Category Archives: HMRC Publications

VAT grouping and divisional registration guidance updated

By Marcus Ward 9 February 2024

HMRC has update VAT Notice 700/2: Group and divisional registration.

VAT group registration

VAT grouping is a facilitation measure by which two or more eligible persons can be treated as a single taxable person for VAT purposes. Eligible persons are bodies corporate, individuals, partnerships and Scottish partnerships, provided that certain conditions are satisfied. Bodies corporate includes companies of all types and limited liability partnerships.

The pros and cons of VAT grouping here.

Divisional registration

This is a facility that allows a corporate body which carries on its business through a number of self-accounting units to register each of those units or divisions separately for VAT. Guidance on divisional registration is in section 9.

Updates

Recent updates include:

Information on what happens if HMRC refuses your application and how to request a paper VAT1 form
The list of notifications a business may receive while waiting for a VAT grouping registration number, has been updated at section 2.17. A new section about late payment submission penalties has been added at section 5.11.

Repayment interest on VAT credits or overpayments – Update

By Marcus Ward 6 February 2024

HMRC has updated its guidance on when repayment interest is due.

If a business has claimed more input tax than it has declared output tax (a repayment return) HMRC will repay the difference by making a VAT repayment. HMRC will also repay any VAT that has been overpaid in error. Repayments are usually made within 30 days. The 30 days starts from the day HMRC receives the VAT Return and ends the day your repayment is approved (not the day it is received). HMRC does not count days taken to check the return is accurate and legitimate, and to correct any errors or omissions, as part of this 30-day period.

If HMRC is late in paying, a business may be entitled to repayment interest on any VAT that it is owed. For accounting periods starting on or after 1 January 2023, repayment interest replaces the repayment supplement.

A business, or its agent can track a VAT repayment online.

Update

Information on eligibility criteria for repayment interest on overpayments and start dates when VAT is not paid to HMRC has been amended. Information on repayment interest end dates when HMRC sets it off against your debts has also been updated.

VAT: Buildings and construction update

By Marcus Ward 1 February 2024

HMRC has amended Notice 708 which covers:

when building work can be zero-rated or reduced-rated at 5%
when building materials can be zero-rated or reduced-rated at 5%
when the sale, or long lease in a building is zero-rated
where you can find out more about the VAT domestic reverse charge for building and construction services
when developers are blocked from deducting input tax on goods that are not building materials
when a builder or developer needs to have a certificate from their customer, confirming that the building concerned is intended to be used for a purpose that attracts the zero or reduced rate
when a customer can issue that certificate to a builder or developer
what happens when a certificated building is no longer used for the purpose that attracted the zero rate, the use for that purpose decreases or the building is disposed of
the special time of supply rules for builders
when a business, on using its own labour to carry out building work on a building or civil engineering structure that it occupies or uses, must account for a self-supply charge

Sections 18.1 and 18.2 of the Notice and the certificates in those sections have been updated to show they have force of law under The VAT Act 1994, Schedule 8, Group 5, Note 12.

VAT: HMRC agent update

By Marcus Ward 23 January 2024

HMRC have published a recent agent update. In respect of VAT it covers:

reporting accurate tax turnover for VAT registration
reporting VAT deregistration to HMRC
reporting dissolved companies and VAT deregistration to HMRC
reporting insolvent companies and VAT deregistration to HMRC
intending traders
DIY housebuilders’ scheme digitalisation
changes for goods moving from the island of Ireland to GB from 31 January 2024

Extension of VAT energy-saving materials relief

By Marcus Ward 22 January 2024

HMRC have published a new Policy Paper on the extension of energy-saving materials (ESMs).

Installations of ESMs in residential accommodation currently benefit from a temporary VAT zero rate until 31 March 2027, after which they revert to the reduced rate of VAT at 5%.

This measure extends the relief to installations of ESMs in buildings used solely for relevant charitable purposes, such as village halls or similar recreational facilities for a local community.

It also expands the scope of the relief to the following technologies:

electrical batteries that store electricity generated by certain ESMs and from the National Grid
water-source heat pumps
diverters that enable excess electricity from certain ESMs to be used within a building in which it is generated rather than exported to the grid

It also adds certain preparatory groundworks that are necessary for the installation of ground- and water-source heat pumps.

The changes apply from 1 February 2024

The policy objective is to incentivise the installation of ESMs across the UK to improve energy efficiency and reduce carbon emissions.

The measures are implemented by The Value Added Tax (Installation of Energy-Saving Materials) Order 2024.

VAT: Alternative Dispute Resolution guidance updated

By Marcus Ward 16 January 2024

HMRC has, this month, updated its guidance on how to use Alternative Dispute Resolution (ADR) to settle a tax dispute.

Anyone can apply for ADR to help resolve a dispute with HMRC, or to get more information about issues that need to be taken for a legal ruling. The Guidance explains how to apply for ADR and when you can use it to resolve a VAT disagreement with HMRC.

A full overview of the ADR system written by us here, but broadly, it is the involvement of a third party (a facilitator) to help resolve disputes between HMRC and taxpayers. Its aim is to reduce costs for both the taxpayer and HMRC when disputes occur and to reduce the number of cases that reach statutory review and/or Tribunal.

VAT: Fuel and power HMRC update

By Marcus Ward 10 January 2024

HMRC has updated its VAT Notice 701/19 from 5 January 2024.

Sections 2, 3 and 5 have been amended to include information about the VAT treatment of charging of electric vehicles (EVs) when using charging points.

VAT: Electronic Sales Suppression (ESS)

By Marcus Ward 3 January 2024

HMRC has published new guidance on ESS and information on how to make a disclosure.

What is ESS?

ESS is also known as till fraud or till manipulation. It is where a business manipulates their till systems to hide or reduce the true value or number of sales. This is carried out through the use of ESS tools such as misusing built in till functions or installing software specifically designed to suppress sales. HMRC call this sales suppression and it is done either at, or after, the point of sale (POS). The records then appear to be correct and complete.

Businesses do this to reduce their turnover so that they pay less tax. They also do this to try to appear compliant.

Misusing a till system reduces the recorded turnover of the business and the amount of VAT payable, whilst providing what appears to be an accurate and complete record.

ESS is tax fraud. You are involved with ESS if you have made, supplied, promoted, possess or have access to an ESS tool.

You are also involved in ESS if:

you own an ESS tool
have access to an ESS tool
have tried to access an ESS tool

What is an ESS tool?

An ESS tool is a piece of software, computer code script or hardware. It allows a business to hide or reduce the value of individual transactions on its electronic sales records. This includes using and/or configuring a till, or point of sale system, in a way that suppresses sales.

You do not have to have used an ESS tool to suppress sales or pay less VAT for HMRC to charge a penalty for being involved in ESS, it is fraud regardless.

HMRC powers

Finance Act 2022, Schedule 14 allows HMRC to issue an information notice for ESS. This means HMRC can ask for certain information that only applies to ESS. It allows the issue of a Notice to a ‘relevant person’ for a ‘relevant purpose’.

Who is a ‘relevant person’

A ‘relevant person’ is any person who HMRC think it might be able to charge a penalty for being involved in ESS.

What is a ‘relevant purpose’

A ‘relevant purpose’ is the reason that HMRC is asking for information about ESS and ESS Tools. The law allows HMRC to do this in three types of situations which are to help it:

decide whether a relevant person has made, supplied, promoted, or possesses an ESS tool — HMRC would be able to charge this person a penalty
understand how an ESS tool works
identify any other person who has made, supplied, promoted, or possesses the ESS tool

Disclosure

HMRC is offering an opportunity for those involved in ESS to make a disclosure. Early voluntary disclosure could lead to a reduction in financial penalties. Use the ‘Make a disclosure about misusing your till system’ form to tell HMRC that you have been using your till system to reduce your tax bill.

Further reading and more detailed information on penalties here.

VAT: Payments on account – update

By Marcus Ward 12 December 2023

HMRC have updated its payments on account (POA) guidance.

What are POA?

These are advance payments towards a business’s VAT bill. They are mandatory.

HMRC will notify a taxpayer to make POA if a business renders VAT returns quarterly, and it owes more than £2.3 million in any period of 12 months or less.

Under the POA arrangement, businesses make interim payments at the end of months two and three for each return quarter. The interim payment is intended to cover part of the overall VAT liability for the that quarter. The balancing payment for the return’s VAT liability will be settled when the business submits its VAT return payment. Quarterly VAT returns are filed online as normal.

POA calculation

HMRC will calculate POA based on a business’s annual VAT liability in the period that it goes over the threshold. The annual VAT liability in that period will be divided by 24 to arrive at an instalment amount.

A taxable person who has been in business for less than 12 months will have POA calculated by HMRC on a pro rata basis.

POA start date and annual cycle

The payments on account cycle starts in the first quarter after a business exceeds the £2.3 million threshold.

The payments will remain the same until the start of the next annual cycle.

The annual cycle begins in April, May or June depending on which VAT return ‘stagger’ a business is on. HMRC bases the amount of payments during the annual cycle on the liability in the period known as the ‘reference year’.

POA due dates

The due dates for POA are the last working day of the second and third months of every VAT quarter no matter what the period end date is. The seven-day extension for paying electronically does not apply to POA.

POA that are not paid on time will be subject to late payment interest.

Due dates for quarterly balancing payments

Balancing payments are due with the VAT return and must clear HMRC’s bank account by the last working day of the month if standard period end dates are used.

Late payments

If a business does not make POA or the balancing payment in full and on time HMRC will:

take immediate action to recover the debt
charge late payment interest
consider charging late payment penalties on amounts unpaid after the balancing payment due date
consider transferring a business from quarterly to monthly returns

Removal from a POA arrangement

If a business’s VAT liability falls below £2.3 million in the reference year HMRC will remove it from the arrangement six months later.

Alternative to payments on account

If making POA and submitting quarterly VAT returns does not suit a business, it can choose to make VAT returns and payments monthly.

Commentary

As may be seen, it is important to recognise the POA limit and to make payments on time. There is an obvious cash flow impact and plans should be put in place if the VAT turnover is nearing the threshold.

Annual UK VAT statistics 2022 to 2023

By Marcus Ward 4 December 2023

HMRC has published VAT statistics for 2022 to 2023. This is an overview of VAT statistics, covering receipts information and the characteristics of the VAT trader population in the UK.

The Headlines

total VAT receipts in the financial year 2022-23 increased by 1% to £160 billion compared to £158 billion in 2021-22.
during 2022-23, the VAT population was 2,392,790. There were 2,464,109 live traders as at March 2023, with 277,441 new registrations and 397,675 deregistrations in-year.
total net Home VAT liability in 2022-23 was £156.76 billion.
the Wholesale and Retail sector was the largest contributor to net Home VAT liability (32%) with a total of £50 billion.
75% of total net Home VAT liability (£117 billion) was paid by traders with an annual turnover of greater than £10 million.

Receipts dropped significantly between March 2020 and June 2020 due to the VAT payment deferment policy. Further reductions in receipts across the April 2020 to March 2021 financial year can be attributed to economic impacts of the Covid-19 pandemic as well as the temporary reduced rate of 5% for hospitality, holiday accommodation and attractions.