VATease VAT Newsletter January 2006
Welcome to the first VATease Newsletter of 2006. Following the 2 newsflashes issued last month and the quiet Christmas period there is very little to be reported.
Pre-Budget Report
If you haven't seen VATease's run down of the VAT changes announced in and after the Pre-Budget Report you can see the archive copy on our website.
VAT on Mileage Claims
VATease also issued a newsflash about HM Revenue & Customs' announcement of some good news regarding the claiming of VAT on mileage allowances paid to employees. This is also archived on the VATease website.
HMRC has recently announced further details. Officers will enforce the new rules "with a light touch until such time as businesses have had a reasonable period to adjust to the new requirement." The Department has also tried to clarify what invoices it expects to be retained in an information sheet available from its website.
Intrastat Declarations
Changes have been announced to the scheme requiring businesses trading with other EU member states to make supplementary declarations.
The value of acquisitions (purchases from EU member states) or dispatches (sales to EU member states) beyond which a trader has to make supplementary declaration to HMRC has been increased from £221,000 to £225,000.
Further, for trades where a "supplementary unit" is required on the declaration form the "net mass" will not be required.
Refunds to overseas businesses
HM Revenue & Customs has announced a withdrawal of its proposal to refuse VAT refunds to overseas businesses where invoices have been made out to employees instead of the company. Following representations from the hotel trade, where business practice is to issue invoices in the name of an individual HMRC will accept that invoice as evidence for input VAT claims.
Missing Trader Fraud - Mobile Phones and Computer Chips
Legislation introduced by the Govt. to combat the current massive levels of missing trader fraud is currently being challenged in the European Court by the Federation of Technological Industries, an association of mobile phone and computer chip traders.
The legislation allows HMRC to direct that traders can be "jointly and severally liable" for VAT not declared by previous suppliers of mobile phones or computer chips purchased if the trader had reasonable grounds to suspect that the VAT would not be declared. Further it allows HMRC to require traders in mobile phones and computer chips to pay a security (a bond) against VAT due from suppliers.
The Advocate General has delivered his opinion in the case. It is a technical judgement that appears to suggest the Joint and Several Liability rules are within the confines of EC legislation but that the requirement for Security is not.
The final judgement will not be due for several months and may not follow the AG's opinion. However, it is a good indication of how the judge is likely to decide.
Membership Fees
Many Membership Clubs such as gym clubs ad health clubs give members the option to pay in a single payment or in monthly instalments. The sum of the monthly instalments is usually more than the single payment. During 2005 HMRC announced that it would accept that the additional amount charged can be treated as an exempt charge for credit.
However, in recent Tribunal Cases HMRC has succeeded in overturning claims by gyms and health clubs for VAT the clubs believe overpaid on these additional amounts.
VATease Comment: This seems like a bizarre case of double standards by HMRC. To accept that something is not subject to VAT but to refuse to repay VAT businesses had previously charged on these amounts.
DIY Builders Scheme
The scope for reclaiming VAT via the DIY Builders Scheme has been extended recently following a Tribunal decision. Where a part-commercial, part residential building has been converted into dwellings, HMRC have previously refused repayment on any dwellings that shared any part of the floor area with the previous residential area.
The Tribunal directed that repayment should be given for the conversion of any area that was not previously residential regardless of whether the new dwelling shares any floor area with the formerly residential area.
If you require further information please contact us on 0121 778 4299.
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