Monthly Newsletter - November 2007

In this issue:

• Changes in the VAT treatment of serviced building plots
• VAT Registration procedure changes
• New scheme to ease VAT payments for yacht owners
• Commission earned by sub-agents in the travel industry
• Teleos

Changes in the VAT treatment of serviced building plots

HMRC has announced a change in the liability treatment of serviced building plots following a recent VAT Tribunal decision.  The Tribunal held that the sale of a plot of land within a serviced site constituted a single exempt supply of the land.  The Tribunal also held that the supply of civil engineering works to the landowner was zero rated because it had been made in the course of the construction of a building designed as a dwelling.  Customs’ view is that the supply of civil engineering works normally attracts VAT but where the landowner can demonstrate that the services have been received in the course of construction of a building designed as a dwelling, or buildings intended for use for solely relevant residential or relevant charitable purpose, they can be zero rated.

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VAT Registration procedure changes

On 1st October 2007 HMRC announced changes to the VAT registration procedures where they state that Wolverhampton Office will become the principal processing office for VAT registration and deregistration applications.

VAT 68 applications, VAT group applications, Flat Rate Scheme applications and Annual Accounting requests should be sent to HMRC’s VAT Registration Office in Grimsby.

Agricultural Flat Rate Scheme applications should be sent to the VAT Registration Office in Carmarthen. 

Those without a business establishment, agent, or tax representative in the UK, should continue to use the Non-Established Taxable Persons Unit in Aberdeen.

HMRC also state that for the time being on-line VAT registration applications will continue to be directed to the four National Registration Service sites at Carmarthen, Grimsby, Newry and Wolverhampton.

These changes are to be effective from 1st October 2007.

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New scheme to ease VAT payments for yacht owners

A pilot scheme is being run by HMRC and the Association of Brokers and Yacht Agents (ABYA) to enable yacht owners to bring in boats from abroad to sell in the United Kingdom without having to pay VAT, leaving it up to the new owner to either import the yacht into the EU or keep it elsewhere.

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Commission earned by sub-agents in the travel industry

Revenue & Customs have set out a change in their interpretation of VAT applying to the treatment of commission earned by sub-agents in the travel industry.

Their view has been that if you are acting as a sub-agent (that is an intermediary acting for another intermediary), then your services which are supplied in the United Kingdom are standard rated.  There is no change if sub-agents provide services which facilitate the making of supplies, such as a simple introduction. 

However, if sub-agents are involved in the making of arrangements for travel services, then the place of their supply will follow the normal rules for supplies by intermediaries.  This will depend upon where the underlying arranged supply has been made and, (where this is in the EU), whether the customer is EU VAT registered.

The liability of the sub-agents’ supplies for which they receive the commission will follow that of the underlying supply.  Where they are involved in the provision of specific supplies of zero rated passenger transport, their commission for those transactions will also be zero rated.  Where they are involved in the provision of a package supplied by a UK tour operator under the Tour Operators’ Margin Scheme, their commission will continue to be standard rated.

Sub-agents should therefore review the VAT liability of their supplies and they are not required to correct past declaration errors which were made on the basis of HMRC’s earlier interpretation of the law. 

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Teleos

The European Court of Justice has given its judgement in the Teleos case on 27th September 2007, which states that goods must physically leave the territory of the Member State of the supply to qualify for zero rating.

If a supplier acts in good faith and submits evidence establishing a right to zero rate an intra Community transaction, and has no involvement in tax evasion and takes every reasonable measure in their power to ensure that the transaction did not lead to their participation in taxable evasion, then the Member State cannot hold the supplier to account for the VAT on those goods if the information relied on subsequently proves to be false.

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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