Monthly Newsletter - August 2007

In this issue:

• Changes to VAT invoicing with effect from October 2007
• VAT Notes 2/2007
• VAT recovery on third party costs
• Hotel Deposits
• VAT and Gift Aid
• Karen is off to pastures new

Changes to VAT invoicing with effect from October 2007

HMRC have produced VAT Information Sheet 10/07 which sets out changes to the current VAT invoicing regulations which will principally affect suppliers subject to the Secondhand Schemes, Tour Operators Margin Scheme invoices and Intra-EC zero rated supplies.

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VAT Notes 2/2007

HMRC published VAT Notes 2/2007 which sets out details of the new information including recent tax changes.

We would remind you that Customs believe that any changes outlined in VAT Notes which affect your business but are not implemented could leave the business open to VAT assessments.

It is therefore important that any changes are carefully monitored to ensure compliance, avoiding penalties and surcharges.

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VAT recovery on third party costs

Generally a business is unable to reclaim VAT which is paid out on third party costs because the supply of goods or services is not to the business concerned. 

This is highlighted in a recent VAT & Duties Tribunal case involving the deductibility of professional legal services to the directors of a Company.  The Company reclaimed the VAT, HMRC assessed for the VAT, and the Tribunal found in favour of HMRC, stating that the professional legal services were supplied not to the Company but rather supplied in their entirety to the appellants’ three shareholders.

In order to succeed in the appeal, the Company had to show first the services in question had been supplied to it and that they were used or were to be used for the purpose of its business.

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Hotel Deposits

A recent ECJ decision involving a French Company has confirmed the sums paid as a deposit relating to the supply of hotel services, which are subject to Value Added Tax, are to be regarded as VAT exempt where the client exercises the cancellation option and the sum is retained by the hotelier as a fixed cancellation charge paid as compensation for the loss suffered as a result of the cancellation charge.

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VAT and Gift Aid

We are aware of an opportunity for Charity shops to increase the amount of Gift Aid that they can reclaim from the Government if they change the way they sell their goods acting as agent rather than as principal.

We are aware of major High Street Charity shops implementing these changes and gaining some substantial enhanced Gift Aid receipts.

If you would like further details, then please contact John Crawford who will be pleased to provide further advice.

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And Finally....

Karen is off to pastures new.

Karen Gibbons has left the firm with effect from 1 August to become a teacher.  We wish her well in her new career and we are not sure whether VAT consultancy or teaching is the more hazardous occupation!

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For further information regarding any of these articles or any other VAT issue, please phone us on 01962 735350 or e-mail us at: vat@thevatconsultancy.com