VAT Newsletter June 2004

VATease has been hearing persistent, but as yet unconfirmed, rumours that HM Customs & Excise are having a crack down on VAT reclaimed on personal calls. We remind you that VAT cannot be reclaimed on expenses used for non-business purposes.

Where it is difficult to obtain precise figures for personal calls, you should introduce an apportionment for a "fair and reasonable" amount of the VAT on phone bills, both mobile and fixed, that contain an element of private use. Customs do not accept that no personal calls are made unless it is written in to contracts of employment that employees sign up to.

Last month we highlighted an important change to the ToGC rules whereby an additional notification has to be made to the vendor of the business. HM Customs & Excise have extended their 'transitional period' to 30 June 2004. During this period Customs will allow ToGC treatment even where notification has not been made, provided it could have been made.

VATease has a form of words that can be added to the buyer's warranties in a contract of sale that satisfy the requirement to make a notification.

In an Business Brief dated 1 June 2004, HM Customs & Excise announced that, with effect from 1 April 2004, all DIY Builders claims will be dealt with by the Birmingham Office. Contact details are:

HM Customs and Excise
2 Broadway
Broad Street
Five Ways
Birmingham
West Midlands
B15 1BG
Tel: 0121 697 4000
Fax: 0121 697 4002

HM Customs & Excise have announced a change of policy on the attribution of input VAT to intended supplies of property and speculative supplies.

Customs now accept that there can be an intention to make taxable supplies before a valid option to tax is in place. They will however require clear documentary evidence of the intention.

Where land is bought speculatively and it is not known whether taxable or exempt supplies will be made, any VAT incurred will be "non-attributable" and must be apportioned using the business' partial exemption method. Once an intention is formed, or if costs are used for a different purpose, there will be a VAT clawback or payback as appropriate.

Full details of Customs' new policy are available at:

There's been a recent blow for those who leave it until the last minute to post VAT returns. A company whose VAT return was due on 31 May 2003 posted the return on Sunday 29 May 2003. The tribunal found that, since there was no collection from the relevant post box on a Sunday, Customs could not have received the return by the due date, and held that there was no reasonable excuse for the late return.

Input VAT on the purchase of a car is ordinarily not reclaimable for most businesses. However, where you can show that the car is used exclusively for business purposes and "is not available" for private use, the input VAT can be reclaimed.

An extremely narrow interpretation is placed on "is not available" and it usually requires the car to be physically or legally incapable of private use, such as being insured only for business purposes.

A recent tribunal decision extended this interpretation to include a circumstance whereby a Limited Company minuted a resolution that a car provided to a Director, who did not use it to drive to work, was for business use only. The Tribunal held that the company's resolution effectively placed "a legal embargo on private use" of the car.