Tag Archives: input-tax

VAT DIY Housebuilders’ Scheme – useful information

By   9 September 2019
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The DIY Housebuilders’ Scheme is a tax refund scheme for people who build, or arrange to have built, a house they intend to live in. It also applies to converting commercial property into a house(s). Details here.

However, there are often uncertainties and disputes over precisely what tax may be claimed on various expenditure. To this end, HMRC has published a comprehensive list of items, sorted alphabetically, which should avoid a lot of potential disagreements on claims.

It should be noted that a claim for services can only be made for conversions (at the reduced rate of 5%) as any services in respect of a new build property should be zero rated.

What else can a housebuilder not claim for?

There is no claim available for:

  • building projects outside the UK
  • materials or services that are not subject to VAT, eg; are zero-rated or exempt or provided by a non VAT-registered supplier
  • professional or supervisory fees, eg; architects and surveyors
  • the hire of plant, tools and equipment, eg; generators, scaffolding and skips
  • building materials that aren’t permanently attached to or, part of, the building itself
  • some fitted furniture, electrical and gas appliances, carpets or garden ornaments
  • supplies for which you do not have a VAT invoice.

If you would like assistance with making a claim, please contact us.

VAT: Domestic Reverse Charge for builders – introduction delayed

By   9 September 2019
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As you were…

The UK Government has announced that it is to delay the introduction of the VAT Domestic Reverse Charge (DRC) for construction businesses by a year after a coalition of trade bodies and organisations highlighted its potentially damaging consequences. Details of DRC here

The DRC was due to come into force from 1st October this year, but it has been announced via Revenue and Customs Brief 10 (2019): domestic reverse charge VAT for construction services – delay in implementation that it has been deferred for a year. The new implementation date will be 1 October 2020 unless there are further delays.

The move has been welcomed by all parties affected by the rules and HMRC said that it was committed to working closely with the sector to raise awareness and provide additional guidance to make sure all businesses will be ready for the new implementation date.

Invoices etc

HMRC have also recognised that some businesses have already put changes in place to anticipate the original introduction date and appreciate that it may not be possible to reverse these changes before 1 October 2019. Where “genuine errors” have occurred, HMRC has stated that it will take into account the late change in its implementation date.

 Comments

The Chief Executive of the Federation of Master Builders said “I’m pleased that the government has made this sensible and pragmatic decision to delay reverse charge VAT until a time when it will have less of a negative impact on the tens of thousands of construction companies across the UK. To plough on with the October 2019 implementation could have been disastrous given that the changes were due to be made just before the UK is expected to leave the EU, quite possibly on ‘no-deal’ terms.” The situation hasn’t been helped by the poor communication and guidance produced by HMRC. Despite the best efforts of construction trade associations to communicate the changes to their members, it’s concerning that so few employers have even heard of reverse charge VAT.”

It has been stated by certain trade bodies that more than two-thirds of construction firms had not heard of the VAT changes and of those who had, around the same number had not prepared for them. My own experience backs this up and talking to other tax people and building businesses it is clear that this is not an issue which has been publicised widely and despite accountancy firms doing their best to bring it to the attention of relevant clients and contacts, many remain unaware.

Commentary

Discussions over Brexit (obviously!) have been blamed for the situation, although there is no word about why HMRC waited until a month before the intended implication to decide to delay the DRC. A lot of work has been carried out on this matter, and changes to documentation, processing and systems have taken place which will need to be reversed before 1 October 2019. At least the delay will provide HMRC with a new chance to let affected parties know next time and gives them time to identify why so many building businesses were unaware of the reverse charge.

Whether the DRC IS introduced next year remains to be seen. To my mind, it does not deal with the major sources of tax leakage in the construction industry and, as usual, complaint business will play by the book and those that do not will find a way round the rules. To exclude labour only services appears to be a folly. Perhaps they will be amended before next year.

VAT and Customs Duty: Brexit latest

By   20 August 2019
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HMRC has been issuing guidance in readiness for Brexit, and in particular, a No Deal Brexit.

They generally provide information on preparations and actions required by business that trade cross-border.

Imports

If a business bring goods into the UK from the EU there are actions you should take before and after you’ve imported the goods. This applies to:

  • importers
  • freight forwarders
  • fast parcel operators
  • customs agents
  • traders who move their own goods

(This guidance does not apply to moving goods between Ireland and Northern Ireland). A border on the island of Ireland is a whole other matter.

The full guidance for importers.

Exports

Again, this guidance relates to:

  • exporters
  • freight forwarders
  • fast parcel operators
  • customs agents
  • traders who move their own goods.

The full guidance for exporters.

Email updates on Brexit

We recommend that business falling within the above definitions sign up the free HMRC Brexit email alert service.

This service covers: information about Brexit including the Article 50 process, negotiations, and announcements about policy changes as a result of Brexit.

It is crucial that businesses understand the impact of a No Deal Brexit and make preparations for all eventualities of the political negotiations. Sign up here

VAT – A beginner’s practical guide

By   2 August 2019
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I am often asked if there is a VAT beginner’s guide, I find HMRC guidance generally unhelpful for someone without a tax background, so, here is all the basic information you may need in one place.

 What is VAT?

Value Added Tax (VAT) is a tax charged on most business transactions made in the UK. It is charged on goods and services and is an ad valorem tax, which means it is proportionate to the value of the supply made.

All goods and services that are VAT rated (at any rate including zero) are called “taxable supplies”. VAT must be charged on taxable supplies from the date a business first needs to be registered. The value of these supplies is called the “taxable turnover”.

Exempt items

VAT does not apply to certain services because the law says these are exempt from VAT. These include some; financial services, property transactions, insurance education and healthcare. Supplies that are exempt from VAT do not form part of the taxable turnover.

The VAT rates

There are currently three rates of VAT in the UK:

  • 20% (standard rate) – Most items are standard rate unless they are specifically included in the lower rate categories.
  • 5% (reduced rate) – this applies to applies to certain items such as domestic fuel and power, installation of energy-saving materials, sanitary hygiene products and children’s car seats.
  • 0% (zero rate) – applies to specified items such as food, books and newspapers, children’s clothing, new houses and public transport.

VAT registration

A business is required to register for, and charge VAT, if:

  • the taxable turnover reaches or is likely to reach a set limit, known as the VAT registration threshold
  • a VAT registered business has been acquired as a going concern (TOGC)
  • potentially; goods or services have been purchased VAT free from non-UK countries (a self-supply)

Registration limit

The current VAT registration threshold is £85,000. If at the end of any month the value of taxable supplies made in the past twelve months is more than this figure a business MUST VAT register.  A business can opt to register for VAT if its taxable turnover is less than this. Please note that taxable turnover is the amount of income received by a business and not just profit. If a business does not register at the correct time it will be fined.

Additionally, if, at any time there are reasonable grounds to expect that the value of the taxable supplies will be more than the threshold in the next thirty days alone a business must register immediately.

What are the exceptions?

VAT is not chargeable on:

  • taxable supplies made by a business which is not, and is not required to be, registered for VAT
  • zero rated supplies
  • supplies deemed to be made outside the UK
  • exempt supplies

What if a business only makes exempt or zero-rated supplies?

Exempt

If a business only makes exempt supplies, it cannot be registered for VAT. If a business is registered for VAT and makes some exempt supplies, it may not be able to reclaim all of its input tax.

Zero rated

If a business only supplies goods or services which are zero-rated, it does not have to register for VAT, but, it may do so if it chooses.

What is input tax and output tax?

Input tax is the VAT a business pays to its suppliers for goods and services. It is VAT on goods or services coming into a business. In most cases, input tax is the VAT that registered businesses can reclaim (offset against output tax).

Output tax is the term used to describe the VAT charged on a business’ sales of goods or services. Output tax is the VAT a business collects from its customers on each sale it makes.

A full guide to VAT jargon here

Is there anything that will make VAT simpler for a small business?

There are a number of simplified arrangements to make VAT accounting easier for small businesses. These are:

  • Cash Accounting Scheme
  • Annual Accounting Scheme
  • Flat Rate Scheme
  • Margin schemes for second-hand goods
  • Global Accounting
  • VAT schemes for retailers
  • Tour Operators’ Margin Scheme
  • Bad Debt Relief

Details may be found here and here and here.

VAT calculation

  • A business adds VAT to the value of sales it makes to other businesses or customers
  • The VAT amount is reached by multiplying the sale amount by the VAT rate percentage, then adding that to the value of the sale.
  • The total of the VAT on sales for a VAT period is output tax
  • For a VAT period, a business will total all VAT it has been charged by suppliers (eg stock, repairs, rent, and general business expenses etc) – this is input tax.
  • On the VAT return for the period, the amount payable or reclaimable to HMRC is the output tax less input tax.

Records

A business must keep complete, up-to-date records that enable it to calculate the correct amount of VAT to declare on its returns. VAT records must be kept for at least six years, because a business will need to show them to HMRC when asked.

It is acceptable for ordinary business records to be the basis for VAT accounts. A business will need records of sales and purchases (and any adjustments such as credit notes) including details of how much VAT the business charged or paid. If trading internationally, records of imports and exports/dispatches and acquisitions with all overseas territories, including the EU must be recorded. VAT records must show details of any supplies a business has given away or taken for personal use.

VAT records must also include all invoices you have received and issued. Invoice requirements here

Records will also need to include a VAT account, showing how total input tax and output tax has been calculated to include in your VAT returns.

It is vital to ensure that the VAT records are accurate. Failure to do so can lead to significant tax penalties

MTD

For certain business, the new MTD rules apply and certain software must be used. Details here

Time of supply (tax point)

It is important to establish the time VAT is due. Full details here

VAT returns

A VAT registered business must submit returns on a regular basis (usually quarterly or monthly). A VAT return summarises a business’ sales and purchases and the VAT relating to them. All the information a business requires must be in its VAT records, specifically a VAT account.

Return requirements include:

  • sales total (excluding VAT)
  • output tax – this also includes VAT due on any other taxable transactions, eg; barters, non-monetary consideration, goods taken for personal use
  • value of purchases (excluding VAT)
  • input tax claimable
  • total of VAT payable/claimable
  • summary of trade with other EU Member States

Online VAT returns are due one month and seven days after the end of the VAT period. Payment of any VAT owed is due at the same time, although HMRC will collect direct debit payments three days later.

VAT: Land and property quiz – Answers

By   1 August 2019
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The “fun” quiz.

The important thing to consider is what the purchaser does, or intends to do, with the land once purchased. This will dictate the input tax recovery position. So, can the input tax be recovered? Answers to quiz questions in the 26 July 2019 post below

Answers 

On the purchased land the person constructs:

  1. a dwelling and supplies the house on a 25-year lease

Yes

The lease is 21 years or over, so it is zero rated. However, a lease under 21 years would be an exempt so no recovery. For more details

  1. an office and uses it for his own business supplying FS to a client in China

Yes

However, if the FS supply had been to the UK or another EU Member State, the supply would be exempt so no input tax recovery. This may change in the event of a No-Deal Brexit.

  1. a storage facility and a fully taxable company leases it to another company in the same partly exempt VAT group after opting to tax

No

Unlikely to be full input tax recovery as the VAT group is itself partly exempt. The Capital Goods Scheme (CGS) may apply.

  1. a block of ten flats with a gym and swimming pool which tenants are entitled to use. Grants 99 years leases on all flats

Yes

The supply is zero rated, notwithstanding there are additional (to usual residential dwellings) facilities.

  1. a dwelling but uses it for short term holiday lets of no more than a fortnight.

Yes

Holiday lets are standard rated, so the business would be taxable. The purchaser would need to VAT register, however.

  1. a warehouse which is sold on completion but without an option to tax being made before the sale

Yes

A ‘new” commercial building (one under three years old) is mandatorily standard rated, so no option to tax is required.

  1. the land is held with the intention of constructing dwellings at some time in the future, which could be over six years

Yes

As long as the intention remains, and can be evidenced, the input tax may be attributed to the future taxable, zero rated, supply.

  1. a factory which is not subjected to an option to tax but is leased to an US company

 No

The place of supply (POS) is the UK as this is where the immovable property is located, regardless of the status of the client. Consequently, this is an exempt supply with no right to input tax recovery.

  1. a block of three flats which are rented for six months before freehold sale

No, or maybe, or yes

The initial supply is exempt, so the input tax is, preliminarily, attributed to the short term lets. However, a simplified form of the partial exemption de minimis limits may be used and, depending on the scale of the development, it is possible that some, or all, of the input tax may be recovered despite the initial exempt supplies.

  1. a sport hall by a school Academy which is leased to sporting charities and also used for its own educational purposes. No option to tax

No

It would be unlikely that an Academy would be able to recover all the input tax. Because it would make (exempt) business supplies, this would fall outside the VAT Act 1994, Section 33 rules, so there would be no input tax recovery in respect of those activities. There would be an apportionment and only the input tax referable to own use would be recoverable as those supplies of education would be non-business. If the Academy opted to tax the facilities (and was VAT registered), the input tax would be recoverable in full. No input tax referable to business use would be possible if the Academy was using VAT126 claims. VAT and Academies

  1. a manufacturing plant which a company rents to a connected (non-VAT grouped) party which makes and sells toys. The option is taken

Yes

As the connected party is fully taxable the anti-avoidance rules do not apply. If the connected party was not able to recover the VAT charged to it (say it made exempt supplies) the anti-avoidance legislation would kick in and the option would be disapplied, meaning that the input tax in the hands of the developer would not be recoverable.

  1. a car showroom and offices which a company uses for its own business of selling cars, providing finance and brokering insurance

No

There would be mixed use; car sales are taxable, finance and insurance are exempt, so some of the input tax would probably not be recoverable (dependent upon the de minimis limits). The development would be an overhead of the business. It is likely that the property would be an item covered by the CGS.

  1. a care home for the elderly which a company uses for that purpose

No

This likely be an exempt supply, so no input tax recovery on supplies which are properly VATable. There may be reliefs on construction costs, however.

  1. a small cabin office and the remaining land is used for a forestry business which will have no sales for ten years (when the trees are grown)

Yes

Although the intended taxable supplies are some way off, as long as the intention can be evidenced, the input tax may be recovered when incurred as it will relate to those intended taxable transactions. If the intention changes, this may impact the initial recovery. More information

  1. a residential block which is immediately transferred to an associated company (an arm’s length transaction) on completion. No tenants are in situ.

Yes

The transfer of the freehold triggers the zero rating. The associated company may then, if it chooses, make exempt supplies without a VAT cost. This type of planning can be very helpful.

So there we have it. How did you get on?  I would say that any score over eight is very good.

VAT: Land and property – A “fun” quiz

By   26 July 2019
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VAT: Land and property

I am quite often asked the seemingly straightforward question: Can I recover VAT on this land purchase? So, by way of a little quiz, I look at why this can be a loaded question.

Background

A person purchases bare land in the UK for £450,000 which is subjected to the option to tax. So, VAT of £90,000 is incurred. Your task, should you wish to accept it, is to say yes, no, or maybe to input tax recovery in the following situations (assume the purchaser is VAT registered).

Questions

On the purchased land the person constructs:

  1. a dwelling and supplies the house on a 25-year lease
  2. an office and uses it for his own business supplying FS to a client in China
  3. a storage facility and a fully taxable company leases it to another company in the same partly exempt VAT group after opting to tax
  4. a block of ten flats with a gym and swimming pool which tenants are entitled to use. Grants 99 years leases on all flats
  5. a dwelling but uses it for short term holiday lets of no more than a fortnight.
  6. a warehouse which is sold on completion but without an option to tax being made before the sale
  7. the land is held with the intention of constructing dwellings at some time in the future, which could be over six years
  8. a factory which is not subjected to an option to tax but is leased to an US company
  9. a block of three flats which are rented for six months before freehold sale
  10. a sport hall by a school Academy which is leased to sporting charities and also used for its own educational purposes. No option to tax
  11. a manufacturing plant which a company rents to a connected (non-VAT grouped) party which makes and sells toys. The option is taken
  12. a car showroom and offices which a company uses for its own business of selling cars, providing finance and brokering insurance
  13. a care home for the elderly which a company uses for that purpose
  14. a small cabin office and the remaining land is used for a forestry business which will have no sales for ten years (when the trees are grown)
  15. a residential block which is immediately transferred to an associated company (an arm’s length transaction) on completion. No tenants are in situ.

We are looking at recovery of input tax on the land purchase here, ignoring other (say; construction and professional) costs. That is another article in itself.

The questions have been simplified, usually, they tend to be rather more “involved”.

Answers

…soon!

VAT Glossary – Partial Exemption

By   9 July 2019
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The VAT world of partial exemption can be complex with some arcane language used in guidance. Here is your “cut out and keep” guide: 

A general guide to partial exemption here.

VAT Glossary

Partial Exemption
Term Explanation
Allocation Some special methods have different sectors where the recoverable element of residual input tax is different. Allocation is the means by which residual input tax is distributed to specific sectors within a method.
Annual adjustment At the end of the tax year the partial exemption calculation is recalculated using annual figures.
Apportionment Residual input tax must be apportioned to reflect the extent to which the purchases on which it is incurred are used in making onward taxable supplies. The partial exemption method carries out this function.
De minimis tests Tests designed to allow recovery of minimal amounts of exempt input tax.
Direct attribution The identification of input tax on supplies that are wholly used, or to be wholly used in making taxable supplies or are wholly used or to be wholly used in making exempt supplies.
Exempt input tax Input tax incurred on purchases which are used or to be used in making exempt supplies. It comprises input tax directly attributable to exempt supplies and, after the partial exemption method has been applied, the exempt element of residual input tax identified by the partial exemption method.
Exempt supplies Supplies made by a business, which are listed in Schedule 9 of the VAT Act 1994. VAT incurred in making exempt supplies is non-recoverable, unless they are ‘specified’ supplies, subject to the de minimis test.
Input tax VAT incurred by a VAT registered person on goods and services purchased for the purposes of a business.
Longer period This is usually the tax year for annual adjustment purposes but may in certain circumstances be shorter than a tax year. It may also be longer in the case of a mid-year stagger change.
Foreign supplies Supplies made by a business which are made outside the UK but which would be taxable if they were made in the UK.
Residual input tax Input tax which is used, or to be used, to make both taxable and exempt supplies. It is apportioned between taxable and exempt supplies by the partial exemption method. Residual input tax is commonly referred to as ‘non-attributable input tax’ or ‘the pot’.
Special method Any partial exemption method, other than the standard method, used to identify the taxable element of input tax incurred. Special methods require prior approval from HMRC.
Specified supplies Supplies specified by Treasury Order which are not taxable supplies, but which carry the right to recover input tax incurred in making them.
Standard method This is the default partial exemption method. It is specified in law and is suitable for most smaller businesses.
Taxable input tax Input tax incurred on purchases of goods and services which are used or to be used in making taxable supplies and other supplies which carry the ‘right to deduct’.
Taxable supplies Supplies made by a business, which are either standard, reduced or zero-rated. Input tax incurred in making taxable supplies is deductible.
Tax year Every VAT registered business has a tax year. This usually ends at the end of March, April or May each year, depending on the business’s VAT return periods.
VAT Groups Two or more corporate bodies accounting for VAT under a single VAT registration number. One acts as representative member and any supplies between the members of the group are disregarded for VAT purposes.

Any business which receives income from the following sources may be affected by partial exemption:

  • Property letting and sales – potentially all types of supply of land
  • Financial services
  • Insurance
  • Betting, gaming and lotteries
  • Education
  • Health and welfare
  • Sport, sports competitions and physical education
  • Cultural services

This list is not exhaustive.

If your, or your client’s business is partially exempt I always recommend a review.

VAT: Evidence to claim input tax

By   9 July 2019
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Latest from the courts

Hot on the heels of my recent article here, a First Tier Tribunal (FTT) case has considered what evidence may be accepted for a claim for input tax.

The Wasteaway case contemplated whether HMRC’s disallowance of the appellant’s claim, (via The VAT Act 1994, section 73) for input tax was correct, or whether they should have allowed the claim based on alternative evidence of receiving the relevant supplies in lieu of missing tax invoices.

It is well known that in order to claim input tax on expenditure a business is required to have a valid tax invoice to support it. But what if there is no VAT invoice? Can, or should HMRC accept any other evidence to support a claim?

Background 

It was stated that the invoices were lost during a time when the business was evicted from its premises. The judge formed the view that the appellant’s approach to record keeping was “slapdash”. Which isn’t a good starting point. HMRC issued an assessment because it was decided that the appellant had “not provided satisfactory evidence of the taxable supply to the business and its direct link to your onward taxable supply for discretion to be considered under Article 182 of the Principal VAT Directive. If no invoice, a pro forma invoice or a document stating ‘this is not a VAT invoice’ has been provided…” along with an offer to provide alternative evidence.

It was also discovered, during the inspection, that not only had output tax been underdeclared, but the appellant had a history of poor record keeping.

Decision

Despite the business providing; records of payments, in some cases weighbridge tickets, detailed bank statements, spreadsheets and Sage accounts information – which it was contended amounted to alternative documentary evidence, it was ruled that this was insufficient, so the assessment stood.

The lack of care in obtaining and retaining documents, poor accounting procedures such that output tax was understated and the past behaviour and history of the taxpayer meant that HMRC was not obliged to accept the proffered alternative evidence, The general unreliability of the records counted against the business and that HMRC acted in best judgement.

It was stated that HMRC were perfectly justified in requiring more detailed and convincing documentary evidence to replace the missing VAT invoices than the appellant provided. And the inspector could not be criticised for refusing to accept the extremely thin evidence supplied as an alternative to the missing VAT invoices.

Commentary

It is clear that every business must keep proper records and retain all documents, especially invoices. It was hardly surprising that failure to do that ensured that this appeal was dismissed. It also didn’t help that the appellant had a poor track record of accounting.

HMRC do have the discretion to accept alternative evidence, however, this is more likely if the relevant invoices have been genuinely misplaced, destroyed or not received. There is also the opportunity to go to the supplier and request a replacement invoice.

So, basically: Keep records properly or it will cost you!

 

I have to charge myself VAT?!

By   9 July 2019
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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. 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.

Intrastat_flow_diagramMore 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!

VAT: The transport of disabled persons

By   24 June 2019
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HMRC have released Revenue and Customs Brief 3 (2019) RCB3 2019 which sets out the treatment of certain transport services, specifically in relation to the Jigsaw Medical Services Upper Tribunal (UT) case. This case considered emergency ambulance services contrasted with patient transport services. It was accepted that they were exempt (“the supply of transport services for sick or injured persons in vehicles specially designed for that purpose” – VAT Act 1994, Schedule 9, Group 7, item 11) but could they “also” be treated as zero rated?

Technical

Zero rating takes precedence over exemption, so if these services qualify for both exemption and zero rating, they will be treated as zero rated. Although both treatments are VAT free, zero rating is beneficial as it provides the suppler the ability to recover input tax attributable to the supplies.

Summary

The Brief clarifies that zero rating applies if the supply of transport is in any vehicle with seating to carry ten or more passengers (including the driver) or if there would be 10 seats if wheelchair adaptations were removed. If the supply is not zero rated, say, because of the number of seats test is failed, the above exemption may apply if the service is the transport of sick or injured persons. If that exemption does not apply, then the default position applies, and the service is standard rated. RCB3 also provides information on how to apply the “ten seat rule” and on adapted vehicles.