Embryos of animal species which are used for human food may be zero-rated but “anything below” the embryo stage is standard-rated.
Tag Archives: vat-planning
VAT: DIY Housebuilders’ Scheme – deadline for claims extended
The DIY Housebuilders’ Scheme is a tax refund mechanism 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). This puts a person who constructs their own home on equal footing with commercial housebuilders. There is no need to be VAT registered in order to make the claim.
One of the main problems was the very strict (and rigorously enforced) deadline of three months for the submission of the claim form. This is from completion of the build (usually this is when the certificate of practical completion is issued) or the building is inhabited, although it can be earlier if the certificate is delayed.
A case on when a house is considered to be complete here.
However, HMRC has announced that this deadline will be extended to six months from a date yet to be announced. This extension is welcome as it is often difficult to collect all the required information and documentation. In addition, the whole process will be digitised some time in the future which will also simplify the process.
The Scheme can be complex, but here is our Top Ten Tips for claimants.
VAT: Evidence for retrospective claims – new guidance
HMRC has updated its Manual VRM9300 on historic VAT claims.
These types of claims are often called “Fleming” claims and refer to those made before the introduction of the four (once three) year time cap. Such claims extend beyond the period that businesses were required to keep business records and so these were less likely to have remained available.
Where detailed records are unavailable it does not mean there is a lower standard of proof for a claim. The civil standard of proof (on a balance of probabilities) remains.
However, taxpayers’ estimates, assumptions and extrapolations must be sufficiently robust to support a claim. HMRC and the Tribunals must have regard to the evidence that is available, and each claim must be considered on its individual merits.
HMRC state that it “…is not obliged to accept a figure simply because some input tax is due or because it is the claimant’s ‘best guess’ based on the material available”. The claimant must first establish that its method of valuing the claim is reasonable and provide an identifiable repayable amount.
The guidance considers the judgement in the NHS Lothian [2022] UKSC 28 case and its impact on claims where full evidence is unavailable.
Alternative evidence
It is also worth noting that HMRC have the discretion to accept alternative evidence.
VAT: Food for assistance dogs now zero rated
VAT Quickie
Pet food is generally standard rated, however, food for “working dogs” is zero rated. Working dogs include animals such as; working sheep dogs, gun dogs and racing greyhounds. The definition in Public Notice 701/15 Animals And Animal Food has been amended at para 6.4 to now include assistance dogs from 28 February 2023.
Assistance dogs are trained to support disabled people and people with medical conditions in a variety of ways. From guide dogs to medical alert dogs, from autism dogs to hearing dogs.
NB: Although dog food held out as for sale for working dogs is zero rated, this excludes biscuit or meal – which remain standard rated regardless of use.
VAT: HMRC yearly average and spot rates
HMRC has published the annual yearly and spot foreign exchange rates in CSV format.
You should use these exchange rates if you have to convert any foreign currency to sterling for Customs and VAT purposes.
When searching for exchange rates a business should consider what it requires the rates for and and the type of rate needed.
HMRC have published guidance on the use of exchange rates for tax and accounting purposes:
VAT: The Windsor Framework
While we await the fine details, trade between GB and Northern Ireland is likely to be subject to new rules. These are set out under the heading of The Windsor Framework published by HM Government.
(Very) General
Via the Northern Ireland Protocol (NIP), Northern Ireland operated under the EU VAT rules. There are revised VAT rules set out in The Windsor Framework. The EU rules on VAT rates will not apply to a list of goods for consumption in Northern Ireland in certain circumstances.
The Windsor Framework amends the legal text of the NIP to ensure that Northern Ireland will be subject to the same VAT and excise rules that apply in the rest of the UK.
The Framework means that legislation to apply the zero-rate of VAT to energy saving materials can be introduced. A number of other flexibilities should enable UK-wide VAT changes to apply in Northern Ireland. It is anticipated that future VAT issues can be addressed in order to manage any divergences in policy between GB and Northern Ireland.
A bit more detail
The Windsor Framework sets up a new UK internal trade scheme, based on commercial data-sharing rather than traditional international customs processes.
Under the NIP, a framework exists that allows goods to move from GB to Northern Ireland tariff-free. If the goods do not fall within that framework, they are treated as if moving across an international border and full customs declarations are required.
This Framework introduces arrangements through a new UK internal market system (colloquially called the “Green Lane”) for internal trade. Goods being sold in Northern Ireland will not be subject to “unnecessary paperwork, checks and duties”.
The new scheme will significantly expand the number of businesses able to move goods using the Green Lane by being classed as internal UK traders.
The Changes
To ensure that internal UK trade is protected, the agreement expands the number of businesses able to be classed as internal UK traders and move goods as ‘not at risk’ of entering the EU through three changes:
- businesses throughout the UK will now be eligible – moving away from the previous restrictions that required a physical premises in Northern Ireland.
- the turnover threshold below which companies involved in processing can move goods under the scheme which they can show stay in Northern Ireland is increased from the current £500,000 limit up to £2 million (this means that four-fifths of manufacturing and processing companies in Northern Ireland who trade with GB will automatically be in scope).
- if businesses are above that threshold, they will be eligible to move goods under the scheme if those goods are for use in the animal feed, healthcare, construction and not-for-profit sectors.
Businesses in the scheme that can show their goods will stay in Northern Ireland will gain access to a simplified process for goods movements, using ordinary commercial data rather than customs data.
Goods moving to the EU will be subject to normal third-country processes and requirements.
Reduction in so-called frictions
The Framework seeks to address a range of issues that added frictions or costs for internal UK trade:
- safeguarded tariff-free movements of all types of steel into Northern Ireland .
- a forward process for ensuring that Northern Ireland businesses can access other goods subject to Tariff Rate Quotas in the future, dealing with the unique disadvantages under the existing system.
- where businesses cannot be certain of the end destination of their goods when first moving them into Northern Ireland, a new tariff reimbursement scheme for those who can show the goods were ultimately not destined for the EU.
VAT Registration: Top tips for agent submissions
HMRC has, last week, set out the main reasons why online VAT registration applications submitted by agents are delayed. In such cases a caseworker is required to review the application and usually raise additional queries.
The “Top Five” reasons for delay
If an agent can avoid these, then the chances of a quick and successful registration is enhanced.
- Business verification failed or is not completed
It is important to have all the business details available when completing the application. There can be difficulties when an application is started but set aside while more information is sought. There is only a seven-day limit once the process is underway.
- Same address used for the business and either the applicant’s home address or agent’s address
This is the Principal Place of Business (PPOB) and should be where the day-to-day activities of the business take place. It is not the applicant’s residence (unless the business is run from home) or the agent’s address.
- Bank details provided do not relate to the business
Bank details for VAT repayments must be:
- a UK account
- in the precise name of the business
If the entity is a partnership the account name may be in the name of a partner. If no UK account exists when the application is being made, this can be added later, but thus itself can cause issues.
- ID documents are not provided digitally
These are cases where the applicant has chosen to provide identification documents by post. There is a facility to attach digital ID and this should be used wherever possible to avoid delays. Three items of ID are required: one a photo ID (passport or driving licence) and the other two non-photo documents (utility bills or birth certificates etc).
- Verifying the applicant’s business
This is often when the business belongs overseas or does not yet have an Unique Taxpayer Reference (UTR). Again, it is preferrable to have all this information to hand before the process is started.
Information which an agent needs
- Government Gateway user ID and password for either agent services account or HMRC Online services
- agent’s name
- phone number
- email address
- client’s name
- client’s date of birth
- details of client’s turnover and nature of business
- client’s bank account details
- client’s National Insurance number
- forms of ID from the client
- client’s Corporation Tax Payments, PAYE, Self-Assessment Return, recent payslip or P60
Previously HMRC has commented on delays and set out these additional common errors:
- 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
And I will add; do not forget form VAT5L when registering a business which is involved in land and property transactions.
A VAT Did you know?
Girls Brigade officers’ dress hats are standard rated. Girls Brigade soft forage hats are zero-rated.
VAT: Updated guidance on deliberate behaviour
HMRC has published updated guidance on deliberate behaviour. It clarifies the definition of these actions in respect of extended time limits.
What is deliberate behaviour?
A deliberate inaccuracy in a document occurs when a person (or another person acting on behalf of that person) knowingly gives HMRC an inaccurate document.
“A person who submits a document containing a deliberate inaccuracy might assert that they did not intend to cause a loss of tax. For the purpose of assessing this loss of tax, the person or any persons acting on their behalf will be treated as deliberately causing the loss of tax if they consciously intended to mislead HMRC”.
Examples
- knowingly failing to record all sales
- describing transactions inaccurately or in a way likely to mislead
- lodging a VAT return that includes a figure of net VAT due that is too low because the person does not have the cash at that time to pay the full amount, and later telling HMRC the true figure when he has the funds to pay
- similarly declaring less tax due for aggregates levy, climate change levy, landfill tax or excise duty because the person does not have the funds at that time to pay the full amount
(This list is not exhaustive and HMRC provide more examples in the guidance).
Why is it important?
Mainly, there are different time limits within which HMRC can take action.
A 20 year time limit applies where tax has been underdeclared, or over-repaid, as a result of a deliberately inaccurate return or other document. The normal cap is four years.
Other action
Although HMRC can make assessments to recover any tax lost, it also have a criminal investigation policy and will refer the most serious cases for consideration of criminal proceedings where appropriate.
If you or your clients are subject to an investigation, please seek professional advice immediately. There is a dark side to VAT.
VAT: Alternative Dispute Resolution (ADR) new guidance
HMRC has published an updated Internal Manual which provides guidance on the ADR mechanism. I have written about this in detail here.
What is ADR?
ADR is the involvement of a third party (a facilitator) to help resolve disputes between HMRC and taxpayers. It is mainly used by SMEs and individuals for VAT purposes, although it is not limited to these entities. Its aim is to reduce costs for both parties (the taxpayer and HMRC) when disputes occur and to reduce the number of cases that reach statutory review and/or Tribunal. The facilitator is impartial and independent and aims to assist both parties in resolving the tax dispute.
Changes
The changes are mainly in connection with disagreements about whether a case is suitable for ADR. These include cases where requests have been made for ADR, for example:
- requests from taxpayers for ADR where the HMRC decision is that the case is not suitable for ADR
- requests from taxpayers for ADR where some of the HMRC case team believe the case is unsuitable, but other members of the team believe the case may be suitable
- referrals from HMRC for complex or sensitive cases where they would like to offer ADR to the taxpayer
An ADR Panel, which consists of senior personnel from HMRC, will consider requests for ADR in circumstances where there is uncertainty about the suitability of a case for ADR. The ADR Panel will aim to provide assurance that applications by taxpayers in the most complex or potentially contentious cases for ADR are properly assessed and that decisions are consistent and principled.