Monthly Newsletter - October 2006

In this issue:

• Reverse charge procedure in France
  
• The Reduced Rule for Long Stay Guests in Hotels
  
• Reverse Charge for Mobile Phone (and similar) Industry
  
• DIY Claim
  
• Riverside Housing Association
  
• The VAT Consultancy expands yet again

Reverse charge procedure in France

France has introduced sweeping changes for non-established businesses that only trade with French VAT registered customers.

Instead of being able to register for VAT, non-established businesses will require their customers to apply the reverse charge. This will mean French input tax incurred will need to be reclaimed through an 8th or 13th Directive claim.

This will not apply to those who deal with non-VAT registered French customers or private individuals.

Contact us for further details.

The Reduced Rule for Long Stay Guests in Hotels

Following the recent tribunal case of Afro Caribbean Housing Association, HMRC now accept that the reduced value rule is not limited to a supply to individuals occupying the accommodation. Where local authorities or housing associations contract with hotels to provide accommodation, for homeless people or asylum seekers, for example, they can qualify for the reduced value rule.

This only applies to continued occupation by an individual for over 28 days, not a block booking that covers several individuals using the same accommodation

For further information see Business Brief 15/06.

Reverse charge for Mobile Phone (and similar) Industry

Further to Business Brief 10/06 detailing the proposals to introduce a reverse charge, Customs have issued guidance on the proposed date for its introduction. The EU derogation has been granted but needs approval from Member States, the current date to work towards is 1 December 2006.

For further information see Business Brief 14/06 for a full list of those businesses which are likely to be affected by the changes.

DIY Claim

The appellants had majorly demolished their existing dwelling, save for part of an external wall. They applied for and received planning permission to build a replacement dwelling. This was classed by the local authority planning inspector as a “new build”.

A DIY builders claim was subsequently refused by HMRC due to the dwelling breaching the rules in regards to new build – the retained wall had not been a condition of planning permission and therefore could not be described as a new build for VAT purposes.

The tribunal dismissed the appellants claim. 

Riverside Housing Association

The recent High Court case explored whether Riverside Housing’s construction of the headquarters could be zero rated under Item 2, Group 5 or Schedule 8.

The claim had been originally dismissed due to the Association using the building in the course or furtherance of business, even though Riverside was run for philanthropic reasons and are a registered charity, it was deemed that the letting of property is an economic activity regardless of who is the landlord.

The High Court upheld the tribunals decision.

The VAT Consultancy expands yet again

We would like to welcome Phil Morris into our expanding team.

Phil comes to us with a background in consultancy within Big 4 practice and is a welcome addition. He has joined Peter Baumgardt at our new offices in Aztec West, Bristol, details of which can be found on our contact page.

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