In our twentieth year, 2011, looks to be a very busy year for the team here at The VAT Consultancy – and that’s not just due to the VAT rise on 4th Jan. The arrival of VAT and customs duty Director, Julie Park, will allow us to strengthen and expand our corporate client offering. Julie has advised clients across a range of industry sectors on a broad range of issues including international supply chain issues such as VAT efficient VAT and customs duties structuring and VAT in the travel sector.
Read more about Julie’s work
This month on the VAT Blog
We’ve been busy getting ready for the New Year VAT rate rise with our 12 VAT rules of Christmas, advice for businesses, charities and consumers on everything from minimising the impact of the rise on your business and your clients through to being savvy with the choices you make on the high street. Read the blog to find out more or follow us on twitter @vatconsultancy for daily tips!
The office christmas party VAT rules!
Many businesses don’t realise that they can claim the VAT back for staff on their office Christmas party.
Read our blog to find out just what the do’s & don’ts are.
Double hit in New Year for businesses purchasing or leasing corporate jets
Businesses purchasing or leasing corporate jets from January 2011 will face a double whammy as the VAT rate on such transactions will increase from the current 0% to 20%. Given the cost of purchasing such jets typically runs at £25m plus, even where a business can fully recover the VAT incurred, there will be a cash flow disadvantage until the VAT is refunded by HMRC. It is also commonplace for senior executives to use the aircraft for non business purposes so the VAT incurred will not always be recoverable, adding to the bottom line cost.
The increase comes as a result of the increased UK standard rate of VAT and also a change in the type of aircraft qualifying for zero rating. Historically zero rating applied simply if the aircraft weighed more than 8,000 kgs and was not designed or adapted for recreation or pleasure.
From 1 January 2011 an additional test applies – the aircraft must be used by an airline flying on international routes. This excludes corporate jets as the business owning or leasing them is typically not an airline.
Many businesses have sought to bring forward purchases of such aircraft or import the aircraft prior to 1 Jan 2011 and return it overseas for fitting out after 1 Jan where appropriate so as to reduce the increased VAT cost. This is achieved with the use of Outward Processing Relief (OPR).
For more detail on this contact Julie Park
HMRC News Round-up
Intrastat thresholds increase from 1st January 2011 and will affect businesses trading with other EU Member States. The exemption threshold for Despatches remains at £250,000 while the exemption threshold for Arrivals remains at £600,000 per annum and Delivery term threshold remains at £16 million.
Notice of requirement to give security to Customs & Excise
HMRC have revised Notice 700/52 which sets out the background to the Notice of Requirement to give security to Customs & Excise which may occur if a business makes a large or unusual VAT claim or claims that HMRC need to verify. If you have in your previous or current business failed to comply with VAT obligations, this may also trigger a requirement to provide security.
We would remind tax payers that if security is not agreed with HMRC, then they can be prosecuted both individually and as well a company if they continue to trade without providing the security being asked for.
There is an appeals procedure and we will be happy to discuss the specific cases as they arise.
Interest on monies due to HMRC
You may be aware that H.M. Revenue & Customs charge interest on monies due to them as a result of an error or omission on a VAT Return and this interest was normally notified on the same document as the assessed VAT.
We understand that the interest is now notified on a separate document to the assessed VAT and is generally received a few weeks after the VAT assessment. Be aware therefore when trying to arrange financial arrangements to meet additional liabilities that the interest charge will arrive at a later date.
All assessments and charges to interest should of course be critically reviewed to ensure that the tax and the interest has been correctly computed and we will be happy to advise clients where they feel the tax is not correct.
News from the Tribunals
OM Properties Investment Co. Ltd (TC 00752)
In the above Tribunal case the issue was the insurance charges to tenants of commercial properties which have been opted to tax. The landlord insured the properties under a block policy and extension to the insurance BUT the charge for insurance should have followed the VAT liability of the rent being charged which is standard rated. Landlords should be aware of the above ruling.
Airtours HolidayTransport Ltd
The Upper Tribunal has allowed an appeal by HMRC against the decision of the First-Tier Tribunal that VAT charged to the tax payer by Accountants in respect of fees relating to a tripartite agreement was deductible as input tax by the tax payer. The Upper Tribunal agreed with HMRC that the input tax charged by the Accountants was not input tax to Airtours but was in fact input tax to the Banks and other institutions who had instructed the Accountants to provide their services. The morale of the story is that while you may pay for a service, you may not necessarily be entitled to the input tax, particularly where there are tripartite agreements in place.
We would like to send best wishes for Christmas and the New Year to all our clients and readers from the team at The VAT Consultancy.
As is our custom, we will be making donations to charities in lieu of sending individual cards.
The offices will close on Thursday 23rd December and will reopen as follows:
29th, 30th, 31st December
4th January 2011 – normal office hours resume.