Monthly Newsletter - January 2007

In this issue:

• Dispensing Doctors - HMRC publish further guidance
• Guidance on Islamic Products
• EU Changes
• VAT Registrations
• VAT Tribunal Case: Maybeck LLP
• HMRC Publish Annual Report

Dispensing Doctors – HMRC publish further guidance

HMRC have finally published some long awaited guidance on the practicalities of accounting for VAT for dispensing surgeries.  The information offers guidance on HMRC’s accepted policy with regards to the use of the monthly statement of fees in the partial exemption.  Further details may be found in Information Sheet 12/06 on HMRC’s website.

Guidance on Islamic Products

HMRC have issued guidance on the treatment of certain Islamic products, this guidance has been drafted in conjunction with HMRC and representative trade bodies.  The products are those financial ones operating via a trade and rental agreement which are allowable under Sharia’s principles.  Further details can be found in Information Sheet 11/06 on HMRC’s website.

EU Changes

Intrastat annual threshold increases
The exemption threshold increases from 225k to 260k from 1 January 2007.

New EU members

Bulgaria and Romania joined the EU with effect from 1 January 2007.   The impact is wide ranging such as:

- Tour Operators Margins Scheme - if the tours are outside of the EU then the supply is Zero Rated; however when they are within the EU the margin becomes Standard Rated.

- Sch5 services – if you have been supplying Sch 5 services to a customer in Romania you will have been ZR your supply, however, now you can only Zero Rate that supply if the customer is receiving the supply for business purposes.

VAT Registrations

HMRC have recently published guidance on the VAT registration process, interestingly they have noted that they aim to process each application within 14 days of receipt (that’s simply to start the process), however, they only expect to be able to issue a VAT registration number within a maximum 12 weeks!  In bold they write, “Please do not telephone us until after the 12-week period”!  When the registrations unit have a backlog then registrations can indeed take up to 12 weeks to process especially when they are complex, however, we would always recommend chasing up the registration, to ensure it has been received and is actually being dealt with within the two weeks of it being received by HMRC….
 

VAT Tribunal Case: Maybeck LLP

The case highlights again the complexity of how to treat professional fees in respect of share acquisitions.  In this case the company acquired a minority shareholding in a company which it was to undertake business through.  The question was raised as to whether this minority (40%) shareholding provided a direct and immediate link to the company’s own activities or was merely an investment.  The Appeal held that following the precedent in the Cibo Participations case, costs of acquisition were part of Maybeck’s general costs (previous cost component) and therefore had a direct and immediate link with Maybeck’s business activities as a whole. 

HMRC Publish Annual Report

HMRC’s published 2005-06 report has noted the introduction of a dedicated ‘Hidden Economy Team’ which has been introduced to tackle those who should be registered (both indirect and direct taxes).  They also introduced 26 risk-led campaigns through the year such as the Motors Dealers (recovered £36m VAT) and the Game Shooting has identified potential VAT arrears of £60 million.    They also note that it costs 5.5p to collect every £1 of VAT!

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