer is liable to pay the VAT.

This covers UK supplies where the customer accounts for the VAT (eg under the gold scheme or any reverse charge requirement under the missing trader intra-community rules). The way in which margin scheme treatment is referenced on an invoice is a matter for the business and we recommend: “This supply is subject to the reverse charge”.

Exempt or zero-rated supplies

Invoices do not have to be raised for exempt or zero-rated transactions when supplied in the UK. But if such supplies are included on invoices with taxable supplies, the exempt and zero-rated supplies must be totalled separately and the invoice must show clearly that there is no VAT payable on them.

Leasing of motor cars

Where an invoice relates wholly or partly to the letting on hire of a motor car other than for self-drive, the invoice must state whether the car is a qualifying vehicle

Alternative evidence to support a claim for input tax

In certain situations HMRC can use its discretion and allow an input tax with documentary evidence other than an invoice. Guidance here.

Electronic invoices

Full information on electronic invoicing here.

Retailers

Retailers may issue a “less detailed tax invoice” if a customer requests one. the supply must be for £250 or less (including VAT) and must show:

your name, address and VAT registration number
the time of supply (tax point)
a description which identifies the goods or services supplied
and for each VAT rate applicable, the total amount payable, including VAT and the VAT rate charged.

Summary

As may be seen, it is a matter of law whether an invoice is valid and when they must be issued. Therefore it is important for a business to understand the position and for its system to be able to produce a valid tax invoice and to recognise what is required to claim input tax. As always with VAT, there are penalties for getting documentation wrong.

VAT: Carousel fraud – How to recognise it and how to avoid been caught in it

By Marcus Ward 8 August 2024

VAT carousel fraud, also known as missing trader fraud or missing trader intra-community (MTIC) fraud, is a complex and highly sophisticated process used by organised criminals which involves defrauding governments of money that should be paid in VAT. It involves a series of transactions where goods are repeatedly bought and sold across borders, with the criminal acquiring goods free of VAT (exports of goods are tax free) and then reselling them with VAT added. The fraudster then does not pay output tax to the relevant authority, usually disappearing or closing the business without doing so. It mainly takes place in Europe, but also increasingly in South East Asia.

Round and round

If the goods are not sold to consumers (B2C) but rather, the transactions pass through a series of businesses. To perpetuate a carousel fraud, companies often create a number of sham shell companies to conceal the nature of the transactions in a complex web. The shell companies continue to trade with each other, and the transactions go round and round like a carousel. This can be almost endless. It is possible for the same goods to be traded many times between companies within the carousel fraud scheme network. Often, these transactions do not actually occur – the goods do not actually move from one party to another, but false invoices are issued.

It is common for these criminals to use the fraudulent money they have illegitimately obtained from other large scale illegal activities.

Innocent participants

Unfortunately, carousel fraud can involve innocent businesses. This often mean that these businesses suffer a VAT cost because HMRC will refuse to repay an input tax claim as the matching output tax was not paid by the missing trader. HMRC do this on the basis that the claimant knew, or should have known, that (s)he was involved in a VAT fraud (so perhaps not always so innocent).

Refusal to repay an input tax claim

This option is available to governments using the “Kittel” principle. This refers to a Court of Justice of the European Union (CJEU) case – Axel Kittel & Recolta Recycling SPRL (C-439/04 and C-440/04) where it was held a taxable person must forego his right to reclaim input tax where “it is ascertained, having regard to objective factors, that the taxable person knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT”.

The right of input tax deduction may also be denied where the taxpayer could/should have guessed that their transactions involved VAT fraud.

Due diligence

It is crucial that businesses carry out comprehensive due diligence/risk assessment to avoid buying goods that have been subject to carousel fraud anywhere along the supply chain. It is not enough to avoid a refusal to repay input tax to say to HMRC that a business just “didn’t know” about a previous fraud. The scope of verification of a transaction will depend on its size, value, and the type of business, eg; whether it is a new or existing business partner. Transactions with regular suppliers should also be verified, although there should be be a lower risk of VAT fraud.

HMRC sets out in its internal manuals guidance on due diligence and risk assessment which is helpful. The following quote sets out the authorities’ overview:

“The important thing to remember is that merely making enquiries is not enough. The taxable person must take appropriate action based on the results of those enquiries. Therefore, for example, if the taxable person has undertaken effective due diligence/risk assessment on its supplier and that due diligence/risk assessment shows one or more of the following results in relation to the supplier:

only been trading for a very short period of time,
managed to achieve a large income in that short period of time,
a poor credit rating,
returned only partly completed application or trading forms,
contacted the taxable person out-of-the-blue etc,

and yet the taxable person still goes ahead and trades without making any further enquiries, this could lead to the conclusion that the due diligence/risk assessment was casually undertaken and of no value”.

Carousel VAT fraud investigations

HMRC carries out serious VAT investigations via the procedures set out in Public Notice 160 in cases where they have reason to believe dishonest conduct has taken place. These are often cases where larger amounts of VAT are involved and/or where HMRC suspect fraudulent behaviour. If a business is under investigation for carousel VAT fraud it will receive a letter from HMRC. The consequences of a carousel VAT fraud conviction are serious, and a recipient of such a letter is strongly advised to contact a specialist carousel fraud barrister immediately to provide expert legal guidance.

The Reverse charge (RC) mechanism

Governments take the threat of carousel VAT fraud very seriously and are continually implementing new measures to deter the schemes. The UK has introduced changes to the way that VAT is charged on mobile telephones, computer chips and emissions allowances to help prevent crime (it was common to use these goods and services in carousel fraud).

The RC mechanism requires the purchaser, rather than the supplier, to account for VAT on the supply via a self-supply. Therefore, the supplier does not collect VAT, so it cannot defraud the government.

The future

VAT policy is consistently updated, so businesses must be aware of these changes to ensure compliance. Technology is being progressively used to fight fraud, and again, businesses need to be aware of this and the obligation to upgrade their own technology to comply with, say; real time reporting, eInvoicing, and other innovations. Compliance technology is increasingly employed to detect inconsistent transactions which means that a business must be compliant, because if it isn’t it will be easier for the tax authorities to detect. Even if non-compliance is unintentional the exposure to penalties and interest is increased.

HMRC videos and seminars for new businesses on VAT basics

By Marcus Ward 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: Top 10 Tips for small businesses and start-ups

By Marcus Ward 11 March 2024

At some point it is likely that a small business or start-up will need to consider VAT. Here are a few pointers:

Should you be registered for VAT?

If your income is above £90,000 pa of taxable supplies, you have no choice. But you can voluntarily register if below this threshold. There are significant penalties for failure to register at the correct time.

Advantages of VAT registration: VAT recovery on expenses plus, perhaps; gravitas for a business
Disadvantages: administration costs plus a potential additional cost to customers if they are unable to recover VAT charged to them (eg; they are private individuals) which could affect your competitiveness Potential for penalties and interest for getting it wrong.

VAT: Buildings and construction update

By Marcus Ward 1 February 2024

HMRC has amended Notice 708 which covers:

when building work can be zero-rated or reduced-rated at 5%
when building materials can be zero-rated or reduced-rated at 5%
when the sale, or long lease in a building is zero-rated
where you can find out more about the VAT domestic reverse charge for building and construction services
when developers are blocked from deducting input tax on goods that are not building materials
when a builder or developer needs to have a certificate from their customer, confirming that the building concerned is intended to be used for a purpose that attracts the zero or reduced rate
when a customer can issue that certificate to a builder or developer
what happens when a certificated building is no longer used for the purpose that attracted the zero rate, the use for that purpose decreases or the building is disposed of
the special time of supply rules for builders
when a business, on using its own labour to carry out building work on a building or civil engineering structure that it occupies or uses, must account for a self-supply charge

Sections 18.1 and 18.2 of the Notice and the certificates in those sections have been updated to show they have force of law under The VAT Act 1994, Schedule 8, Group 5, Note 12.

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 – A Christmas Tale

By Marcus Ward 6 December 2022

Well, it is nearly Christmas…. and at Christmas tradition dictates that you repeat the same nonsense every year….

Dear Marcus

My business, if that is what it is, has become large enough for me to fear that HMRC might take an interest in my activities. May I explain what I do and then you can write to me with your advice? If you think a face to face meeting would be better, I can be found in most decent sized department stores from mid-September to 24 December.

First of all, I am based in Greenland, but I do bring a stock of goods, mainly toys, to the UK and I distribute them. Where do I belong? Am I making supplies in the UK? Do I pay Customs Duty?

If I do this for philanthropic reasons, am I a charity, and if so, does that mean I do not pay VAT?

I have heard that giving vouchers can be complicated, I think I will need help with these gifts.

The toys are of course mainly for children and I wonder if zero rating might apply? I have heard that small T shirts are zero rated so what about a train set – it is small and intended for children. Does it matter if adults play with it? My friend Rudolph has told me that there is a peculiar rule about gifts. He says that if I give them away regularly or they cost more than £50 I might have to account for output tax. Is that right?

My next question concerns barter transactions. Fathers often leave me a food item such as a mince pie and a drink and there is an unwritten rule that I should then leave something in return. If I’m given Sainsbury’s own brand sherry, I will leave polyester underpants but if I’m left a glass of Glenfiddich I will be more generous and leave best woollen socks. Have I made a supply and what is the value please? My feeling is that the food items are not solicited so VAT might not be due and, in any event; isn’t food zero-rated, or does it count as catering? Oh, and what if the food is hot?

Transport is a big worry for me. Lots of children ask me for a ride on my airborne transport. I suppose I could manage to fit twelve passengers in. Does that mean my services are zero-rated? If I do this free of charge will I need to charge Air Passenger Duty? Does it matter if I stay within the UK, or the EU or the rest of the world? What if I travel to every country? My transport is the equivalent of six horsepower and if I refuel with fodder in the UK will I be liable for fuel scale charges? After dropping the passengers off I suppose I will be accused of using fuel for the private journey back home – is this non-business? Somebody has told me that if I buy hay labelled as animal food I can avoid VAT but if I buy the much cheaper bedding hay I will need to pay tax. Please comment.

May I also ask about VAT registration? I know the limit is £85,000 per annum but do blips count? If I do make supplies at all, I do nothing for 364 days and then, in one day (well, night really) I blast through the limit and then drop back to nil turnover. May I be excused from registration? If I do need to register should I use AnNOEL Accounting? At least I can get only one penalty per annum if I get the sums wrong.

I would like to make a claim for input tax on clothing. I feel that my red clothing not only protects me from the extreme cold, but it is akin to a uniform and should be allowable. These are not clothes that I would choose to wear except for my fairly unusual job. If lady barristers can claim for black skirts, I think I should be able to claim for red dress. And what about my annual haircut? That costs a fortune. I only let my hair grow that long because it is expected of me.

Insurance worries me too. You know that I carry some very expensive goods on my transport. Play Stations, mountain bikes, i-Pads and Accrington Stanley replica shirts for example. My parent company in Greenland takes out insurance there and they make a charge to me. If I am required to register for VAT in England will I need to apply the Reverse Charge? This seems to be a daft idea if I understand it correctly. Does it mean I have to charge myself VAT on something that is not VATable and then claim it back again?

And what about Brexit? I know the UK has already left the EU, but does this affect me? What about distance selling? How do I account for supplies to and from the EU? Will there be Tariffs? Do I have to queue at Dover?

Next, you’ll be telling me that Father Christmas isn’t real……….

HAPPY CHRISTMAS EVERYBODY!

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must

account for output tax, calculated on the full value of the supply received, in Box 1;

(subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;

include the full value of the supply in both Boxes 6 and 7.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must

account for output tax, calculated on the full value of the supply received, in Box 1;

(subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;

include the full value of the supply in both Boxes 6 and 7.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

What services are only indirectly related to land?