HMRC have issued a BB 5(2024) on Tour Operators’ Margin Scheme (TOMS) for business to business (B2B) wholesale supplies.
Ultimately, the policy allowing businesses to choose whether to apply TOMS to B2B wholesale supplies remains unchanged.
HMRC has issued its 1 May 2024 to 30 April 2025 Road Fuel Scale Charges (RFSC)
RFSC
A scale charge is a way of accounting for output tax on road fuel bought by a business for cars which is then put to private use. If a business uses the scale charge, it can recover all the VAT charged on road fuel without having to identify specific business and private use. The charge is calculated on a flat rate basis according to the CO2 emissions of the car.
More on motoring expenses here.
A business will need to calculate the correct RFSC based on a car’s CO2 emissions, and the length of its VAT accounting period. This will be either one, 3, or 12 months. The CO2 emissions figure may be found here if the information is not available in the log book.
Alternatives to using RFSC
Business/private mileage calculation example:
The following article provides help with Scheme claimants:
HMRC guidance
HMRC has published a website Manage your import duties and VAT accounts, which provides a centralised place from which businesses importing goods can manage payment and guarantee accounts, manage and view authorities, and download duty deferment statements, import VAT certificates, postponed import VAT statements, and notification of adjustment statements. The website can only be accessed via the Government Gateway.
From this site a business can:
Downloads are also available for:
To use the service a business must be subscribed to the Customs Declaration service.
Latest from the courts
In the The Prudential Assurance Company Limited (Pru) Court of Appeal (CoA) case the issues were the “difficult” questions in respect of the relationship between the VAT grouping rules and the time of supply (tax point) legislation. Is VAT is applicable on a continuous supply of services where these services were supplied while the companies were VAT grouped, but invoices were issued after the supplier left the VAT group?
Background
Pru was at the relevant time carrying on with-profits life and insurance business. Silverfleet Capital Limited (Silverfleet) provided Pru with investment management services. Under an agreement dated 30 August 2002, the consideration which Silverfleet received for its services comprised a management fee calculated by reference to the amount of investments made during the period in which services were provided and performance fees, payable in the event that the performance of certain funds exceeded a set benchmark rate of return.
When Silverfleet was rendering its investment management services, Pru was the representative member of a VAT group of which Silverfleet was also a member. However, in 2007 a management buy-out was effected, as a result of which Silverfleet ceased to be a member of Pru’s VAT group. It also ceased to provide management services to Pru.
During 2014 and 2015, the hurdle rate set under the 2002 agreement was passed. Silverfleet accordingly invoiced Prudential at various dates between 2015 and 2016 for fees totalling £9,330,805.92 (“the Performance Fees”) plus VAT at 20%.
The Issues
The CoA considered whether the Performance Fees are subject to VAT.
The First-tier Tribunal (FTT) decided the point in favour of Pru. However, HMRC succeeded in an appeal to the Upper Tribunal (UT). In a decision that decision, the UT concluded that VAT was chargeable on the Performance Fees.
In its decision, the FTT queried whether regulation 90 of the VAT Regulations went so far as to direct that Silverfleet’s services had not been provided within a VAT group and had been “supplied in the course or furtherance of a business that in the VAT group world was not being carried on”. Further, the FTT was “unable to see what feature distinguishes [Prudential’s] case from that of the taxpayer in [B J Rice & Associates v Customs and Excise Commissioners]”.
In contrast, the UT considered that, pursuant to regulation 90 of the VAT Regulations, Silverfleet’s services were to be treated as having been supplied when invoiced and, hence, at a time when Silverfleet and Prudential were no longer members of the same VAT group. That being so, section 43 of VATA 1994 was not, in the UT’s view, in point. The UT also considered that the FTT had erred in regarding itself as bound by B J Rice & Associates v Customs and Excise Commissioners [1996] STC 581 (“B J Rice”) to allow the appeal. Unlike Mr Rice, the UT said in its decision, Silverfleet “was not entirely outside the scope of VAT when the Services were rendered, but rather it was subject to a specific set of assumptions and disregards”.
Pru contended that Silverfleet should not be considered to have made the supply in the course or furtherance of any business carried on by it. The business will instead be assumed to have been carried on by Pru. This was important because if VAT was applicable to the services Pru would not be in a position to recover it (in full at least) due to partial exemption which represented a large VAT cost.
Unsurprisingly, HMRC considered that output tax was due because at the tax point, Silverfleet as no longer part of the VAT group.
Legislation
The VAT Act 1994, section 43 lays down the rules in respect of VAT groups, and The VAT Regulations 1995, regulation 90 makes provision with respect to the time at which continuous supplies of services are to be treated as supplied for VAT purposes.
Section 43 explains that any supply by one member of a VAT group to another is to be “disregarded” and that “any business carried on by a member of the group shall be treated as carried on by the representative member”. Does this mean that no VAT is chargeable on an intra-group supply regardless of whether the supplier has left the group by the time consideration for the supply is the subject of a VAT invoice and paid? Or is section 43 inapplicable in respect of continuous supplies insofar as the consideration is invoiced and received only after the supplier is no longer a member of the VAT group because regulation 90 provides for the services to be treated as supplied at the time of the invoice or payment?
Decision
The appeal was dismissed and HMTC’s assessment was upheld. It was not possible to disregard the supply as intra-group and the tax point rules for the continuous supply of services meant that it was a taxable supply. The decision was not unanimous, with the decision by the judges being a 2:1 majority.
Commentary
This was a close decision and highlights the necessity of considering the interaction between VAT groups and tax points and the implications of timings. The case makes interesting reading in full (well, for VAT people anyway!) for the technical discussions and the disagreement between the judges.
I am often asked as a VAT person whether I find tax boring. I do often find it frustrating, some of the mechanics arcane and dealing with HMRC something of a challenge (putting it politely). However, I have been advising on the tax for getting on for 30 years, so it must have its attractions…
I think the best way to put it is by quoting K Maurer:
Tax is not boring. Tax is politics. Tax is geography. Tax is social issues. Tax is financial literacy. Tax is financial empowerment. Tax is problem solving. Tax is helping others create a stronger sense of independence. Tax is anything but boring!
I would also add that tax is challenging as a practitioner, it is also; evaluating information, arriving at creative solutions, hand-holding, standing up for rights, explaining, challenging views and assumptions and…keeping on top of a rapidly changing legislative/legislation and commercial landscapes.
It can also be very silly – as my serious of VAT: Did you knows illustrate.
Some of my other favourite tax and business quotations here.
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:
Dead mice, rats and day-old chicks sold for feeding to exotic pets may be zero-rated.
The VAT helpline will be open for five days every month ahead of the deadline for filing VAT returns – outside of this time, customers will again be directed to use HMRC’s online services.
CIOT stated that:
“We are deeply dismayed that, so soon after the criticisms levelled at them by the Public Accounts Committee, and in the light of an inconclusive evaluation, HMRC have decided to make these big, permanent cuts to the help they provide to taxpayers”.
This again illustrates that HMRC cannot cope and that the service provided to businesses is truly awful.
Update! One-day later…
HMRC has now reversed the above planned cuts less than 24 hours after they were announced!
After strong criticism from many sources HMRC said that while “making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity”, the pace of this change “needs to match the public appetite for managing their tax affairs online”.
“We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.”
A statement on behalf of the Treasury Committee noted it was “extremely pleased to see that common sense has prevailed”, called the planned cuts “mismanaged from the beginning” and commented that the announcement was “ill-advised”.
“We welcome the decision to reverse yesterday’s announcement. While we do not oppose expansion of digital services for those who want to use them, we remain entirely unconvinced that HMRC is adequately prepared to impose such a significant change in how it serves taxpayers. It further pondered over the extent to which the department is prioritising its own needs over those of law-abiding and vulnerable taxpayers.
This Guidance provides examples to help with the completion of declarations on the Customs Declarations Service for exports. It has been updated with the addition of a standard pre-lodged export declaration document.