Tag Archives: vat-relief

VAT: EORI – What is it? Do I need one?

By   10 April 2025
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VAT Basics
HMRC has published new  guidance on Economic Operator Registration and Identification (EORI) numbers. Although most of the guidance is not new, it is a reminder of what EORI numbers are and who needs them.
What is an EORI?

EORI is an acronym for Economic Operator Registration & Identification.

An EORI number is assigned to importers and exporters by HMRC (EOs) and is used in the process of customs entry declarations and customs clearance for both import and export shipments moving to or from the UK.

What is the EORI number for?

An EORI number is stored both nationally and on a central EU EORI database. The information it provides is used by customs authorities to exchange information, and to share information with government departments and agencies. It is used for statistical and security purposes.

A business may need to demonstrate to HMRC that it has carried out proper due diligence in certain cases.

Who needs an EORI number?

You will require an EORI number if you are planning to import or export goods. EOs can be sole proprietors, partnerships, UK incorporated companies, registered charities, and overseas companies. However, private individuals bringing their own possessions to or from the UK do not need an EORI number. An EO does not need to be VAT registered to have an EORI number.

For VAT groups, each member who imports or exports goods needs an EORI number.

Format of the EORI number

VAT registered companies will see the EORI as an extension of their VAT number. Your VAT nine digit VAT number will be prefixed with “GB” and suffixed with “000”.

How do I apply for an EORI Number?

Non VAT registered companies can apply using this link – FORM C220

VAT registered companies can apply using this link – FORM C220A

Once completed, your form should be emailed to:  eori@hmrc.gsi.gov.uk

How long will my EORI application take?

The process is straightforward and EORI applications usually take up to three working days to process.

Please contact us if you have any issues with importing or exporting.

EORI checker

Gov.uk has provided a new tool to check a business’ EORI number. (This used to be an EU resource now not available due to Brexit).

Access

Who has access to an EORI number?

The general public can access limited data, When a business is notified of its EORI number, it will be asked whether it objects to this data being published on the site.

VAT: Construction Services Reverse Charge – New HMRC Manual

By   8 April 2025
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The Construction Reverse Charge (RC) background details here.

HMRC has recently published its VAT Reverse Charge for Building and Construction Services Manual.

It includes:

  • how it works
  • which services are covered
  • the supplies of materials
  • the supplies of labour and/or staff
  • who needs to apply it
  • practical issues such as invoicing and adjustments to consideration
  • compliance issues

The contents of the new manual are:

A VAT Did you know?

By   26 March 2025
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Oils and fats used for animal food is zero-rated, unless it is waste oil from a fish and chip shop – which is standard rated… even if it is used to feed animals.

VAT treatment of lost, stolen, damaged or destroyed goods

By   24 March 2025
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Is output tax due on goods that, for various reasons, cannot be sold, or are sold at a discount?

HMRC says that the VAT treatment depends on whether or not there was actually a supply of goods, what happened to them, who was responsible for them at the time and whether a VAT invoice was issued. The value of any supply will also need to recognise any credit given to the customer.

So, as often is the case with the tax, the answer is: “It depends”. So, let’s look at the categories to find out:

Lost goods

This depends on who lost the goods.

Sometimes a business will sell goods to a customer, but they did not receive them because they went astray. This could happen, for example, if goods are lost in the post.

  • customer is responsible for loss

If the customer is responsible for any losses before the goods are delivered, then VAT is due on the full amount of the sale.

  • supplier responsible for loss

If the supplier is responsible for any losses before the goods are delivered, then the way VAT is dealt with will depend on whether an invoice has been issued.

If an invoice has been issued, output tax is due on the amount invoiced, less the value of any credit given to the customer. So, if credit has been given a full refund, no VAT will be due.

If no invoice has been issued, there is no VAT due. This is because nothing has been supplied. It is prudent to make a note in the business records that the goods were lost an no invoice was raised.

Stolen goods

If goods are stolen from a business’ premises no VAT is due – as long as any customer has not been invoiced. HMRC are very likely to examine such circumstances as it is sometimes used as an ‘excuse’ for underdeclarations. Consequently, we always advise businesses to hold as much evidence as possible to support a claim that theft has taken place.

Goods stolen from a supplier’s premises after they have been sold to a customer- If the contract with the customer means that they are responsible for the goods while they are on the supplier’s premises – there has been a supply and output tax is due.

If the customer is not responsible for the goods when they are stolen, then if:

  • a VAT invoice issued – VAT is due on the amount invoiced (but subject to subsequent amendment to the quantum)
  • no invoice has been issued – there is no VAT due because there is no supply

NB: If cash is stolen from a business, this does not reduce the value of output tax on any supply.

Fraud

If goods are lost due to fraud it can be difficult to demonstrate or evidence. To avoid paying output tax on goods lost to a fraud a business is required to:

  • report the incident to the police
  • contact HMRC and give them the case details – this will entail providing a crime or case reference number given by the police. HMRC will consider each case and advise appropriately

Damaged goods

Damaged goods may be sold on at a discounted price, or they might have some scrap value. Output tax is due on whatever income is received for the goods sold. If an insurer makes a payment in respect of the damage, no VAT is due on this income.

Destroyed goods

If goods are destroyed such that they cannot be sold, and these are handed over (or what is left of them) to the insurer, no VAT is due on the disposal. Furthermore, there is no output tax due on any money received from the insurer. HMRC will need to see evidence of the insurance claim, and details of any insurance payment, on their next inspection of the business.

Records

Maintaining meticulous records is crucial for VAT compliance and it is very likely that such issues will be examined closely on HMRC inspections. This is because unexpected reductions in output tax will usually trigger enquiries. Input tax claims for the original purchase of the goods will be unaffected, so any mark-up type exercise will flag up the discrepancy.

More on illegal activities here.

VAT: Insolvency update

By   18 March 2025
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HMRC has updated its Insolvency Practitioner Bulletin.
It sets out changes that have been made to form VAT 7 to help insolvency practitioners provide important information and provides explanations of questions on the form.

HMRC has changed the way it issues VAT repayments to insolvency practitioners from Monday 10 March 2025.

An update of the VAT 7 form includes a section to input bank details. It is important to ensure that the most recent version of the VAT 7 is used. This may be found at section 6.2 on Insolvency VAT Notice 700/56.

VAT Domestic Reverse Charge procedure Notice updated

By   4 March 2025
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The Notice sets out how the Domestic Reverse Charge (DRC) makes supplies of standard or reduced rated construction services between construction or building businesses subject to the charge. This means that the recipient of the supply will be liable to account for VAT due, instead of the supplier. Consequently, the customer in the construction industry receiving the supply of construction services will be required to pay the VAT directly to HMRC rather than paying it to the supplier. It will be able to reclaim this VAT subject to the normal VAT rules. The DRC will apply throughout the supply chain up to the point where the customer receiving the supply is no longer a business that makes supplies of construction services (a so-called end user).

 

The supplies to which the DRC applies are set out here

The update includes information on recipients of DRC supplies that are not VAT registered. Broadly; if a business buys specified goods or services, it may make it liable to VAT registered on the strength of the value of the DRC. 

VAT: Time to pay guidance updated

By   18 February 2025
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HMRC’s guidance: How to pay a debt to HMRC with a Time to Pay arrangement was updated on 17 February 2025. This covers businesses which owe a debt to the department.

The updates cover:

  • Information about when a payment plan can be set up without contacting HMRC has been added.
  • Section ‘How we work out debt repayments’ has been removed as the information is covered in the section
  • Information to work out what businesses can afford to pay has been updated in the section ‘How we work out what you can afford to pay’.

If a business owes VAT

It can set up a payment plan to spread the cost of its latest VAT bill online without calling HMRC if it:

  • has missed the deadline to pay a VAT bill
  • owes £100,000 or less
  • plan to pay its debt off within the next 12 months
  • has a debt for an accounting period that started in 2023 or later
  • does not have any other payment plans or debts with HMRC
  • has filed all your tax returns

More information here: set up a payment plan online.

How to contact HMRC to discuss a Time to Pay arrangement

If a business cannot pay its tax bill and needs assistance (ie; the online arrangements above are not applicable) we recommend that it should contact HMRC as soon as possible.

 

VAT: Input tax claims – alternative evidence

By   12 February 2025
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What can be used to make a claim?

It is well known that in order to claim input tax on expenditure a business is required to have a valid tax invoice to support it. But what if there is no VAT invoice? Can HMRC accept any other evidence to support a claim? Well, the answer is yes… sometimes.

HMRC has discretion provided by legislation: VAT Regulations 1995/2518 Reg 29(2). Specifically, the wording most relevant here is “…such other documentary evidence of the charge to VAT as the Commissioners may direct.” Broadly, a business must hold the correct evidence before being able to exercise the right to deduct.

Where claims to deduct VAT are not supported by a valid VAT invoice HMRC staff are required to consider whether there is satisfactory alternative evidence of the taxable supply available to support deduction. HMRC staff should not simply refuse a claim without giving reasonable consideration to such evidence. HMRC has a duty to ensure that taxpayers pay no more tax than is properly due. However, this obligation is balanced against a duty to protect the public revenue.

Full details of tax invoices here.

What HMRC consider

HMRC staff are required to work through the following checklist:

  • Does the business have alternative documentary evidence other than an invoice (for example a supplier statement)?
  • Does the business have evidence of receipt of a taxable supply on which VAT has been charged?
  • Does the business have evidence of payment?
  • Does the business have evidence of how the goods/services have been consumed or evidence regarding their onward supply?
  • How did the business know the supplier existed?
  • How was the business relationship with the supplier established? For example: How was contact made?
  • Does the business know where the supplier operates from (have staff visited?)
  • How did the business contact them?
  • How does the business know the supplier can supply the goods or services?
  • If goods, how does the business know they are not stolen?
  • How does the business return faulty supplies?

Outcome

If the responses to the above tests are credible, HMRC staff should exercise their discretion to allow the taxpayer to deduct the input tax. Overall, HMRC is required to be satisfied that sufficient evidence is held by the business which demonstrates that VAT has been paid on a taxable supply of goods or services received by that business and which were used by that business for its taxable activities

Challenge HMRC’s decision

A business may only challenge HMRC’s decision not to allow a claim (did not exercise its discretion) if it acted in an unfair or unreasonable way. In these cases, the onus is on the taxpayer to demonstrate that HMRC have been unreasonable in not using the available discretion. This is quite often a difficult thing to do.

Case law

Not surprisingly, there is significant case law on this subject. The most relevant and recent being the Upper Tribunal (UT) cases of James Boyce Scandico Ltdv and Wasteaway Shropshire Limited.

Tips

If possible, always obtain a proper tax invoice from a supplier, and don’t lose it! The level of evidence required when no invoice is held usually depends on the value of the claim. There would be a difference between persuading an inspector that £20 input tax on stationery is recoverable and the claiming of £200,000 VAT on a property purchase is permissible. As always in VAT, if you get it wrong and claim VAT without the appropriate evidence there is likely to be a penalty to pay.

If you, or your clients are in dispute with HMRC on input tax claims, please contact us.

VAT – Fuel and power guidance updated

By   11 February 2025
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HMRC has updated its notice Updated its Notice 701/19: Fuel and power.

The Notice explains how suppliers and users should treat supplies of fuel and power for VAT purposes and it sets out how to treat a number of other supplies connected with fuel and power.

The update provides more detail of supplies for domestic use.

Supplies of fuel and power for domestic use are eligible for the reduced rate of 5%.

The provider must be certain that the supply is to a dwelling or certain types of residential accommodation. Examples of allowed residential accommodation are:

  • armed forces residential accommodation
  • caravans
  • children’s homes
  • homes providing care for the elderly or disabled, people with a past or present dependence on alcohol or drugs or people with a past or present mental disorder
  • houseboats
  • houses, flats or other dwellings
  • hospices
  • institutions that are the sole or main residence of at least 90% of their residents
  • monasteries, nunneries and similar religious communities
  • school and university residential accommodation for students or pupils
  • self catering holiday accommodation

The following buildings are not considered residential accommodation for the purposes of fuel and power:

  • hospitals
  • prisons or similar establishments
  • hotels, inns or similar establishments

VAT penalties and surcharges – time limits for appeals. The Excel case

By   10 February 2025
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Latest from the courts

The recent Xcel Consult Limited First-Tier Tribunal (FTT) case serves as a reminder on the tight time limits for appealing against VAT penalties and surcharges.

The VAT Act 1994 Section 83G sets out a statutory time limit for bringing appeals in respect of VAT penalties and surcharges of the kind in question in this case. An appeal is to be made to the tribunal before the end of the period of 30 days beginning with the date of the document notifying the decision to which the appeal relates.

Section 83G(6) provides that an appeal may be made after the expiry of the statutory period if the Tribunal gives permission. In deciding whether to give permission to allow the late appeal, the three-stage test set out in Maitland is applied. These tests are:

(1) establish the length of the delay and whether it is serious and/or significant

(2) establish the reason or reasons why the delay occurred

(3) evaluate all the circumstances of the case, using a balancing exercise to assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission, and in doing so take into account “the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected”.

Commentary

Our advice is to always respond within the 30 day limit, as relying on an out of time appeal can be risky. If that is not possible, an appeal should be submitted asap to ensure that test 1) above is not a reason to reject a submission.