Tag Archives: overseas-VAT-registration

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

By Marcus Ward 8 April 2024

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

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

Other updates include:

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

VAT registration delays – latest

By Marcus Ward 8 March 2021

Anecdotally, we understand that some businesses applying for registration are experiencing significant delays. Further, attempts to contact HMRC by email is often difficult, and telephones are regularly not answered (although we understand that some people have enjoyed more success with the webchat). Also, the Non-Established Taxable Persons (NETP) office has moved, right at the time when more EU businesses need to register in the GB due to Brexit. This has created an even longer backlog.

Confirmation

The Business Delivery Team at HMRC has confirmed that it is attempting to deal with a very high number of applications, which are being delayed for various reasons (not least by the sheer volume one expects). The department has also stated that the following actions and checks will assist with faster processing times and urges applicants to check that all information requested set out here is included with the application to avoid any further delays. The most salient being to use the online method rather than the hard copy. However, this is not always possible if additional documentation needs to be sent.

How to avoid common errors identified by HMRC

ensure that the addresses provided on the VAT 1 form matches the business’s principal place of business (PPOB)
check that the notification of a trade classification matches the supplies the business makes
the VAT treatment of activities must be correctly identified
the correct person must sign the application – eg; for a corporate body it must be a director, company secretary or authorised signatory or an authorised agent
ensure the correct registration date (effective date of registration – EDR) is given. And that the EDR is accurate considering the circumstances that have been outlined for requesting registration elsewhere in the application
the bank account details provided must be in the name of the taxable person

And I will add; do not forget form VAT5L when registering a business which is involved in land and property transactions.

The Business Delivery Team also stated that “We are also considering how we can improve the registration process by resolving more cases in real time by telephone and engaging with customers in a different way to gather any further required information. We’ll tell you more about this shortly.”

While any improvement in communication is to be welcomed, it remains to be seen what practical measures will be implemented to speed up registration processing and how soon these will be put in place.

VAT Taxable Supply – Definition

By Marcus Ward 3 July 2020

What is a taxable supply and who is a taxable person?

A VAT Back To Basics

Taxable supply

It is sometimes useful when considering a transaction to “go back to basics” for VAT purposes. There are certain tests to determine whether a supply is taxable, and these are set out below. Broadly, the tests establish whether UK VAT is payable on a sale and they determine whether an entity is “in business”, that is; carrying on an economic activity.

A transaction is within the scope of UK VAT if all four of the following conditions are satisfied:

It is a supply of goods or services.

There is a distinction between the two types of supply as different VAT treatments may apply. Generally, everything that is not tangible goods is services. However, if no goods or services are actually provided, there is no supply. Indeed, if there is no consideration for a supply, in most cases it is not a taxable supply.

It takes place in the UK.

There are quite complex tests to consider when analysing the “place of supply”, especially where services are concerned. If the place of supply is outside the UK then usually no UK VAT is due, however, the supply may be subject to VAT in another country.

It is made by a taxable person.

A taxable person is any legal entity which is, or should be, registered for VAT in the UK.

It is made in the course or furtherance of any business carried on by that person

Business

The term “business” is only used in UK legislation, The Principal VAT Directive refers to “economic activity” rather than “business” and since UK domestic legislation must conform to the Directive both terms must be seen as having the same meaning. Since the very first days of VAT there have been disagreements over what constitutes a “business”. I have only recently ended a dispute over this definition for a (as it turns out) very happy client. The tests were set out as long ago as 1981 and may be summarised as follows:

Is the activity a serious undertaking earnestly pursued?
Is the activity an occupation or function, which is actively pursued with reasonable or recognisable continuity?
Does the activity have a certain measure of substance in terms of the quarterly or annual value of taxable supplies made (bearing in mind that exempt supplies can also be business)?
Is the activity conducted in a regular manner and on sound and recognised business principles?
Is the activity predominantly concerned with the making of taxable supplies for a consideration?
Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them?

So, if these tests are passed a taxable supply exists. The next step is to establish which VAT rate applies. In an often quoted comment from the judge in the Morrison’s Academy Boarding Houses Association 1978 STC1 Court Of Session case “…In my opinion it will never be possible or desirable to define exhaustively ‘business’ ”. Which what it lacks in helpfulness, makes up for in candour.

There was something of a deviation from the Lord Fisher tests in the Longbridge Court of Appeal case, however, that appears to be a blip and HMRC seem to have reverted to Lord Fisher in subsequent hearings on the same topic. A bit of a: watch this space area of VAT.

Recent cases on business

Recent case law on this issue here and here and HMRC Internal guidance on the Lord Fisher tests here

Commentary

Tip: It is often easier to consider what isn’t a taxable supply to establish the correct VAT treatment. Specific examples of situations which are not taxable supplies are; donations, certain free supplies of services, certain grants or funding, some compensation and some transactions which are specifically excluded from the tax by legislation, eg; transfers of going concerns (TOGC).

I think that it is often the case that the basic building blocks of the tax are overlooked, especially in complex situations and I find it helps to “go back to the first page” sometimes.

VAT: Consignment and call-off stock

By Marcus Ward 5 May 2020

Consignment, call-off stock and sale or return goods

If a business is required to provide regular sales of goods to customers, a prudent business structure is to keep inventory in a warehouse near the customer, or which belongs to the customer. This is likely to reduce transport costs and provides quicker access to the goods thus reducing time in the supply chain. This practice is likely to increase after Brexit with the predicted delays at borders. There are specific VAT rules for businesses which hold stock in foreign countries. They stipulate when, and what VAT should be charged, and if a business needs to VAT register as a non-resident trader in another EU country in which it is warehousing its goods.

Call off and consignment stock have been in the news recently (see below) so now seems a good time to consider what the terms mean, the differences and the VAT treatment applicable.

Differences

There is often confusion over the terms; consignment and call-off stock, and they are sometimes used interchangeably. They are differentiated based on who controls access to, and use of, the goods. The difference determines the VAT requirements and compliance rules, so it is important to identify the actual arrangements a business has in place, or plan for the most beneficial outcome. Both of these measures involve the transfer of a business’ own goods – for the purposes of this article; cross-border. The transfer of goods within the same legal entity from one country to another is a deemed supply. This fact is sometimes missed, which can lead to problems. The VAT rules differ from country to country and create legal uncertainty for businesses. Call-off stock is one of the four “quick fixes” announced by the EC aiming for uniformity. UK implementation here. However, reports mention difficulties and disharmony on a number of issues and these fixes are likely to be irrelevant in the case of a no-deal Brexit.

In summary

Consignment stock

Consignment stocks are created when a business transfers its own goods to another Member State to create a stock over which it has control and from which it makes supplies. Typically, there are multiple potential customers for consignment stock.

Note: Goods sent to an overseas customer on sale or return are treated in the same way as consignment stocks.

Call-off stock

Call-off stock is the transfer of goods by a business from one Member State to another to create a stock of goods from which its customers can ‘call-off’ ie; use and pay for the goods as and when they require them.

Not call-off stock

Goods delivered to storage facilities operated by the supplier, rather than the customer, should be treated as consignment stocks (see above). If stocks of goods are dispatched by a supplier for call-off by more than one customer, this is also likely to be consignment stock.

VAT treatment

Consignment stock

There is an initial deemed supply of own goods to form the stock which takes place in the Member State from which the goods are originally shipped. This is usually VAT free as a dispatch and the usual documentary requirements apply.

The place of subsequent supplies of the goods, once a buyer has been found (change of ownership) is usually the Member State in which the stock is held.

Because the business is transferring its own goods “to itself” in another Member State it will be making an acquisition of goods in that Member State. The business is likely to be liable to register for VAT there (or appoint a fiscal representative in the country of arrival) and to account for acquisition tax in the other Member State. Output tax will also be due (at the rate of VAT applicable in the Member State in which the goods are located) on the sale to a third party.

Consignment stock – reporting requirements

If a UK VAT registered business transfers goods to another Member State to create a consignment stock it must complete boxes 6 and 8 on the VAT return and an EC Sales List declaration reporting a value based on the cost of the goods – see HMRC Public Notice 725. The supply must be reported on an Intrastat dispatch Supplementary Declaration (SD) at the time the goods are dispatched.

As this is a supply of own goods, the value to be declared for Intrastat purposes is the amount that would have been realised in the event of a sale under normal market conditions. If the business is required to register for VAT in the partner Member State, it will have to comply with the VAT and Intrastat requirements in that Member State.

Call-off stock

As the customer has control of the goods in storage, is aware of stock movements, and may take stock whenever he requires this does not generally require the seller to VAT register in the foreign country as a non-resident trader. Such sales are treated as a “regular’ dispatch and the seller is required to show the customer’s VAT number etc on invoices and other documentation in order to treat it as VAT free in the usual way. With effect 1 January 2020 the time of supply for the intra-EC supply is the date the goods are called off by the customer. Before this date the time of supply was the date the goods were physically dispatched.

Call-off stock – reporting requirements

The supply of call-off stock from the UK to a VAT registered business in another Member State is VAT free (subject to the normal rules). Boxes 6 and 8 of the VAT return and the EC Sales list declaration should be completed using a value based on the cost of the goods as above. An Intrastat dispatch Supplementary Declaration (SD) should also be completed at the time the goods are dispatched from the UK, again using a value based on the cost of the goods.

Latest

Following the introduction of the four VAT ‘Quick Fixes’ across the EU, HMRC published specific draft legislation regarding the ‘Call-off stock Quick Fix’. Additionally, HMRC has updated its policy paper on changes to the rules for call-off stock arrangements between the UK and EU Member States. In particular, new information on the accounting of small losses has been added.

Brexit

Unless a deal can be negotiated with the EC to replicate the current arrangements, movements between the UK and the EU27 will follow the third country rules. This means goods will be treated as imports with VAT and duty, plus a local VAT registration in most, if not all cases. Of course, this will likely mean delays and additional administration at borders, plus the addition of duty. A small ray of light (which will be of little compensation) is the removal of Intrastat and SD reporting.

This article considers UK suppliers selling goods outside the UK only. Please contact me if you have any queries on an overseas business using a consignment of call-off stock arrangement in the UK.