We know that burying a deceased person is exempt, but exhumation is standard rated and we now know, thanks to the UK Funerals On-line Ltd FTT case, that the service of the repatriation of the body of a deceased person can be viewed as either an exempt supply of funeral services or a zero-rated supply of transport services.
This being the case, zero rating trumps exemption via of The VAT Act 1994, section 30(1).
From November 2023 HMRC is removing the paper version of the VAT 1 Form – applying for VAT registration.
Around 95% of applicants (or their agents) currently use the online registration service: How to register for VAT and in order to improve processing time HMRC is removing the paper VAT 1 Form.
From November only a very limited number of businesses will be able to use the Form VAT 1 and these will only be available by specific request from the VAT Helpline. Those businesses are:
Businesses registered for VAT at a high-volume address will be asked by HMRC to prove they are established in the UK.
High-Volume Addresses
A high-volume address is where a single UK address is listed as the principal place of business (PPOB) for many VAT-registered businesses. We understand that many thousands of businesses are registered at single addresses in the UK.
HMRC will require proof of a place of belonging in the UK to avoid online marketplaces failing to account for output tax.
Online marketplaces
Online marketplaces are liable for the output VAT from sales on their platforms by overseas traders. HMRC understand that Non Established Taxable Persons (NETPs) have incorporated in the UK and provided UK address details to marketplaces. Since they are then no longer “overseas traders” these rules do not apply. In these situations, the NETP does not declare VAT and the marketplace does not become liable for it.
HMRC is writing to all VAT registered businesses with a PPOB at a high-volume address to ask for evidence to demonstrate that the business is actually established in the UK. If the business does not respond, by default, HMRC will consider the business to be a NETP and seek to recover VAT from the online marketplace business.
Evidence of UK establishment
HMRC will outline what specific evidence it will accept in their letter.
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
B2C
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.
Introduction
The tour operators’ margin scheme (TOMS) is a special scheme for businesses that buy in and re-sell travel, accommodation and certain other services as principals or undisclosed agents (ie; that act in their own name). In many cases, it enables VAT to be accounted for on travel supplies without businesses having to register and account for VAT in every country in which the services and goods are enjoyed. It does, however, apply to travel/accommodation services enjoyed within the UK and wholly outside the UK.
Under the scheme:
Who must use the TOMS?
TOMS does not only apply to ‘traditional’ tour operators. It applies to any business which is making the type of supplies set out below even if this is not its main business activity. For example, it must be used by
The CJEC has confirmed that to make the application of the TOMS depend upon whether a trader was formally classified as a travel agent or tour operator would create distortion of competition. Ancillary travel services which constitute ‘a small proportion of the package price compared to accommodation’ would not lead to a hotelier falling within the provisions, but where, in return for a package price, a hotelier habitually offers his customers travel to the hotel from distant pick-up points in addition to accommodation, such services cannot be treated as purely ancillary.
Supplies covered by the TOMS
The TOMS must be used by a person acting as a principal or undisclosed agent for
‘Margin scheme supplies’ are those supplies which are
by a tour operator in an EU country in which he has established his business or has a fixed establishment.
A ‘traveller’ is a person, including a business or local authority, who receives supplies of transport and/or accommodation, other than for the purpose of re-supply.
Examples
If meeting the above conditions, the following are always treated as margin scheme supplies.
Other supplies meeting the above conditions may be treated as margin scheme supplies but only if provided as part of a package with one or more of the supplies listed above. These include
This scheme is complex and specialist advice should always be sought before advising clients.
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:
What services directly relate to land?
HMRC provide the following examples:
The following HMRC examples are not deemed to be land related services:
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).
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:
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.
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.
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.
HMRC has published updated guidance on the evidence required to zero rate the export of goods. VAT Notice 703 sets out the following changes on the documentation which is required for proof of export:
“An accurate description of the exported goods and quantities are required, for example ‘2000 mobile phones (Make ABC and Model Number XYZ2000), value £50,000’.
If the evidence is found to be unsatisfactory you as the supplier will become liable for the VAT due.
If you’ve described goods inaccurately on an export declaration you may be liable for a customs penalty.
The rest of this paragraph has force of law.
The evidence you obtain as proof of export, whether official or commercial, or supporting must clearly identify:
Vague descriptions of good, quantities or values are not acceptable. An accurate value must be shown and not excluded or replaced by a lower or higher amount”.
Overview
It is vitally important that exporters obtain the correct evidence that goods have physically left the UK and that all descriptions of the goods are accurate and satisfy HMRC requirements. There has been a significant amount of case law on export documentation (an example here) which illustrates that this is often an area of dispute.
HMRC has published the annual yearly and spot foreign exchange rates in CSV format.
You should use these exchange rates if you have to convert any foreign currency to sterling for Customs and VAT purposes.
When searching for exchange rates a business should consider what it requires the rates for and and the type of rate needed.
HMRC have published guidance on the use of exchange rates for tax and accounting purposes: