Category Archives: HMRC Publications

VAT: Trader Support Service extended to December 2023

By   10 October 2022
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HMRC has announced that the Trader Support Service for businesses moving goods between Great Britain and Northern Ireland has been extended until 31 December 2023.

This service is designed to assist businesses navigate changes to the way goods move under the Northern Ireland Protocol since Brexit.

The service provides support to manage digital declarations including completing import and safety and security declarations.

It also provides guidance and training to help businesses understand what the Protocol means for them, enables traders to complete declarations without the need to purchase specialist software saving time and money.

Businesses moving goods between Great Britain and Northern Ireland can sign up to the Trader Support Service and access free online courses and training materials.

VAT: MTD reminder

By   4 October 2022
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HMRC have announced that the existing Making Tax Digital (MTD) online portal closes on 31 October 2022.

What businesses need to do now (or they could face a penalty)

If businesses haven not signed up to MTD and started using compatible software already, they must follow these steps now:

Step 1

Choose suitable MTD-compatible software they can find a list of software on GOV.‌‌‌UK.

Step 2

Check the permissions in their software – once they have allowed it to work with MTD, they can file their VAT returns easily. Go to GOV.‌‌‌UK and search ‘manage permissions for tax software’ for information on how businesses should do this.

Step 3

Keep digital records for their current and future VAT returns – a business can find out what records they need to keep on GOV.‌‌‌UK.

Step 4

Sign up for MTD and file their future VAT returns using MTD-compatible software – to find out how to do this, go to GOV.‌‌‌UK and search ‘record VAT’.

Businesses who file quarterly or monthly VAT returns must complete these steps in order to file their returns due after 1‌‌‌ ‌‌November.

Exemption from MTD for VAT

There are exemptions from MTD and they my be applied for here.

VAT: Fuel and Power Notice updated

By   4 October 2022
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HMRC Guidance: Fuel and power (VAT Notice 701/19)

This Notice has recently been updated. It now covers the VAT Reverse Charge measures for wholesale gas and electricity and construction services (Section 2) . There is more information about wholesale gas and electricity and using the VAT domestic Reverse Charge at section 3 of Notice 735: Domestic reverse charge procedure (VAT Notice 735).

Sections 4.1 and 4.3 now include more detail about hydrogen gas.

Brief overview

The reduced rate of VAT of 5% applies to supplies of fuel and power for qualifying use.

Qualifying use means:

  • fuel and power for domestic use
  • fuel and power for charity non-business use
  • fuel and power where the amount supplied does not exceed the small quantities, called the de minimis limits
  • fuel and power partly for qualifying use and partly for other purposes, where 60% or more of the supply is for qualifying use

Other supplies of fuel and power in the UK are standard rated.

VAT: Updates on appeals to courts

By   21 September 2022
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Latest from the courts

HMRC has published an update on taxpayers’ appeals. This is a round up of the status of recent cases.

It is helpful for businesses which operate in similar areas, or have tax issues with HMRC and for a general overview on how the courts are approaching certain matters.

The cases which HMRC lose often provide opportunities for retrospective claims for other businesses.

VAT: Input tax attribution to business and non-business activities

By   15 September 2022
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HMRC has issued new guidance on the amount of input tax claimable when an element is attributable to non-business (NB) activities.

If an entity is involved in both business and NB activities, eg; a charity which provides free advice and also has a shop which sells donated goods, it is unable to recover all of the VAT it incurs.  VAT attributable to NB activities is not input tax and cannot be reclaimed.  Therefore it is necessary to calculate the quantum of VAT attributable to business and NB activities. That VAT which cannot be attributed is called overhead VAT and must be apportioned between business and NB activities.  There are many varied ways of doing this as the VAT legislation does not specify any particular method.  Therefore it is important to consider all of the available alternatives. Examples of these are; income, expenditure, time, floorspace, transaction count etc (similar to those methods available for partial exemption calculations).

The new guidance is mainly as a result of the Sveda ECJ case.

The definition of business and NB here.

Legislation: The VAT Act 1994 Section 24(5).

Further reading

The following articles consider case law and other relevant business/NB issues:

Wakefield College

Longbridge

Babylon Farm

A Shoot

Y4 Express

Lajvér Meliorációs Nonprofit Kft. and Lajvér Csapadékvízrendezési Nonprofit Kft

Healthwatch Hampshire CIC 

Pertempts Limited

Northumbria Healthcare

VAT: New online service for error correction

By   30 August 2022
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HMRC has launched a new online service for the correction of errors made on previous VAT returns. Previously, a business must have emailed a correction to form to: inbox.btcnevaterrorcorrection@hmrc.gov.uk (it is still possible to use this method of reporting). The Form VAT652 – “Tell HMRC about any errors in your VAT Return” is used for any corrections of £10,000 (net of all errors) or more of VAT.

VAT: Education and Health & Welfare – new HMRC guidance

By   23 August 2022
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The subject of education often gives rise to complex VAT issues – as the number of Tribunal cases illustrates.

Background

A number of schools provide early or pre-school education (before compulsory education). All children aged four should be able to access an early education place and some early education and childcare services offer free part-time early or pre-school education to three year olds. This is paid for at the discretion of Local Authorities. Places for children under three in voluntary or private pre-school settings are paid for mainly by parents.

Update

In light of, inter alia, the Yarburgh Children’s Trust, Wakefield College , Longbridge and St Paul’s Community Project, HMRC has updated to reflect changes to it’s policy in respect of charities supplying; crèche, pre-school education, nursery, after-school clubs and playgroup facilities.

Business test

HMRC’s past position was that if a charity supplied nursery and crèche facilities for a consideration that was fixed at a level designed to only cover its costs, this was not a business activity for VAT purposes. Now the two-part test derived from the Wakefield College Court of Appeal case will be applied:

  • Test One

The activity results in a supply of goods or services for consideration. This requires a legal relationship between the supplier and the recipient. The initial question is whether the supply is made for a consideration. An activity that does not involve the making of supplies for consideration is not a business activity.

  • Test Two

The supply is made for the purpose of obtaining income therefrom (remuneration)

General

The provision of pre-school education (without charge) is non-business; breakfast clubs and after-school child-minding/homework clubs remain non-business in the Local Authority sector even when a charge is made. This is on condition that the school offers the service strictly to its own pupils and that the fee charged is designed to no more than cover overhead costs.

Law

VAT Act 1994, Schedule 9, Group 6 – Education

VAT Act 1994, Schedule 9, Group 7, Item 9 – Health and Welfare

VAT & Customs Duty: Goodbye CHIEF, hello CDS

By   23 August 2022
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Businesses who import into the UK currently use Customs Handling of Import and Export Freight (CHIEF) to declare goods.

There is also a separate scheme running concurrently, known as Customs Declaration Service (CDS).

From 1 October 2022 CHIEF will cease and importers must use CDS.

Exports

CHIEF is also currently used for exports and this will continue to a later date of: 31 March 2023.

Action

This change will significantly affect all businesses which import goods. Although it is likely that import agents will handle the majority of issues, an importer will be required to:

Failure to comply with these requirements will result in a business being unable to import goods.

VAT: Making Tax Digital (MTD) Reminder

By   23 August 2022
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HMRC has issued a reminder that:

  • from 1 November 2022, taxpayers will no longer be able to use their existing VAT online account to file their monthly or quarterly VAT returns
  • taxpayers that file annual VAT returns will still be able to use their VAT online account until 15 May 2023
  • by law, VAT-registered businesses must now sign up to MTD and use MTD-compatible software to keep their VAT records and file their VAT returns
  • there are penalties for businesses that do not sign up for MTD and file their VAT returns through MTD-compatible software,
  • even if taxpayers already use MTD-compatible software to keep records and file their VAT returns online, they must sign up to MTD before they file their next return
  • businesses may be able to get a discount on software through the UK Government’s Help to Grow: Digital scheme, which offers 50% off compatible digital accounting software