Category Archives: EC

VAT – Prompt Payment Discounts (PPD) changes to valuation from 1 April 2015

By   19 February 2015
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VAT – Prompt Payment Discount Changes

Businesses don’t have much time to change their accounting procedures and systems to deal with the new PPD rules.  A recent survey has shown that over 13% of business will be affected by the changes which do not appear to have been given much publicity. These changes are necessary to align UK legislation with the EC Principal VAT Directive.  It is crucial that advisers and businesses are not caught out by the change in valuation of supplies offered at a discount.

The changes – summary

Old Rules

Under the previous rules output tax was due on the discounted price offered for prompt payment – regardless of whether the customer takes up the discount.

New Rules

From 1 April 2015 output tax is due on the full consideration actually paid by the customer when PPD is offered.

The new rules are required because HMRC is concerned that there was a difference between output tax paid on the discounted price, and the (higher) amount received if a PPD is not taken.  Historically, this was not so much of an issue because most PPD was offered B2B and the VAT was generally recoverable by the recipient of the supply.  However, increasingly, PPD is now offered B2C and therefore reduces “sticking tax” and the consequential VAT loss for HMRC.

A simple example

Old Rules

B2B PPD of 10% if invoice paid within 21 days.

Goods                                          £10,000

VAT 20% on £9,000                     £1,800

Invoice Total                               £11,800

Both parties post £1,800 to VAT account and there is no adjustment if discount not taken.

New Rules

Using the above figures:

Must assume discount is not taken so invoice total = £12,000

If customer actually takes up PPD a credit note is issued for both elements of the supply – £200 credit for the VAT.

Both parties process the new documentation to adjust the original invoice – VAT is neutral.

This increases a business’ administrative burden and also creates a significant additional risk of penalties and interest if businesses are ignorant of the change, or implement the changes incorrectly.

VAT Input Tax recoverable in each Member State – A country by country guide

By   16 February 2015
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VAT Refunds – Irrecoverable Tax A Country by Country Detailed Guide

VAT incurred in other EC Member States may be recovered in certain circumstances. However, some claims are specifically blocked by Member States. Unfortunately, there are differences between each Member State’s domestic legislation.

For full details of how to make a claim for VAT incurred abroad, please see “Reclaiming VAT Overseas” here

Here is a summary of VAT which cannot be claimed via the refund system:

Austria

VAT cannot be recovered on:

• The purchase, hire, operation and repair of passenger motor vehicles, except driving school vehicles, taxis and hire car vehicles;

• Entertainment expenses, except for business meals where the purpose of the meeting and the identity of the participants are documented.

Belgium

VAT cannot be recovered on:

• Manufactured tobacco;

• Spirits, except those intended for resale or supply in respect of a service (e.g. bars, hotels and restaurants);

• Accommodation, meals and beverages under an accommodation or a catering contract, unless these costs are incurred by a company’s staff effecting outside supplies of goods or services or by taxable persons who in turn supply the same services for consideration;

• Entertainment expenses (although expenses incurred in respect of an advertising event may be recoverable);

• Generally; the purchase of motor vehicles used for passenger transport and goods and services relating to such vehicles (although in some cases a 50% restriction applies and there are exceptions depending on use).

Bulgaria

VAT cannot be recovered on:

• Goods or services intended for making VAT-exempt supplies;

• Goods or services intended for “non-business” supplies;

• Entertainment expenses;

• Motorcycles or passenger cars (with less than five seats, excluding the driver’s seat), although certain exceptions apply;

• Goods or services related to the maintenance of a motorcycle or passenger car; and

• Goods that have been confiscated by the State or a building that has been demolished because it was unlawfully constructed.

Cyprus

VAT cannot be recovered on:

• Non-business supplies; if a supply has both business and non-business purposes, VAT can be reclaimed only on the business portion of the supply;

• Supplies or imports of passenger cars;

• Certain second-hand goods, e.g. cars and antiques for which the VAT margin scheme is used;

• Business entertainment and hospitality expenses, except the provision of

entertainment to employees;

• Supplies used or to be used to make a supply in Cyprus; and

• Goods and services, such as hotel accommodation, purchased for resale and that are for the direct benefit of travellers.

Czech Republic

VAT cannot be recovered on:

• Entertainment expenses.

Denmark

VAT cannot be recovered on:

• Meals for the owner and staff of a business. However, VAT on meals incurred for business purposes is partly refundable;

• The acquisition and running of places of residence for the owner and staff of a business;

• The acquisition and operating costs connected to holiday homes for the owner and staff of a business;

• Entertainment expenses, representation costs and gifts. However, VAT on business entertainment is partly refundable;

• The driving of foreign tourist buses;

• The acquisition, repair and operation of motor vehicles designed for the conveyance of not more than nine persons; and

• Payments in kind to the staff of a business. No more than 25% of VAT may be recovered on restaurant bills and no more than 50% of VAT on hotel accommodation.

• There is a right to deduct a specific amount of VAT for companies that lease

passenger cars if:

• The leasing period is at least six months; and

• The vehicle is used for business purposes for at least 10% of the mileage.

Estonia

A VAT refund is available if an Estonian company can make a similar VAT deduction on its business expenses. This limits the VAT deduction, for example, on meals and entertainment expenses. VAT on accommodation costs is deductible if the trip is not for leisure purposes.

Finland

VAT cannot be recovered on:

• Immovable property that the taxable person or its staff uses as a residence, nursery, recreational or leisure facility, as well as goods and services connected with it or its use;

• Goods and services related to transport between the place of residence and place of work of the taxable person or its staff;

• Goods and services used for business entertainment purposes and business gifts;

• (With some exceptions) Passenger cars, motorcycles, caravans, vessels intended for recreational or sports purposes and aircraft with a maximum permissible take-off weight not exceeding 1,550 kg, or on goods and services related to their use;

• Purchases intended for the private consumption of the entrepreneur or his personnel;

• Purchases related to exempt sales of investment gold;

• Purchases of taxable goods and services for direct benefit of passengers made in the name of a foreign travel service company; and

• Purchases that are VAT-exempt, but have erroneously been charged with VAT.

France

VAT cannot be recovered on:

• Accommodation costs incurred on behalf of the management or staff of a company. (VAT is recoverable when such expenses are incurred for the benefit of persons not employed by the company, provided the expenses are incurred in the interest of the company or when it supplies the same services for consideration);

• The supply, import, leasing, repair and maintenance of most cars for passenger transport and other related costs, such as petrol. (However, 80% of VAT on diesel fuel can be recovered and VAT is recoverable when the cars are purchased by a car dealer for resale or by a person who hires out cars.);

• Goods transferred without remuneration or for remuneration that is much lower than their normal price, unless the value of the goods is very low (except business gifts whose collective value does not exceed EUR 65, including VAT, per beneficiary per year); and

• Domestic transport of passengers and related expenses (except for public transport supplies and transportation from home to work, subject to conditions).

If French VAT has been incorrectly charged, a foreign taxable person can, in principle, obtain a refund (unless a corrected invoice has been issued—a specific procedure applies for a supplier to issue a corrected invoice).

Germany

VAT cannot be recovered on:

• Supplies of goods and services that are not used for business purposes, including gifts; or

• Supplies of services acquired or goods imported connected to certain exempt activities.

Greece

VAT cannot be recovered on:

• Intra-community supplies and exports.

• The supply, import or intra-community acquisition of tobacco products that are destined for use in non-taxable transactions;

• The supply, import or intra-community acquisition of alcoholic beverages that are destined for use in non-taxable transactions;

• Entertainment expenditure, including expenditure on hospitality and amusement;

• The acquisition, leasing or hire, modification, repair or maintenance of passenger vehicles with up to nine seats, pleasure boats except if they are used for the sale, leasing or transportation of persons for a fee;

• Accommodation, food, transport and entertainment expenses incurred for company personnel or representatives;

• The supply of goods and services in connection with real estate located in Greece (in certain circumstances);

• Expenses unrelated to the business activity of the claimant; and

• Incorrect VAT invoicing.

• If the VAT imposed is used for both taxable and exempt transactions, a refund will be granted only in respect of the taxable transactions.

Hungary

VAT cannot be recovered on:

• Use of goods or the services directly for exempt supply of goods and/or services; or

• Use of goods or services for purposes other than taxable business activities, except when the goods or services are entirely used in the interest of achieving taxable objectives.

• Motor fuels and other fuels, goods that are necessary directly for the operation of passenger cars;

• Passenger cars, motorcycles above 125 cc, yachts, sporting and leisure boats;

• Residential buildings (except where a taxable person engaged in the leasing of such buildings opted for taxation of the rental);

• Purchases of goods and services related to the construction and renovation of residential buildings;

• Food and beverages;

• Services received in connection with the operation and maintenance of passenger cars;

• Services of restaurants and other public catering services;

• Entertainment services;

• Taxi services;

• Parking services and highway tolls, with the exception of parking services used and highway tolls paid for a motor vehicle whose gross weight is equal to 3.5 tons or more (including buses); and

• 30% of telephone and mobile phone costs and services related to data submission by internet protocol.

Iceland

VAT cannot be recovered on:

• Cars used for personal transport, including car hires and fuel;

• Food and drinks, including restaurant expenses;

• Gifts and entertainment expenses;

• Residential housing of employees.

Ireland

VAT cannot be recovered on:

• Petrol except diesel;

• Food, drink, hotels/accommodation or other personal services (as from 1 July 2007, VAT on accommodation is recoverable if certain stringent conditions are satisfied);

• Entertainment expenses; and

• The purchase, hire or importation of passenger motor vehicles (VAT on motor vehicles used for certain purposes is recoverable).

Italy

VAT cannot be recovered on:

• Entertainment expenses.

• It is possible to deduct VAT paid on cars/fuel/maintenance used for the company’s business. The percentage deduction set by Italian VAT legislation is 40% in the case of both private and business use. The deduction is 100% if exclusively used for business purposes.

Latvia

VAT cannot be recovered on:

• The acquisition of unused immovable property and services received in relation to the construction, reconstruction, renovation, restoration or repair of immovable property;

• Goods and services purchased for personal use;

− Rental, maintenance and repair of a passenger car if these services are not used for business purposes. If the vehicle is used for business purposes, VAT can be recovered for the business use (in proportion to that use), but the claimant must provide supporting documentation with the application (e.g. route description in Latvian or English);

− Purchase of fuel, lubricants and spare parts intended for a passenger car if they are not used for business purposes;

− Expenses for recreation activities;

− Catering (including restaurants);

− Health improvement activities; and

− Entertainment.

Lithuania

VAT cannot be recovered on:

• The purchase or lease of a passenger car;

• Transport of passengers by cars (taxi services);

• Entertainment and representation expenses. However, where a taxable person is established in the EU, 75% of the VAT incurred on entertainment and representation expenses (goods and

services) is refundable;

• The supply of goods or services on which VAT does not have to be accounted for;

• Goods supplied to another EU member state if the supply of these goods would have been subject to the zero rate; and

• Goods exported from the EU if the supply of these goods would have been subject to the zero rate.

Luxembourg

VAT cannot be recovered on:

• Supplies on which VAT has been charged by mistake;

• Goods or services that are VAT exempt.

• Goods or services used for private purposes.

Malta

VAT cannot be recovered on:

• Tobacco or tobacco products, except those intended for resale;

• Alcoholic beverages, except those intended for resale or for the supply of catering;

• Works of art, collectors’ items and antiques, except those intended for resale;

• Non-commercial motor vehicles (and goods and services for the purpose of

repairing, maintaining and fuelling non-commercial motor vehicles), except those intended for resale, charter/hire, driving instructions or for the purpose of the carriage of goods or passengers for consideration;

• Vessels or aircraft, except those intended for resale or charter/hire for the purpose of the carriage of goods or passengers for consideration;

• Purchases relating to the provision of hospitality or entertainment, subject to certain exceptions; and

• Purchases relating to the provision of transport or entertainment to employees, subject to certain exceptions.

The Netherlands

VAT cannot be recovered on:

• Supplies of goods and services that are not used for business purposes;

• Supplies acquired or imported in connection with an exempt business activity;

• Food and drinks in restaurants, hotels and cafes;

• Business entertainment in excess of EUR 227 per year per person;

• Employee benefits in-kind in excess of EUR 227 per year per person;

• VAT on costs for the lease or rental of cars (these are limited to an 84% VAT refund – a 16% adjustment is made for private use).

Norway

VAT cannot be recovered on:

• Entertainment expenses;

• Food and drinks;

• The purchase, hire or importation of passenger cars, as well as on petrol, oil, repairs, maintenance and other related costs;

• Goods and services acquired for use outside the scope of Norwegian VAT;

• Goods imported and used for activities outside the scope of Norwegian VAT; and

• Benefits-in-kind for employees.

Poland

VAT cannot be recovered on:

• Goods and services, the acquisition of which resulted from a donation or free provision of services;

• Lodging and catering services, with some exceptions;

• The deductibility of input VAT on the purchase (lease) of passenger cars is limited to 60%, but not exceeding PLN 6,000 per car.

• The purchase of engine fuel, diesel oil and gas for passenger cars or other motor vehicles.

Portugal

VAT cannot be recovered on:

• Accommodation, food and drinks (except in the case of specific events);

• Entertainment expenses;

• Purchase, hire, importation and repairs of vehicles, boats, and aircraft (unless these assets are used in specific activities). However, it is possible to recover VAT incurred on commercial cars and trucks;

• Fuel expenses (50% of the VAT on diesel is recoverable and 100% if certain

vehicles are involved);

• Tobacco; and

• Travel expenses, including tolls (except in the case of specific events).

Romania

VAT cannot be recovered on:

• Invoices on which VAT was unlawfully charged;

• Acquisitions that can be VAT exempt;

• Acquisitions made by tour operators that apply the margin scheme in the Member State in which they are established;

• Tobacco products and spirits, except those intended for resale or for supply during the performance of a catering service and;

• Acquisitions of passenger vehicles and fuel (with some exceptions).

Slovak Republic

VAT cannot be recovered on:

• Supplies of goods and services where the application of VAT was not in compliance with the Slovak VAT legislation;

• Supplies of goods that are or may be exempt from VAT (intra-Community supply of

goods, export of goods); or

• Supplies made under the tour operator margin scheme.

Slovenia

VAT cannot be recovered for:

• Yachts and boats for sport and amusement, fuel, lubricants, spare parts and related services;

• Aircraft and fuel, lubricants, spare parts and connected services;

• Cars and motor bikes and fuel, spare parts and related services;

• Accommodation, meals and beverages, unless these costs are incurred by a taxable person in the course of supplies made as part of their economic activity and;

• Entertainment expenses.

Spain

VAT cannot be recovered on:

• Entertainment expenses;

• Food and drinks, tobacco;

• Jewels and precious stones;

• VAT on accommodation, restaurant and travel expenses will be refundable only to the extent the expenses are deductible for personal and corporate income tax purposes.

• VAT incurred on car rentals and fuel will be refundable only if the car is exclusively used for business activities.

• If not exclusively used for business activities, refunds of VAT on car purchases, car importations and car leases will be possible, but only if the car can be considered an investment good for Spanish VAT purposes (ie; it must be used for at least one year within the company), and only for the proportion that the vehicle is used for business purposes (a business use of at least

50% will be required).

Sweden

VAT cannot be recovered on:

• Permanent accommodation;

• Travel services (only applicable to persons supplying travel services);

• Unreasonable entertainment services;

• Purchase of motor vehicles; and

• Car rentals (these are 50% refundable), with certain exceptions for vehicles intended to be sold or leased by a taxable person whose particular economic activity involves the sale or leasing of motor vehicles, vehicles intended to be solely used for passenger transport for hire or reward and vehicles intended to be used for driving license education and transport of the deceased.

United Kingdom

VAT cannot be recovered on:

• Non-business supplies (if a supply covers both business and non-business use VAT can be reclaimed on the business element of the supply);

• Supplies the claimant intends to use for carrying on an economic activity in the

U.K. or that the claimant intends to export from the U.K. (i.e. economic activities, the place of supply of which is the U.K.);

• Business entertainment and hospitality expenses and other expenses on which the recovery of VAT is restricted in the U.K.;

• Goods and services purchased for resale (e.g. as part of package holiday) and which are for the direct benefit of travellers;

• VAT that has been incorrectly invoiced or where VAT has been charged on the dispatch of goods to another Member State, or the export of goods outside the EU;

• The purchase or import of passenger motor vehicles, unless used wholly for business purposes and

• Certain second-hand goods, such as antiques, for which a tax invoice will not be issued.

• Not more than 50% of VAT can be recovered on the lease of passenger motor vehicles not used solely for business purposes.

Claims

For details of how to make a claim for VAT incurred abroad, please see “Reclaiming VAT Overseas” here

VAT MOSS (Mini One-Stop Shop) Update – Small businesses

By   8 December 2014
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Further to my article on the introduction of new place of supply rules and the MOSS for B2C supplies of telecoms, broadcasting and other e-services HMRC have now stated its position on smaller businesses.

Under the initial rules, businesses which have income below the UK VAT registration turnover limit of (currently £81,000 pa) would be forced to either register for VAT in each EC Member State in which they made a sale (where the customer belongs), or registering for VAT in the UK in order to use the simplified MOSS procedure.

This would, of course, mean that such a business would lose the benefit of not being UK VAT registered and consequently having to do business in the UK with the addition of UK VAT.

HMRC has now indicated that these smaller businesses will be permitted to separate their UK and EC trading and register for VAT in the UK (so they can use the MOSS) without accounting for UK VAT on their domestic trading as long as their UK turnover remains below the VAT registration threshold.

This is curious (but welcome) since HMRC have always been against disaggregation.

For further information please see my new 2015 rules flowchart

MOSShop opens!

By   7 October 2014
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Just a reminder that the Mini One Stop Shop (MOSS) will open on 20 October 2014.

The MOSS is for suppliers of digital services to customers across the EC.

Official notification here

A full explanation of MOSS and digital supplies here

We advise that any provider of; telecoms, broadcasting and electronic services seeks specialist professional advice before the changes come into effect.  We have many clients that are involved in cross-border provision of digital services so are ideally placed to assist with whatever query you may have on this issue.

With the Scottish vote approaching….

By   10 September 2014
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What happens if Scotland gains independence?

A VAT what if….

If the Scots vote for, and gain, full independence from the UK, it is likely that the country will become a separate Member State of the EU. According to David Cameron; It’s currency will become the Euro and it will need to form its own authority for administering VAT. Although cross border controls will not be introduced, the VAT treatment of cross-border transactions will change significantly. Apart from the usual currency exchange issues, UK businesses will also be required to complete additional EC Sales Lists, Intrastat Declarations, and potentially a lot of other administrative and statistical documentation.

UK businesses will also need to determine the status of its Scottish customer, which in turn will establish the place of supply, which will dictate whether UK VAT, Scottish VAT, or no VAT is chargeable. Then there are the Distance Selling rules to consider. Some UK businesses will be required to register in Scotland as well as the UK if they sell goods by mail order. And don’t forget the changed VAT treatment of goods and services purchased from Scotland; in most cases a UK reverse charge will be applicable. Depending on circumstances though, UK businesses and residents will incur Scottish VAT and if they do, only some will be able to recover it. This will not be via a usual UK VAT return, but via an alternative VAT claim method which also adds complexity. Then there is the increase in triangulation cases, never the most straightforward VAT subject!

A simple supply from Carlisle to Ayr would will need to be analysed with a massive amount more information required plus the additional bureaucratic form filling. This added complexity will also increase the possibility of errors on which penalties will be levied.

John Swinney, the cabinet secretary for finance in the Scottish Government has pointed out that an independent Scotland would be able to choose its own levels of income tax and VAT, as well as taking control of other sources of revenue such as alcohol and tobacco duty, air passenger duty and landfill tax.

From a practical point of view, will shops and other business establishments in the North of England start accepting both Sterling and Euros? Will invoices routinely show both Sterling and Euro values? Will excise and duty rates be similar to the UK? Will there be opportunities for enterprising individuals to take advantage of any differences? Will we see smugglers coming up against modern day Robert Burns in his Exciseman incarnation? At what rate will the Scots set VAT? Will it be possible that cross border VAT rate shopping will take place? Will the Scots lose the zero rating reliefs which they currently enjoy as part of the UK? Will the Scottish people be forced to pay VAT on new houses, food, books and children’s clothing after independence? One thing is for sure, the Scots will need a whole new set of domestic legislation to cover VAT and indirect taxes.

Also: What about groups of companies with Scottish and English subsidiaries currently in the same UK VAT Group? Were independence to happen, it would be a riot unpicking that lot.

Good luck everybody!

VAT Invoices – A Full Guide

By   28 August 2014
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The subject of invoices is often misunderstood and can create serious issues if mistakes are made.  VAT is a transaction tax, so primary evidence of the transaction is of utmost importance. Also, a claim for input tax is not valid unless it is supported by an original valid invoice; no other documentation is acceptable.  HMRC can, and often do, reject input claims because of an inaccurate invoice.  There are a lot of misconceptions about invoices, so, although a rather dry subject, it is very important and I thought it would be useful to have all the information in one place, so here is my guide:

 

Obligation to provide a VAT invoice

With certain limited exceptions a VAT registered person must provide the customer with an invoice showing specified particulars including VAT in the following circumstances.

(a) He makes a supply of goods or services in the UK (other than an exempt supply) to a taxable person.

(b) He makes a supply of goods or services to a person in another EC country for the purposes of any business activity carried on by that person. But no invoice is required where the supply is an exempt supply which is made to a person in another EC country which does not require an invoice to be issued for the supply. (Because practice varies widely across the EC, HMRC guidance is that businesses should be guided by their customers as to whether invoices are required for exempt supplies.)

(c) He receives a payment on account from a person in another EC country in respect of a supply he has made or intends to make.

 Exceptions

The above provisions do not apply to the following supplies.

• Zero-rated supplies (other than supplies for acquisition by a person registered in another EC country, see (b) above).

• Supplies where the VAT charged is excluded from credit under VATA 1994, s 25(7) (eg business entertaining and certain motor cars) although a VAT invoice may be issued in such cases.

• Supplies on which VAT is charged but which are not made for a consideration. This includes gifts and private use of goods.

• Sales of second-hand goods under one of the special schemes. Invoices for such sales must not show any VAT.

• Supplies that fall within theTour Operators’ Margin Scheme(TOMS). VAT invoices must not be issued for such supplies.

• Supplies where the customer operates a self-billing arrangement.

• Supplies by retailers unless the customer requests a VAT invoice.

• Supplies by one member to another in the same VAT group.

• Transactions between one division and another of a company registered in the names of its divisions.

• Supplies where the taxable person is entitled to issue, and does issue, invoices relating to services performed in fiscal and other warehousing regimes.

Documents treated as VAT invoices

Although not strictly VAT invoices, certain documents listed below are treated as VAT invoices either under the legislation or by HMRC.

(1) Self-billing invoices

Self-billing is an arrangement between a supplier and a customer in which the customer prepares the supplier’s invoice and forwards it to him, normally with the payment.

(2) Sales by auctioneer, bailiff, etc.

Where goods (including land) forming part of the assets of a business carried on by a taxable person are, under any power exercisable by another person, sold by that person in or towards satisfaction of a debt owed by the taxable person, the goods are deemed to be supplied by the taxable person in the course or furtherance of his business.

The particulars of the VAT chargeable on the supply must be provided on a sale by auction by the auctioneer and where the sale is otherwise than by auction by the person selling the goods. The document issued to the buyer is treated as a VAT invoice.

(3) Authenticated receipts in the construction industry.

(4) Business gifts

Where a business makes a gift of goods on which VAT is due, and the recipient uses the goods for business purposes, that person can recover the VAT as input tax (subject to the normal rules). The donor cannot issue a VAT invoice (because there is no consideration) but instead may provide the recipient with a ‘tax certificate’ which can be used as evidence to support a deduction of input tax. The tax certificate may be on normal invoicing documentation overwritten with the statement:

“Tax certificate – No payment is necessary for these goods. Output tax has been accounted for on the supply.”

Full details of the goods must be shown on the documentation and the amount of VAT shown must be the amount of output tax accounted for to HMRC.

 

Invoicing requirements and particulars

A VAT invoice must contain certain basic information.

A VAT invoice must show the following particulars.

(a) A sequential number based on one or more series which uniquely identifies the document.

The ‘invoice number’ can be numerical, or it can be a combination of numbers and letters, as long as it forms part of a unique and sequential series. Where there is a break in the series, eg; where an invoice is cancelled or spoiled and never issued to a customer, this is still acceptable as long as the relevant invoice is retained.

(b) The time of the supply, ie tax point.

(c) The date of issue of the document.

(d) The name, address and registration number of the supplier.

(e) The name and address of the person to whom the goods or services are supplied.

(f) A description sufficient to identify the goods or services supplied.

(g) For each description, the quantity of the goods or extent of the services, the rate of VAT and amount payable, excluding VAT, expressed in any currency.

(h) The unit price.

This applies to ‘countable’ goods and services. For services, the countable element might be, for example, an hourly rate or a price paid for standard services. If the supply cannot be broken down into countable elements, the total VAT-exclusive price is the unit price.

(i) The gross amount payable, excluding VAT, expressed in any currency.

(j) The rate of any cash discount offered.

(k) The total amount of VAT chargeable expressed in sterling.

(l) Where the margin scheme forSECOND-HAND GOODSor theTOMS is applied, either a reference to the appropriate provision of EC Council Directive 2006/112/EC or the corresponding provision of VATA 1994 or any indication that the margin scheme has been applied.

The way in which margin scheme treatment is referenced on an invoice is a matter for the business and but we recommend:

• “This is a second-hand margin scheme supply.”

• “This supply falls under the Value Added Tax (Tour Operators) Order 1987.”

The requirement only applies to TOMS invoices in business to business transactions.

(m) Where a VAT invoice relates in whole or in part to a supply where the person supplied is liable to pay the VAT, either a reference to the appropriate provision of EC Council Directive 2006/112/EC or the corresponding provision of VATA 1994 or any indication that the supply is one where the customer is liable to pay the VAT.

This covers UK supplies where the customer accounts for the VAT (eg under the gold scheme or any reverse charge requirement under the missing trader intra-community rules). The way in which margin scheme treatment is referenced on an invoice is a matter for the business and we recommend: “This supply is subject to the reverse charge”.

Exempt or zero-rated supplies

Invoices do not have to be raised for exempt or zero-rated transactions when supplied in the UK. But if such supplies are included on invoices with taxable supplies, the exempt and zero-rated supplies must be totalled separately and the invoice must show clearly that there is no VAT payable on them.

Leasing of motor cars

Where an invoice relates wholly or partly to the letting on hire of a motor car other than for self-drive, the invoice must state whether the car is a qualifying vehicle

 

VAT invoices to persons in other EC countries

Unless HMRC allow otherwise, where a registered person provides a person in another EC country with

• A VAT invoice or,

• Any document that refers to a VAT invoice and is intended to amend it (eg a credit note)

It must show the following particulars.

(a) A sequential number based on one or more series which uniquely identifies the document.

(b) The time of the supply, ie tax point.

(c) The date of issue of the document.

(d) The name, address and registration number of the supplier. The letters ‘GB’ must be shown as a prefix to the registration number.

(e) The name and address of the person to whom the goods or services are supplied.

(f) The registration number, if any, of the recipient of the supply of goods or services containing the alphabetical code of the EC country in which the recipient is registered

(g) A description sufficient to identify the goods or services supplied. Where the supply is of a new means of transport a description sufficient to identify it as such.

(h) For each description, the quantity of the goods or the extent of the services, and where a positive rate of VAT is chargeable, the rate of VAT and the amount payable, excluding VAT, expressed in sterling.

(i) The unit price.

(j) The gross amount payable, excluding VAT.

(k) The rate of any cash discount offered.

(l) Where the supply of goods is a taxable supply, the total amount of VAT chargeable expressed in sterling.

(m) where the margin scheme forSECOND-HAND GOODSor TOMS is applied, either a reference to the appropriate provision of EC Council Directive 2006/112/EC or the corresponding provision of VATA 1994 or any indication that the margin scheme has been applied.

The way in which margin scheme treatment is referenced on an invoice is a matter for the business and we recommend: “This is a second-hand margin scheme supply.” And: “This supply falls under the Value Added Tax (Tour Operators) Order 1987”.

The requirement only applies to TOMS invoices in business to business transactions.

(n) Where a VAT invoice relates in whole or in part to a supply where the person supplied is liable to pay the VAT, either a reference to the appropriate provision of EC Council Directive 2006/112/EC or the corresponding provision of VATA 1994 or any indication that the supply is one where the customer is liable to pay the VAT.

The way in which margin scheme treatment is referenced on an invoice is a matter for the business and we recommend the following indication:

“This supply is UK VAT free and subject to the reverse charge in the Member State of receipt”.

(o) Where the supply is an exempt or zero-rated supply, either a reference to the appropriate provision of EC Council Directive 2006/112/EC or the corresponding provision of VATA 1994 or any indication that the supply is exempt or zero-rated as appropriate.

For these purposes, an exempt supply is a supply that, if made in the UK, would be exempt under VATA 1994, Sch 9.

The way in which the intra-EC exempt or zero-rated treatment is referenced on an invoice is a matter for the business and we recommend: “This is an exempt supply.” And: “Zero-rated intra-EC supply.”

Retailers

Retailers may issue a “less detailed tax invoice” if a customer requests one.  the supply must be for £250 or less (including VAT) and must show:

  • your name, address and VAT registration number
  • the time of supply (tax point)
  • a description which identifies the goods or services supplied
  • and for each VAT rate applicable, the total amount payable, including VAT and the VAT rate charged.

Summary

As may be seen, it is a matter of law whether an invoice is valid and there are no dispensations.  Therefore it is important for a business to understand the position and for its system to be able to produce a valid tax invoice.  As always, please contact us should you have any queries.

VAT bits. Is it the “EU” or the “EC”? Which term is correct?

By   11 August 2014
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The European Union (EU) is a collective term. It does not, strictly speaking, have a legal personality.

With reference to Community legislation it is correct to refer to the European Community (EC).

Mind you, my Father has only just stopped calling it the Common Market……..

Taxpayer loses in “TNT” claims lead case.

By   9 July 2014
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In the recent FTT case of Zipvit the court considered retrospective claims by businesses in cases where Royal Mail (and Parcelforce) had treated individually negotiated supplies of postage etc as exempt. In the previous ECJ case of TNT it was ruled that these services should have been standard rated. The claims (said to be over £1billion in total stood behind Zipvit) were made on the basis that recipients of these services could reclaim the VAT as input tax that should properly have been charged by the Royal Mail.
The three salient points where:

1. Where the supplies taxable? – On this point the court agreed with the taxpayer, the UK legislation must be read with the same restrictions as in the relevant EC Directive.
2. Was VAT due from, or paid by, the appellant? – Curiously, the judge did not agree with either party and stated that both had been labouring under a misapprehension. No further submissions were requested however, and on this point the appeal failed.
3. Lack of VAT invoice – Although HMRC have the discretion to accept alternative evidence to support an input tax claim, it was not obliged to. The FTT supported HMRC’s refusal and noted that there would, in any event, be a windfall for the applicant. The appeal was dismissed.

The judge commented that it was likely that this case would be appealed to a higher court.
If you have an appeal stood behind Zipvit, or have previously received exempt supplies from Royal Mail or Parcelforce in respect of individually negotiated contracts – please contact us for further information.

Are e-books books?

By   21 May 2014
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Books are zero rated for VAT purposes, but only (currently) if they are of the traditional dead tree variety. The zero rating does not extend to e-books which are standard rated for VAT. There has been a long standing argument that similar content should not be taxed at different rates solely depending on the method of delivery. This argument is about to be tested in the courts. The UK is not permitted by the EC to extend its current zero rating for printed matter, however, it is expected that the contention in this case will be that the inclusion of new products will not extend the zero rating, but rather the development of technology has created a supply that should be covered by the existing zero rating legislation.

If it is accepted by the courts that all types of book should attract the same rate of VAT, it may mean that the rate will be equalised upwards. So, by the end of the year we could be looking at VAT of 5% being added to books, newspapers and other printed matter which was hitherto VAT free – A “tax on learning” as previous protests had it when there was a threat to tax free books.