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Monthly Newsletter - June 2008
VAT & Property - new option to tax rules Information Sheet 03/08 and Business Brief 24/08 have been published, both of which announce changes to the rules relating to the election to waive the VAT exemption (Option to Tax) under the VAT Act 1994, Schedule 10. The changes come into force on 1st June 2008. If you are involved in property transactions you need to know about the new rules. We will be presenting a series of seminars in Southampton, Bristol & London in the summer providing the essential information you need to be aware of. To book your place click here. HMRC Revised Interpretation HMRC have issued Business Brief 27/08 which explains their current thinking in relation to which bodies can be treated as “public authorities” as allowed for under Article 13(1) of The Principal VAT Directive 2006/112. While the Brief is of immediate interest to further and higher education providers, it may be relevant to other bodies as well. HMRC have issued this statement following several VAT cases which have led the Department to conclude that the legislation is to be narrowly applied. HMRC Change of Address Since the introduction of VAT in the UK on 1st April 1973, the VAT Central Unit has been located in Southend. HMRC is establishing a new VAT Central Unit in but moving to Shipley. Hi-tech scanning equipment for VAT will replace the current manual return and cheque data capture process, enabling cheques and forms to be scanned at a rate of up to 20,000 per hour. The move project plans to deliver the changes for VAT in two phases. Phase 1 relates to VAT returns and associated cheque payments and HMRC expect the first monthly and quarterly returns affected by the change to be for period 06/08 - broadly those accounting periods ending 30th June with a due date on or after 31st July 2008. Business reply envelopes (BREs) bearing the new address will be issued with the relevant returns. Phase 2, scheduled for delivery before the end of December 2008, will cover other VAT accounting documents. An update on the actual date will be given nearer the time but again BREs issued with the relevant documents will bear the new address. The processing of ECSLs and Intrastat Declarations will remain at Southend. It is important, therefore, that all VAT payers are aware of the change and that the correct BRE is used when submitting returns or other declarations and payments to prevent delays and avoid any inappropriate default surcharges or additional interest charges. News from the Tribunals KDP (UK) Limited - Reference 20659 . This appeal covers the recovery of VAT paid on goods and service but was not directly associated with the principal business activity. The items of concern the HMRC consisted of the purchase of a multi-media projector and a commercial vehicle that were to be used as a mobile display unit, plus a photocopier. The Tribunal considered the accounting treatment of the purchases, the intended use by means of a rental to an associated company, as well as the appellant own oral evidence. It concluded that apart from the photocopier the items were not purchased for the purpose of the business and dismissed the appeal. This case considered the ability of Quarriers, which is a charity, to issue a certificate for the zero rating of the proposed construction of a new building to be used as an epilepsy assessment centre. HMRC considered that Quarriers were in business as could not issue a certificate, whereas they considered that the funding they received was not received by way of taxable or business supplies as they were to use the property for a relevant charitable purpose. The Tribunal agreed and allowed the appeal. Abbeyview Bowling Club - Reference 20661 This case concerns the recovery under the partial exemption rules but in particular the standard method over-ride system. The matter arose due to the fact that the Bowling Club constructed an eight-lane indoor bowling rink and recovered the VAT on the construction costs using the standard method. HMRC considered that the standard method over-ride affected the Club’s recovery and raised an assessment. The Tribunal reviewed the evidence and calculations submitted and agreed with the appellant that the over-ride did not apply, and allowed the appeal.
It is understood that Mecca Bingo has won their case of unfair treatment at the VAT Tribunals and will receive a refund of £36.3m and benefits party bingo operators. This follows the success by the ultimate owning company Rank Group with their success in connection with Gaming Machines.
News from the European Court of Justice This is the continuing saga of the chocolate covered teacakes and HMRC’s refusal to repay output tax incorrectly declared by M&S between April 1973 and October 1994. HMRC acknowledged that VAT has been incorrectly declared. The ECJ ruled that the Member State had within its own legislation allowed the sale to be tax free but with the right to recover input tax. Although it had in error collected tax on the sale the trader was entitled to recover the sum mistakenly charged. However this decision is dependent upon whether the UK National Court accepts HMRC’s claim to unjust enrichment by M&S. This case concerns a Dutch company that acted as a sub-agent on behalf of another company who itself acted as insurance broker and insurance agent in the conclusion of insurance contracts. However the appellant carried out in the name and on behalf of the insurance broker the conclusion of insurance contracts and other administrative arrangements, and received a commission for those activities. As the appellant did not have a direct relationship with the parties to the insurance contract the Dutch authorities considered its supplies could not benefit from the VAT exemption. The ECJ disagreed and ruled that if the sub-agent is contractually bound to the insurance broker, exemption can be applied. The Channel Islands A number of well-known UK suppliers of CD’s, DVD’s and contact lenses sell to UK customers from Jersey and in the past there has been no VAT/GST to worry about. In the future these suppliers will now have to prove that they are indeed exporting their products in order to avoid the liability to the new tax. Businesses are only required to register for GST when their turnover exceeds £300,000 although voluntary registration is possible before then. The Republic of Ireland Please contact us to discuss the issues.
We are delighted to report our successful intervention for a client of whom HMRC had demanded a security deposit of in excess of £270k. HMRC have agreed that this sum no longer has to be paid but have insisted that monthly VAT returns are submitted. This however is a small administrative price compared to the potential cash flow consequences of the deposit which would have resulted in the closure of the business.
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 |
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