HMRC's Option to Tax Unit, the section responsible for receiving, processing and monitoring Option to Tax notifications and other correspondence has changed address.

The details are now:
Option to Tax National Unit
Cotton House
7 Cochrane Street
Glasgow
G1 1GY
Tel: 0141 285 4174/4175
Fax: 0141 285 4454
 

From 1 January 2010 the EU "VAT Package" is to be introduced. HMRC has announced the changes that this will bring to the EC Sales List ("ESL") regime.

Under the new rules supplies of services to EC businesses will need to be reported on ESLs in addition to supplies of goods. ESLs for services can be submitted quarterly although ESLs for goods will need to be submitted monthly if the value of goods supplied exceeds £70,000 per quarter (£35,000 per quarter after 1 Jan 2012). Businesses may choose to submit ESLs for both goods and services on a monthly basis even if not required to do so.

The other major change is the timeframe within which business will have to submit their ESLs. Paper ESLs will have to be submitted within 14 days. Electronic ESLs will have up to 21 days.

Finally, the time at which reverse charge services are deemed to be supplied, determining which ESL and which VAT return they should be reported on, is to be changed. Previously based mostly on time of payment the new rules will be very similar to the UK's time of supply rules for services.
 

Along with the ESL Changes, there are changes to the rules that determine where an international service is deemed to have been supplied will change on 1 January 2010. The major change is that the "basic rule" will be the Reverse Charge scheme.
 

With effect from 1 January 2009 the threshold of EU sales or purchases above which a business has to submit Supplementary Declarations ("INTRASTAT Returns") has risen from £260,000 to £270,000. The threshold above which a business has to include additional information about delivery returns on those declarations has risen from £14,500,000 to £16,000,000.
 

HMRC has issued a reminder that it intends to phase out paper VAT returns in favour of online submission starting from 1 April 2010. From that date any newly registered business and all businesses with a turnover exceeding £100,000 will be required to submit VAT returns online.
 

In the current climate, developer of new dwellings may find themselves forced to consider letting the dwellings for a short period before selling them. This can cause the business to loose its entitlement to recover some or all of the VAT on costs incurred in development.

HMRC has issued guidance on simplified calculations to determine how much VAT should be repaid and on the acceptability of schemes to sell the dwellings to associated companies to avoid repaying any VAT.
 

In the 1990s many golf clubs recover VAT that had been charged on member's subscriptions. There are currently another 2 opportunities for golf clubs to recover VAT declared and an opportunity for golf professionals.

For golf clubs the opportunities relate to VAT on green fees charged to non-members and to the possibility to extend the period of the claims made in the 90s.

For VAT registered golf professionals it may be possible to reclaim VAT declared on tuition fees.

Again, to maximise the period of the claim, claims should be submitted to HMRC before 31 March 2009.
 

A recent Tribunal Case has confirmed HMRC's guidance on how VAT should be accounted for on barter transactions.

A school leased land for a peppercorn rent to a private company. The company operated a leisure centre from that land and under the terms of the lease allowed the school to use the facilities free of charge at certain times.

HMRC ruled that there were 2 supplies; one from the school of the lease of the land for the value of the rent plus the value of the free use of the facilities and one from the private company of the use of the facilities.

The lease from the school was exempt so no additional VAT due (although the schools partial exemption method may have been affected). However, the supply from the private company should not have been valued as "free" as the company received consideration in the form of the reduced rent charge.

In fact, the Tribunal went on to rule that the valuation that should have been applied was the value of the supplies to the school and the company should account for VAT on that amount.

BTG Tax comment: It is worth noting that, set up correctly, this issue could have been avoided with very little irrecoverable VAT being created. Anyone involved in barter transactions should ensure that the VAT implications have been considered.
 

HMRC has recently issued guidance on the application of the concession allowing not for profit member's associations to apportion subscription charges between the different supplies made.

It has stated that it will not accept claims from such association for periods prior to 1997 under the current Fleming / Condé Nast claims rules.

HMRC has won yet another VAT Tribunal case regarding a Special Partial Exemption Method that HMRC ruled did not produce a fair and reasonable result. Opticians who still have special methods, particularly ones based on floor area, can expect HMRC to issue a notice that the method be discontinued and the standard method applied when they are next visited.
 

HMRC has issued guidance regarding reclaims of VAT declared on Mechanised Cash Bingo (s.14) Machines. Despite losing a VAT Tribunal HMRC's policy remains unchanged and it will not be repaying claims. However, with the deadline for claims relating to pre-1997 periods approaching Bingo Halls may wish to consider lodging protective claims. HMRC has issued a warning however that it will issue protective assessments for gaming duty to those businesses making such claims.
 

HMRC has issued guidance to its change in policy on penalty charges issued by non-Local Authority car park operators.

Provided the terms and conditions of use of the car park make it clear that any additional charge is a penalty and not payment for additional parking, the excess charge will not attract VAT. If the site owner allows an operator to retain all or some of the penalty, this will constitute additional consideration by the owner to the operator and the operator will have to account for VAT.

HMRC are inviting historic claims for overpaid VAT subject to the normal 3 year time limit but claims may also be possible for periods prior to 1997 provided they are submitted before 31 March 2009.
 

The 13 year Marks & Spencer Tea Cake case has at long last reached its final conclusion. In the latest, and last, decision the House of Lords agreed with M&S that HMRC could not use the defence of Unjust Enrichment for periods prior to 2005.

Where a business has overpaid VAT on its sales HMRC can refuse to repay that VAT if the business would be unjustly enriched, if it would be receiving a refund of VAT that was effectively paid by its customers. However, the HoL ruled that, until they were changed in 2005 the rules produced a distortive affect by treating different businesses differently. HMRC will reconsider claims made before 2005 that were rejected on the basis of an Unjust Enrichment defence subject to the appropriate time limits.
 

On 12 February 2009 the ECJ released the Advocate General's ("AG") opinion on a Swedish referral regarding the recovery of VAT incurred on the sale of shares in a subsidiary company. The AG's opinion suggests that HMRC's current policy of refusing the recovery of such VAT is correct.

AB SKF, a Swedish Company, sold its shareholding in 2 subsidiary companies. SKF incurred a significant amount of VAT on associated professional fees. It claimed on these costs related to the taxable supplies it had been making to the subsidiaries and the VAT was, therefore, recoverable. The Swedish Tax Authorities argued that the costs related to the VAT exempt sale of the shares and was, therefore, not recoverable. AG Mengozzi agreed with the Tax Authorities.

The BTG Tax VAT team observes that the AG's opinion is in line with national VAT law across Europe and continues the logic of established case law. It is, therefore, likely that the ECJ Judges will follow the opinion when they release their final judgement.

However, with the deadline for claims relating to pre-1997 periods (so called "Fleming Claims") is rapidly approaching (31 March 2009), any businesses that could potentially have incurred large amounts of input VAT affected by this decision may wish to reserve their position by submitting a protective claim to HMRC if the cost of doing so is not excessive. Having said this, assuming the ECJ upholds the AG's opinion such a claim would not be paid by HMRC.
 

A current ECJ VAT case may entitle you to recover almost 15% of your postal cost from HM Revenue & Customs.

TNT Post UK Ltd is currently challenging the UK's application of VAT Exemption to postal services in the ECJ. Whilst the case has not yet reached its conclusion, the Advocate General ("AG") has issued her opinion.

She has suggested that only the provision of universal postal services; the pre-priced, fixed fee mail service; should be exempt from VAT.

This may mean that the UK Government should have been treating any other service supplied by the Post Office or Royal mail as subject to VAT.

Businesses who have individually agreed contracts with these organisation and who are able to recover VAT may be entitled to recover VAT on the amount paid, treating the payments made as VAT inclusive.

For a business entitled to recover all of its purchase VAT this could mean a recovery of 14.89% (13.04% after 1 Dec 2008) of expenditure on postage under one of these contracts.

Claims submitted before 31 March 2009 can also include periods prior to 1997 so prompt action may be required.
 

Barry Stocks
Director, VAT & Indirect Taxes
T: 0161 837 1876
E: barry.stocks@btg-tax.com

Mike Marsden
VAT Senior Manager
T: 0161 837 1880
E: mike.marsden@btg-tax.com

Tony Jackson
Director of VAT Services
T: 0121 452 1515
E: tony.jackson@btg-tax.com

Simone Hurst
Director of VAT Services
T: 0121 452 1515
E: simone.hurst@btg-tax.com

Paul Taylor
VAT Manager
T: 0121 452 1515
E: paul.taylor@btg-tax.com

Helen Benussi
Senior VAT Consultant
T: 0121 452 1515
E: helen.benussi@btg-tax.com

Jaysson Palmer
VAT Partner
T: 020 7024 8370
E: jaysson.palmer@btg-tax.com

Mark Chesham
Director of VAT Services & IPT
T: 0117 937 7138
E: mark.chesham@btg-tax.com