Monthly Newsletter - July 2008

In this issue:

• Business Brief 29/08
• Business Brief 30/08
• Business Brief 31/08
• Correction of errors - new legislation
• VAT Refunds
• VAT Tribunal Cases
• Apologies from The VAT Consultancy

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Business Brief 29/08

This Brief announces the publication of a learning package to help agents and tax payers to understand the new penalty regime.  It is published on their website and is available to their staff.  It takes less than ½ hour to complete and provides an overview of the new system.

During this financial year, HMRC consider agents have an opportunity to help their clients identify and correct potential errors arising from weaknesses in their systems before the new penalty regime starts from 1st April 2009.

We are planning seminars in the Autumn on the new penalty regime and will provide details in due course.

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Business Brief 30/08

HMRC are launching a consultation exercise in an attempt to simplify the partial exemption rules with an aim to reduce compliance costs for businesses.  The consultation covers the partial exemption standard method, which uses turnover as a means of apportionment of input tax, the de-minimis rules, which allow businesses to ignore exempt input tax below certain thresholds and the application of the Capital Goods Scheme.  The latter scheme applies to land and property over £250,000 plus VAT. 

For further information or comments, please Contact Us.

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Business Brief 31/08

This Business Brief announces a new clause in the current Finance Bill as a result of HMRC’s loss in the Court of Appeal in Midlands Co-operative Society concerning the assignment of claims. The case held that a right to make a claim for overpaid or over-declared VAT can be transferred, assigned or sold.  HMRC consider this as avoidance. This is in spite of the fact that there is no provision under current law for HMRC to set off the liabilities of a person who originally over-stated the VAT if a claim for the overpaid or over-declared VAT is made by somebody else as a result of the transfer.  They consider that the consequence of the transfer is that tax payers can avoid set off procedures and hence they don’t like it!

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Correction of errors - new legislation

From 1 July 2008 the value limits and rules for amending a VAT return in respect of errors discovered in previous VAT returns have been changed.  In order that a return may be amended to correct a previous error the new limits have been increased to the greater of £10,000 or 1% of VAT “turnover”, to a maximum of £50,000. Turnover is defined as the value of sales and all other outputs excluding any VAT entered in box 6 of the VAT return in which the error is corrected.

Any errors above these limits must be disclosed in writing to HMRC. 

For more information on the impact of this and the new penalty regime starting on 1 April 2009 please Contact Us.

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VAT Refunds
Errors made on claims submitted under the 8th and 13th Directive refund procedure will be subject to a new penalty regime. For non established EU businesses that make claims under the 13th Directive penalties will start from 1 July 2008. For EU established business making reclaims the penalties start from 1 January 2009.

For more information on our refund claims service contact Peter Bradshaw in our Alresford Office

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News from the Tribunals

Mr J and Mrs N Buttigieg Trading as The Cottage Café
This case is a direct result of HMRC’s cross tax evasion team reviewing the VAT Returns of the catering trade in the London area.  During a review of the VAT Returns, it was noticed that in this business there was an inaccurate split between the standard rated and zero rated supplies. This was considered to be disproportionate to the type of business being undertaken, which was a café with a take-away trade.   As a result of the review an unannounced inspection visit was made with a subsequent formal invigilation visit, which resulted in an assessment for £46,678, although following the Tribunal Hearing was reduced to £40,345. The moral of this tale is to ensure that any sales at different VAT rates can be substantiated.

Tribunal Reference 20700 – Mr and Mrs Price
This case concerned the VAT refund claim for a DIY builder scheme on the supply of granite blocks and the cost of transporting them from the quarry to the appellants’ site.  The DIY scheme only allows the VAT to be refunded on the purchase of goods and HMRC had refused the claim for the delivery service as it was seen to be a separate supply from the blocks and therefore outside the DIY refund scheme.  The Tribunal agreed with HMRC and disallowed the claim.

Tribunal Reference 20708 – Gerald Thompson Trading as Elathans
This case concerned an assessment raised because of a lack of evidence to support input tax reclaimed.  The moral of this tale is to ensure that all original invoices are retained.

Tribunal Reference 20712 – Community Housing Association Limited
This case concerned the VAT refund claim of £276,818.90 in relation to a number of construction projects undertaken by the CHA whose original intention was to make exempt supplies.  The case before the Tribunal was that the CHA had re-supplied these professional services to their associate company and as a consequence they had made a taxable supply and the VAT incurred could be reclaimed.  The Commissioners argued that this was not the case, there was no new supply or a re-supply and therefore CHA’s intention has not changed to support any VAT recovery.  The Tribunal agreed and dismissed the appeal.

Tribunal Reference 20689 – Jeanfield Swifts Football Club
This case considered the VAT treatment of construction work on a new pavilion to be used together with a football pitch and car park.  HMRC considered that the construction could not be zero rated for charitable purposes as it was in business due to the fact that it made small charges for hire and admission to the ground.  The Tribunal considered these matters were trivial and were surprised that the matter had gone as far as Tribunal. It was clear to them that the appellants were not in business and zero rating of the construction was available to them as a charity.

Tribunal reference 20713 – Geoffrey and Sharon Clarke
The case considered the imposition of a default surcharge following the electronic submission of the VAT returns deemed to be 1 hour and 42 minutes late of the extended due date and direct debt action for the receipt of the payment some 3 days after the extended due date. The moral of this case is that electronic submissions can be and are timed by HMRC and that the direct debit action by HMRC is triggered by the receipt of the return by HMRC

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Apologies from The VAT Consultancy

We would like to apologise to all clients who have had difficulty in contacting us through our main switchboard in recent days.  In BT’s attempts to reinstate our direct lines they have managed to disconnect our main line!  We have had a temporary divert to our Bristol office but you may well have found that the line seems to be permanently engaged. 

We have been attempting to respond to you where we can by email and mobile but appreciate that this is not the level of service that you normally expect from us.  We are hopeful that by the time you read this the problem will have been resolved.

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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