Tag Archives: VAT-exempt

VAT Invoices – A Full Guide

By   9 September 2024
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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.

(c) The date of issue of the document.

(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: What is an exempt supply, and what does it mean?

By   17 June 2024
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VAT Basics

Exemption generally

Some services are exempt from VAT. If all the services a business provides are exempt, it will not be able to register for VAT, which means it cannot reclaim any input tax incurred on its purchases or expenses.

If a business is VAT registered it may make both taxable and exempt supplies (it will need to make at least some taxable supplies to be registered). Such a business is classed as partly exempt and it may be able to recover some input tax, but usually not all (Please see de minimis below).

Types of supply which may be exempt

Examples are:

The above list is not exhaustive.

* Most businesses which do not routinely make exempt supplies usually encounter exemption in the area of land and property and it is an easy trap to fall into not to consider VAT when involved in property transactions. This is one area where VAT planning may be of assistance as it is possible in most situations to deliberately choose to add VAT to an exempt supply to avoid a loss of input tax.  This is known as the option to tax, and it is considered in more detail here.

The legislation covering exemption is found at The VAT Act 1994, Schedule 9. 

What does exemption mean?

 An entity only making exempt supplies cannot register for VAT and consequently has no VAT responsibilities or obligations. While this may seem attractive, exemption is often a burden rather than a relief. This is because any VAT it incurs on any expenditure is irrecoverable and represents an additional cost.  This often affects charities, although there are some limited reliefs.

Exempt supplies are completely different to non-business activities, although the VAT outcome is often similar.

 Partial exemption de-minimis

A partly exempt business cannot usually recover all of the input tax it incurs. However, there is a relief called de minimis. Broadly, if VAT bearing expenditure is below certain limits in may be recovered in full. These are provisional calculations and are subject to a Partial Exemption Annual Adjustment.

Further information on terms used in partial exemption here.

VAT: The Partial Exemption Annual Adjustment

By   4 December 2023
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What is the annual adjustment? Why is it required?

An annual adjustment is a method used by a business to determine how much input tax it may reclaim.

Even though a partly exempt business must undertake a partial exemption calculation each quarter or month, once a year it will have to make an annual adjustment as well.

An annual adjustment is needed because each tax period can be affected by factors such as seasonal variations either in the value supplies made or in the amount of input tax incurred.

The adjustment has two purposes:

  • to reconsider the use of goods and services over the longer period; and
  • to re-evaluate exempt input tax under the de minimis rules.

An explanation of the Value Added Tax Partial Exemption rules is available here

Throughout the year

When a business makes exempt supplies it will be carrying out a partial exemption calculation at the end of each VAT period. Some periods it may be within the de minimis limits and, therefore, able to claim back all of its VAT and in others there may be some restriction in the amount of VAT that can be reclaimed. Once a year the business will also have to recalculate the figures to see if it has claimed back too much or too little VAT overall. This is known as the partial exemption annual adjustment. Legally, the quarterly/monthly partial exemption calculations are only provisional, and do not crystallise the final VAT liability. That is done via the annual adjustment.

The first stage in the process of recovering input tax is to directly attribute the costs associated with making taxable and exempt supplies as far as possible. The VAT associated with making taxable supplies can be recovered in the normal way while there is no automatic right of deduction for any VAT attributable to making exempt supplies.

The balance of the input tax cannot normally be directly attributed, and so will be the subject of the partial exemption calculation. This will include general overheads such as heating, lighting and telephone and also items such as building maintenance and refurbishments.

The calculation

Using the partial exemption standard method the calculation is based on the formula:

Total taxable supplies (excluding VAT) / Total taxable (excluding VAT) and exempt supplies x 100 = %

This gives the percentage of non-attributable input VAT that can be recovered. The figure calculated is always rounded up to the nearest whole percentage, so, for example, 49.1 becomes 50%. This percentage is then applied to the non-attributable input VAT to give the actual amount that can be recovered.

Once a year

Depending on a businesses’ VAT return quarters, its partial exemption year ends in either March, April, or May. The business has to recalculate the figures during the VAT period following the end of its partial exemption year and any adjustment goes on the return for that period. So, the adjustment will appear on the returns ending in either June, July, or August. If a business is newly registered for VAT its partial exemption “year” runs from when it is first registered to either March, April or May depending on its quarter ends.

Special methods

The majority of businesses use what is known as “the standard method”. However, use of the standard method is not mandatory and a business can use a “special method” that suits a business’ activities better. Any special method has to be “fair and reasonable” and it has to be agreed with HMRC in advance. When using a special method no rounding of the percentage is permitted and it has to be applied to two decimal places.

Commonly used special methods include those based on staff numbers, floor space, purchases or transaction counts, or a combination of these or other methods.

However, even if a business uses a special method it will still have to undertake an annual adjustment calculation once a year using its agreed special method.

De minimis limits

If a business incurs exempt input tax within certain limits it can be treated as fully taxable and all of its VAT can be recovered. If it exceeds these limits none of its exempt input tax can be recovered. The limits are:

  • £625 per month on average (£1,875 per quarter or £7,500 per annum) and;
  • 50% of the total input VAT (the VAT on purchases relating to taxable supplies should always be  greater than the VAT on exempt supplies to pass this test)

The partial exemption annual adjustments are not errors and so do not have to be disclosed under the voluntary disclosure procedure. They are just another entry for the VAT return to be made in the appropriate VAT period.

Conclusion

If a business fails to carry out its partial exemption annual adjustment it may be losing out on some input VAT that it could have claimed. Conversely, it may also show that it has over-claimed input tax. When an HMRC inspector comes to visit he will check that a business has completed the annual adjustment. If it hasn’t, and this has resulted in an over-claim of input VAT, (s)he will assess for the error, charge interest, and if appropriate, raise a penalty. It is fair to say that partly exempt businesses tend to receive more inspections than fully taxable businesses.

A VAT Did you know?

By   20 September 2023
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Dance classes in some EU countries are subject to different VAT rates depending on whether the dance style is considered artistic or entertainment. In the UK, belly dancing and ceroc lessons are standard rated, but ballet is exempt.

VAT: Definition of insurance

By   5 September 2023
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Further to my article on insurance and partial exemption, HMRC has published a new definition of what insurance means for VAT as a consequence of the CJEU United Biscuits (Pension Trustees) Ltd and another v HMRC [2020] STC 2169 case.

It is set out in para 2.2 of Public Notice 701/36

What insurance is

There is no statutory definition of insurance, although guidance can be gained from previous legal decisions in which the essential nature of insurance has been considered.

The Court of Justice of the European Union , in the case of United Biscuits (Pension Trustees) Ltd & Anor v R & C Commrs (Case C235-19) [2020], upheld the definition given in the case of Card Protection Plan Ltd v C & E Commrs (Case C-349/96) [1999] which concluded that:

“…the essentials of an insurance transaction are… that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded”.

HMRC also accept that certain funeral plan contracts are insurance (and therefore exempt from VAT), even though they are not regulated as such under the FSMA insurance regulatory provisions.

Vehicle breakdown insurance is also seen as insurance even though providers are given a specific exclusion under the FSMA from the requirement to be authorised.

VAT: Is a cosmetic treatment exempt medical care? The Illuminate Skin Clinics Ltd case

By   12 July 2023
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Latest from the courts

In the Illuminate Skin Clinics Ltd First-Tier Tribunal (FTT) case the issue was whether cosmetic procedures qualified as exempt medical treatment.

Background

The Appellant runs a private, ie; non-NHS clinic offering a range of aesthetic, skincare and wellness treatments advertised as: fat freezing, thread lifts, chemical peels, fillers, facials, intravenous drips and boosters. The Appellant’s sole director and shareholder, Dr Shotter, complies with Item 1 (below) in terms of qualifications, ie; she is enrolled on the register of medical professionals.

The list of treatments included:

  • Botox
  • Dermal fillers
  • CoolSculpting
  • Microsclerotherapy
  • Prescription skincare
  • Chemical peels
  • Microdermabrasion
  • Thread lifting
  • Thermavein
  • Aqualyx
  • Platelet-rich plasma treatment.

HMRC contended that these supplies were standard rated because there is no medical purpose behind the treatments, and they are carried out for purely cosmetic purposes. An assessment was raised for output tax on this income.

The Appellant argued that what it provided was exempt medical care via The VAT Act 1994, Schedule 9, Group 7, item 1 – “The supply of services consisting in the provision of medical care by a person registered or enrolled in any of the following:

  • The register of medical practitioners…”

And its contention was that the primary purpose of the treatments was “the protection, maintenance or restoration of the health of the person concerned”

In the Mainpay case it was established that “medical” care means “diagnosing, treating and, in so far as possible, curing diseases or health disorders”

Decision

Although there may have been a beneficial psychological impact on undergoing such treatments and this may have been the reason for a patient to proceed (and they may be recommended by qualified medical professionals) this, in itself, was insufficient to persuade the judge that the services were exempt. Consequety, the appeal was rejected and the assessment was upheld.

The FTT found that there was very little evidence of diagnosis. This was important to the overall analysis because diagnosis is the starting point of medical care. Without diagnosis, “treatment”, in the sense of the exemption, is not something which is being done responsively to a disease or a health disorder.

The fact that people go to the clinic feeling unhappy with some aspect of their appearance, and (at least sometimes) are happier when something is done at the clinic about that aspect of their appearance, does not mean that the treatment is medical, or has a therapeutic aim.

It was telling that the differentiation, in Dr Shotter’s own words, between what the clinic does from what “a GP or other health professional” does is; diagnosis. It also highlighted the general trend or purpose of the clinic’s activity – helping people to feel better about their appearance, in contexts where their appearance is not itself a health condition, or threatening to their health in a way which mandates treatment of their appearance by a GP or another health professional.

Helping someone to achieve goals in relation to their appearance, which is what this clinic did, is not treating someone’s mental health status, but is going to their self-esteem and self-confidence. It is a misuse of language to say that this is healthcare in the sense that it would fall within Item 1 of Group 7.

Commentary

There has been an ongoing debate as to what constitutes medical care. Over 20 years ago I was advising a large London clinic on this very point and much turned on whether patients’ mental health was improved by undergoing what many would regard as cosmetic procedures. We were somewhat handicapped in our arguments by the fact that many of the patients were lap dancers undergoing breast augmentation on the direction of the owner of the club…

It is worth remembering that not all services provided by a medically registered practitioner are exempt. The question of whether the medical care exemption is engaged in any given case will turn on the particular facts.

Further recent cases on medical exemption here and here.

VAT: Mind the gap – HMRC latest figures

By   23 June 2023
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GOV.UK has published details of the most recent measurement of the tax gap for 2021-2022.

What is the tax gap?

The tax gap is measured by comparing the net tax total theoretical liability with tax actually paid. This is comparing the amount of tax HMRC expected to receive in the UK and the amount HMRC actually received.

The figures

The tax gap is estimated to be 4.8% of total theoretical tax liabilities, or £35.8 billion in absolute terms, in the 2021 to 2022 tax year.

Total theoretical tax liabilities for the year were £739.3 billion.

There has been a long-term reduction in the tax gap as a proportion of theoretical liabilities: the tax gap reduced from 7.5% in the tax year 2005 to 2006 to 4.8% in 2021 to 2022 – remaining low and stable between the years 2017 to 2018 and 2021 to 2022.

Criminal activity and evasion accounted for £4.1billion loss in tax collected.

30% of all underpayments of tax were due to a failure to take reasonable care, while 13% of instances were down to evasion.

A massive 56% of the tax gap is made up by small businesses (up from 40% of the total in 2017-18). Whether this is down to HMRC improving collection from large businesses or an increasing failure to crack down on small business is a moot point. It remains to be seen how HMRC react to this new information, but experience insists that small businesses may expect increased attention for the authorities.

The VAT gap

VAT represents 21% of the overall tax gap.

The VAT tax gap is 5.4%.

The absolute VAT gap is £7.6 billion.

The VAT gap has reduced from 14.0% of theoretical VAT liability in 2005 to 2006 to 5.4% in 2021 to 2022.

More than two thirds of the theoretical VAT liability was estimated to be from household consumption. The remainder came from the expenditure by businesses that supply goods and services where the VAT is non-recoverable (they are exempt from VAT), and from the government and housing sectors.

Information on the method used to estimate the VAT gap is here for those interested (I don’t imagine that there will be that many…).

So, £7.6 millions of VAT is missing. That seems an awful lot.

VAT: Was an option to tax valid? The Rolldeen Estates Ltd case

By   18 April 2023
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Latest from the courts

In the First-Tier tribunal (FTT) case of Rolldeen Estates Ltd there were a number of issues, inter alia; whether the appellant’s option to tax (OTT) was valid, if not, whether HMRC had the power to deem it valid, whether HMRC acted unreasonably and whether appellant estopped from relying on earlier meeting with an HMRC officer.

Background

The letting of property is an exempt supply, however, a landlord the owner can OTT the property and charge VAT on that supply.  If the OTT is exercised, the supplier is able to reclaim input VAT on costs such as repairs and maintenance, but charges output VAT on its supplies.  The OTT provisions are set out at The VAT Act 1994, Schedule 10.

The appellant in this case had previously submitted an OTT form VAT1614A and charged VAT on the rent to its tenant. Subsequently, the property was sold without charging VAT. HMRC issued an assessment for output tax on the sale value.

Schedule 10

A taxpayer does not need HMRC’s permission to OTT, unless that person has already made exempt supplies in relation to that property – in particular, if the property has already been let without VAT having been charged.  In that scenario, the person must apply to HMRC for permission to exercise the OTT, and permission will only be given if HMRC are satisfied that the input tax is fairly attributed as between the exempt period and the taxable period. When OTT the company stated that no previous exempt supplies of the relevant property had been made and this was also confirmed in subsequent correspondence with HMRC.

Appellant’s contentions

The company informed HMRC that the OTT was invalid so that no VAT was due on the sale. Evidence was provided which demonstrated that Rolldeen had made exempt supplies before the date of the OTT so that HMRC’s permission had therefore been required before it could be opted. No permission had been given and therefore there was no valid OTT in place even though the appellant had purported to exercise that option. Also, the appellant submitted that it was unreasonable of HMRC to have exercised the discretion to deem the OTT to have effect, because they had failed to take into account the fact that during an inspection, HMRC had known that Rolldeen had made exempt supplies before OTT.

HMRC’s view

VATA, Schedule 10, para 30 allows HMRC retrospectively to dispense with the requirement for prior permission, and to treat a “purported option as if it had instead been validly exercised”.  HMRC issued a decision stating that it was exercising its discretion under Schedule 10, para 30 to treat the relevant property as opted with effect from the date of the VAT1614A and that VAT was due on the sale and the assessment was appropriate.

Decision

The FTT found that:

  • after an inspection by HMRC it knew that prior exempt supplies had been made
  • although HMRC knew exempt supplies had already been made Rolldeen was estopped* from relying on that fact, because both parties had shared a “common assumption” that the OTT had been valid
  • para 30 could be used to retrospectively validate the OTT (albeit only in relation to supplies made after 1 June 2008).  In this case that was sufficient as the sale of the property occurred on in March 2015
  • HMRC had not acted unreasonably because they had not taken into account their own failure to carry out a compliance check
  • this is exactly the sort of situation for which para 30 was designed
  • it was entirely reasonable and appropriate of HMRC to deem the purported option to have been validly exercised

The appeal was rejected and the assessment was valid.

Commentary

Again, proof, if proof is needed, that OTT can be a complex and costly area of the tax and care must always be taken. Advice should always be sought, as once an OTT is made, there is usually no going back.

An interesting point in this case was that no case law was cited on this issue and the FTT was unable to identify any.

* The principle of “estoppel” means that a person may be prevented from relying on a particular fact or argument in certain circumstances.

VAT: Doctors and healthcare professionals

By   16 January 2023
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Healthcare services – an overview

I have noticed that I am receiving more and more queries in this area and HMRC does appear to be taking an increased interest in healthcare entities. This is hardly surprising as it can be complex and there are some big numbers involved.

(This article refers to doctors, but applies equally to most healthcare professional entities including; opticians, nurses, osteopaths, chiropractors, midwives, dentists etc.)

The majority of the services provided by doctors’ practices are VAT free. Good news one would think; no need to charge VAT and no need to deal with VAT records, returns and inspections.

However, there is one often repeated question from practices; “How can we reclaim the VAT we are charged?” This is particularly relevant if a practice intends to spend significant amounts on projects such as property construction or purchase.

The first point to make is that if a practice only makes exempt supplies (of medical services) it is not permitted to register for VAT and consequently cannot recover any input tax. Therefore we must look at the types of supplies that a practice may make that are taxable (at the standard or zero rate). If any of these supplies are made it is possible to VAT register regardless of their value. Of course, if taxable supplies are made, the value of which exceeds the current turnover limit of £85,000 in a rolling 12-month period, registration is mandatory.

Examples of supplies of services and goods which may be taxable are:

  • drugs, medicines or appliances that are dispensed by doctors to patients for self-administration
  • dispensing drugs against an NHS prescription (zero-rated)
  • drugs dispensed against private prescriptions (standard-rated)
  • medico legal services that are predominantly legal rather than medical – for example negotiating on behalf of a client or appearing in court in the capacity of an advocate
  • clinical trials or market research services for drug companies that do not involve the care or assessment of a patient
  • paternity testing
  • certain rental of rooms/spaces
  • car parking
  • signing passport applications
  • providing professional witness evidence
  • any services which are not in respect of; the protection, maintenance or restoration of health of a patient.

So what does VAT registration mean?

Once you join the “VAT Club” you will be required to file a VAT return on a monthly of quarterly basis. You may have to issue certain documentation to patients/organisations to whom you make VATable supplies. You may need to charge VAT at 20% on some services. You will be able to reclaim VAT charged to you on purchases and other expenditure subject to the partial exemption rules – see below. You will have to keep records in a certain way (see MTD) and your accounting system needs to be able to process specific information.

Because doctors usually provide services which attract varying VAT treatment, a practice will be required to attribute VAT incurred on expenditure (input tax) to each of these categories. Generally speaking, only VAT incurred in respect of zero-rated and standard-rated services may be recovered. In addition, there will always be input tax which is not attributable to any specific service and is “overhead” eg; property costs, professional fees, telephones etc. VAT registered entities which make both taxable and exempt supplies are deemed “partly exempt” and must carry out calculations on every VAT return.

Partial Exemption

Once the calculations described above have been carried out, the resultant amount of input tax which relates to exempt supplies is compared to the de-minimis limits (broadly; £625 per month VAT and not more than 50% of all input tax). If the figure is below these limits, all VAT incurred is recoverable regardless of what activities the practice is involved in. More details here.

VAT registration in summary

Benefits

  • recovery of input tax; the cost of which is not claimable in any other way
  • potentially, recovery of VAT on items such as property, refurbishment and other expenditure that would have been unavailable prior to VAT registration
  • only a small amount of VAT is likely to be chargeable by a practice
  • may provide opportunities for pre-registration VAT claims

Drawbacks

  • increased administration, documentation and staff time
  • exposure to penalties and interest
  • may require VAT to be added to some services provided which were hitherto VAT free
  • likely that only an element of input tax is recoverable as a result of partial exemption
  • uncertainty on the VAT position of certain services due to current tax cases
  • potentially dealing with the Capital Goods Scheme (CGS)
  • possible increased costs to the practice in respect of professional fees.

Please contact us if any of the above affects you or your clients.

VAT: Financial Services – Flowchart

By   30 June 2022
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FS Intermediary – flowchartDownload
Financial Services (FS) is a complex area of VAT and the legislation and case law add to that complexity. For ease, I have made a flowchart which I hope may help.

The supply of FS intermediary services may be exempt from VAT, but other types of supplies relating to FS are standard rated (advice, marketing, providing information etc).

With new technology advancing all the time, this adds more difficulties in establishing the correct VAT treatment.