VATease Monthly VAT Newsletter December 2006
Seasons greetings everyone! This months newsletter covers issues on Channel Islands CD trade, gaming machine refunds, revised VAT 1's
EC urged to act on Channel Islands' CD trade
A group of music retailers are threatening legal action against the Treasury to try to end the shipments of VAT-free CDs and DVDs from the Channel Islands which exploit a European Union exemption from VAT for imports into the EU worth up to £18. This "low-value consignment relief" has been used by certain retailers to set up operations in the Channel Islands to sell via websites to UK consumers. However, some music retailers, supported by the Forum of Private Business, say the practice amounts to unfair competition and the European Commission is now being urged to act against the British Government over this practice.
When is a car seat not a car seat? - When it's a trailer!
Centre Parcs operate a number of 'holiday parks' and allow customers to hire trailers which attach to bicycles for young children to be towed. Centre Parcs accounted for VAT on the hire of these trailers but then submitted a repayment reclaim on the basis the hire qualified for the reduced rate of 5% under VATA 1994, Sch 7A, Group 5, i.e. as a children's car seat. The claim was rejected by HMRC and Centre Parcs appealed
The Tribunal dismissed the Company's appeal saying that in modern English usage the word 'car', when used without any qualifying adjective, is synonymous with 'motor car'. As a result the trailers did not qualify as 'children's car seats'.Centre Parcs
Alleged misdirection by Customs officer - whether grounds for appeal.
A company had incorrectly treated animal feeds as zero-rated. An assessment was issued by the Commissioners and the company appealed, saying it had been misled by a VAT officer on a control visit. The circumstances fell within what is now an Extra-Statutory Concession. The company contended the tribunal should apply the principles laid down in C & G Developments Ltd (VTD 2384), which was decided in 1987. The tribunal rejected this contention and dismissed the appeal, because C & G was unable to apply the extra statutory concession because it did not exist in 1987. However in this present case, the business could have requested this concession. In view of this the disputed decision was not an appealable matter.
VATease comment:
Please be aware of the correct procedures to follow when involved in a dispute with HMRC. Remember some decisions are not appealable matters.
VAT: Revised VAT Registration Form - VAT 1
Please note that with effect from 1 December 2006 there is a revised VAT registration form (VAT1). HMRC have said they will continue to accept applications that are made on the old style forms until 31 March 2007. The Commissioners have said the following about the amended VAT registration form:
"This is an improved version of the current form. HMRC have simplified the technical language used, and there are better signposts, which should assist applicants. We have re-arranged the questions to make the form user-friendly. The new form also includes a stand-alone guidance note, which should assist applicants when completing the form. The current form, which is 6 pages long, and contains 28 questions, has been reduced to 4 pages and 23 questions, and the flow of questions has been arranged more logically. We have also simplified the questions on the effective date of registration of VAT. Our analysis showed that the most applicants filled in this part of the form incorrectly. We have made it easier for applicants registering on a voluntary basis. These applicants should find it easy to navigate through the form, and will only need to complete 14 out of the 23 questions. In addition to this, we have relaxed the rules relating to evidence from intending traders. This requirement has been identified as a significant cause of registration."
Avoidance Disclosure Statistics
The first set of statistics on the disclosures of avoidance schemes has been published by the Commissioners. They indicate the number of VAT schemes disclosed between 1 August 2004 and 30 September 2006
· Listed schemes 405
· Hallmarked schemes 401
For full details of the statistics please go to:
Changes to Customs Civil Penalty Procedures
With effect from 11 December 2006, the Commissioners have announced that a penalty demand may be issued for a first contravention, in the following circumstances:
· For serious error, i.e. where the resulting customs debt is £10,000 or more.
· Where traders/third party declarants have been given written instructions/guidance by the Commissioners on how to apply procedures fail to adhere to those instructions.
Customs Civil Penalties will now be in line with other departmental penalty regimes. However, because of the complexities of Customs regimes, warning letters will still be sent or education given in cases where this is deemed necessary by the visiting officer to be the appropriate course of action. Businesses still retain the right to request a departmental review.
Proposed Reverse Charge Accounting faces setback at final hour
Reports have come in that plans by Britain to fight an increase in fraud for businesses trading in mobile phones, computer chips and other similar goods by tax by introducing a 'reverse charge mechanism', have been defeated by objections from France, Austria and Germany.
The application to introduce a reverse charge mechanism was backed by the European Commission. Under the reverse charge mechanism the obligation to pay VAT is passed along the chain to the final retailer - no tax changes hands in the interim. An objection was made by France, Austria and Germany. Unanimity among EU finance ministers is however needed. A diplomat from the EU said, "The Germans and Austrians are not happy. Other states don't like the reverse charge mechanism at all, such as France, as they consider it will create fraud in different ways".
The implementation on 1 December has not taken place although as the Government still intends to introduce reverse charge accounting on these goods as soon as derogation has been agreed by the EU, watch this space!
Staatssecretaris van Financien v Joustra - European Court of Justice
In a case that has attracted a lot of interest it has been ruled by the European Court of Justice (ECJ) that only goods acquired and transported by private individuals will be exempt from excise duty in the member state of importation. These goods must also be for the personal use of the individual.
The UK's rules on cross-border shopping will remain unchanged as a result of this judgment.
While this ruling will be disappointing for consumers, UK retailers are breathing a sigh of relief and this puts and end to any speculation that they will lose out to online businesses on the continent.
Whose input tax?
A recent Tribunal has highlighted a case whereby Input Tax was successfully reclaimed even though the invoice was made out to a third party. The Appellant was able to show the invoice was in fact acting as an agent for it and, as the chain of evidence was good, the Tribunal confirmed the Appellant was fully entitled to claim Input Tax.
Check your client base to ensure relevant businesses do not lose out. (Remember, Input Tax can only be claimed if the invoice is paid by the recipient).
Penalties
The House of Lords has ruled that a Civil Penalty for tax evasion can be imposed even when no tax is assessable (being out of time for instance). Clients should be made aware of this fact and also that this is yet another crack in the foundations - if one civil penalty has been successfully issued when VAT is not assessed then so can others.
Gaming Machine Refunds
A recent decision relating to refunds of overpaid VAT in respect of gaming machines has led to a large number of claims being made to HMRC. The result has been a revised business brief identifying qualifying ingredients without which a claim will be refused.
Clients needing advice on this should contact VATease for advice prior to incurring costs on time making claims which cannot succeed.
Charity ghost hunt
As you may have heard from past newsletters, Simone is undertaking a trek in Peru to raise funds for the national ADHD charity ADDISS. On January 19th an all night ghost hunt is taking place at Dudley Castle from 9 pm through to 4am. This is your chance to spend a night in one of the most haunted castles in the UK where a grey lady and a smelly monk still linger… You will have the chance to undertake real vigils, just like the Most Haunted Team, undertake experiments and have ghost hunting equipment at your disposal. In order to attend you will have to raise a minimum of £100 sponsorship - please note all of this money will go to the charity. For more details please contact us.
And Finally …..
VATease will not be sending Christmas cards this year rather we will be making a donation to ADDIS The National ADHD charity.
We would like to wish all our Clients a Very HAPPY CHRISTMAS and a prosperous NEW YEAR and we look forward to seeing you in 2007.
If you require further information please contact us on 0121 778 4299.
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