HMRC have issued new guidance on the Annual Accounting Scheme.
A business can use form VAT600AA if it is already registered for VAT and wants to join the Annual Accounting Scheme.
Tag Archives: VAT-HMRC-publications
HMRC internal manual: VAT Assessments and Error Correction update
HMRC’s manual VAT Assessments and Error Correction was updated on 15 October 2024.
This internal guidance is for HMRC inspectors (but is equally useful for advisers) covers assessments and error correction. The amendments apply mainly to General assessment procedures: Importance of avoiding delay.
The manual covers:
- Making Tax Digital for Business (MTD) – how to deal with MTD customers
- Powers of assessment
- VAT assessments
- Error correction for VAT
- How to assess and correct
- “VALID” computer printouts
- Demand for VAT
- Remission of tax
It also refers to for the most up-to-date guidance on reasonable excuse CH160000.as a defence against penalties and interest.
More on:
Disclosure of Avoidance Schemes – new rules
New HMRC guidance on error reporting
New online service for error correction
Error Disclosure under £10,000 – Draft Letter To HMRC
HMRC videos and seminars for new businesses on VAT basics
HMRC has updated its guidance to businesses on VAT. The helpful instruction includes: email updates, videos and seminars which cover such subjects as:
- VAT basics
- registration
- registering and joining webinars
- accounting Schemes
- late submission and payment penalties and interest changes
- error corrections
- the reverse charge for construction services
- accounting for VAT on the sale of cars on finance
- HMRC community forums
VAT grouping and divisional registration guidance updated
HMRC has update VAT Notice 700/2: Group and divisional registration.
VAT group registration
VAT grouping is a facilitation measure by which two or more eligible persons can be treated as a single taxable person for VAT purposes. Eligible persons are bodies corporate, individuals, partnerships and Scottish partnerships, provided that certain conditions are satisfied. Bodies corporate includes companies of all types and limited liability partnerships.
The pros and cons of VAT grouping here.
Divisional registration
This is a facility that allows a corporate body which carries on its business through a number of self-accounting units to register each of those units or divisions separately for VAT. Guidance on divisional registration is in section 9.
Updates
Recent updates include:
- Information on what happens if HMRC refuses your application and how to request a paper VAT1 form
- The list of notifications a business may receive while waiting for a VAT grouping registration number, has been updated at section 2.17. A new section about late payment submission penalties has been added at section 5.11.
Extension of VAT energy-saving materials relief
HMRC have published a new Policy Paper on the extension of energy-saving materials (ESMs).
Installations of ESMs in residential accommodation currently benefit from a temporary VAT zero rate until 31 March 2027, after which they revert to the reduced rate of VAT at 5%.
This measure extends the relief to installations of ESMs in buildings used solely for relevant charitable purposes, such as village halls or similar recreational facilities for a local community.
It also expands the scope of the relief to the following technologies:
- electrical batteries that store electricity generated by certain ESMs and from the National Grid
- water-source heat pumps
- diverters that enable excess electricity from certain ESMs to be used within a building in which it is generated rather than exported to the grid
It also adds certain preparatory groundworks that are necessary for the installation of ground- and water-source heat pumps.
The changes apply from 1 February 2024
The policy objective is to incentivise the installation of ESMs across the UK to improve energy efficiency and reduce carbon emissions.
The measures are implemented by The Value Added Tax (Installation of Energy-Saving Materials) Order 2024.
VAT: Fuel and power HMRC update
HMRC has updated its VAT Notice 701/19 from 5 January 2024.
Sections 2, 3 and 5 have been amended to include information about the VAT treatment of charging of electric vehicles (EVs) when using charging points.
VAT: Payments on account – update
HMRC have updated its payments on account (POA) guidance.
What are POA?
These are advance payments towards a business’s VAT bill. They are mandatory.
HMRC will notify a taxpayer to make POA if a business renders VAT returns quarterly, and it owes more than £2.3 million in any period of 12 months or less.
Under the POA arrangement, businesses make interim payments at the end of months two and three for each return quarter. The interim payment is intended to cover part of the overall VAT liability for the that quarter. The balancing payment for the return’s VAT liability will be settled when the business submits its VAT return payment. Quarterly VAT returns are filed online as normal.
POA calculation
HMRC will calculate POA based on a business’s annual VAT liability in the period that it goes over the threshold. The annual VAT liability in that period will be divided by 24 to arrive at an instalment amount.
A taxable person who has been in business for less than 12 months will have POA calculated by HMRC on a pro rata basis.
POA start date and annual cycle
The payments on account cycle starts in the first quarter after a business exceeds the £2.3 million threshold.
The payments will remain the same until the start of the next annual cycle.
The annual cycle begins in April, May or June depending on which VAT return ‘stagger’ a business is on. HMRC bases the amount of payments during the annual cycle on the liability in the period known as the ‘reference year’.
POA due dates
The due dates for POA are the last working day of the second and third months of every VAT quarter no matter what the period end date is. The seven-day extension for paying electronically does not apply to POA.
POA that are not paid on time will be subject to late payment interest.
Due dates for quarterly balancing payments
Balancing payments are due with the VAT return and must clear HMRC’s bank account by the last working day of the month if standard period end dates are used.
Late payments
If a business does not make POA or the balancing payment in full and on time HMRC will:
- take immediate action to recover the debt
- charge late payment interest
- consider charging late payment penalties on amounts unpaid after the balancing payment due date
- consider transferring a business from quarterly to monthly returns
Removal from a POA arrangement
If a business’s VAT liability falls below £2.3 million in the reference year HMRC will remove it from the arrangement six months later.
Alternative to payments on account
If making POA and submitting quarterly VAT returns does not suit a business, it can choose to make VAT returns and payments monthly.
Commentary
As may be seen, it is important to recognise the POA limit and to make payments on time. There is an obvious cash flow impact and plans should be put in place if the VAT turnover is nearing the threshold.
VAT: Partial exemption – updated HMRC guidance
HMRC has published updated partial exemption guidance in Manual PE21500.
The main changes are in respect of updated case law, including the Royal Opera House Court of Appeal case dealing with the attribution of input tax.
In that case the CoA considered: the test of direct and immediate link, economic necessity, business/non-business, and chains of transactions.