HMRC updated Notice 700 on 9 June 2023.
Changes
VAT MOSS references to credit notes for supplies of digital services, the annual accounting scheme, and monthly tax periods have been removed.
Updates also reflect the introduction of VAT late submission and late payment penalties, as well as the new interest regime in paragraphs 2.7, 19.9, 21.1, 21.2.1, 21.6, 27.1 and 28.
HMRC has published updated guidance on the evidence required to zero rate the export of goods. VAT Notice 703 sets out the following changes on the documentation which is required for proof of export:
“An accurate description of the exported goods and quantities are required, for example ‘2000 mobile phones (Make ABC and Model Number XYZ2000), value £50,000’.
If the evidence is found to be unsatisfactory you as the supplier will become liable for the VAT due.
If you’ve described goods inaccurately on an export declaration you may be liable for a customs penalty.
The rest of this paragraph has force of law.
The evidence you obtain as proof of export, whether official or commercial, or supporting must clearly identify:
Vague descriptions of good, quantities or values are not acceptable. An accurate value must be shown and not excluded or replaced by a lower or higher amount”.
Overview
It is vitally important that exporters obtain the correct evidence that goods have physically left the UK and that all descriptions of the goods are accurate and satisfy HMRC requirements. There has been a significant amount of case law on export documentation (an example here) which illustrates that this is often an area of dispute.
HMRC has published the annual yearly and spot foreign exchange rates in CSV format.
You should use these exchange rates if you have to convert any foreign currency to sterling for Customs and VAT purposes.
When searching for exchange rates a business should consider what it requires the rates for and and the type of rate needed.
HMRC have published guidance on the use of exchange rates for tax and accounting purposes:
HMRC has published new guidance on repayment interest – in cases where HMRC is late in settling a repayment claim for overpaid VAT.
If HMRC is late in paying an amount representing a repayment, ie; when a return shows more input tax than output tax, or a claim is made for VAT previously overpaid, a business may be entitled to repayment interest on the VAT that it is owed. From 1 January 2023 repayment interest replaced the repayment supplement.
Amount of interest
Repayment interest is paid at the Bank of England base rate minus 1%, with a minimum rate of 0.5%.
Start date
VAT already paid to HMRC
The day after the later of these two dates:
VAT not paid to HMRC
The day after the later of these two dates:
End date
Repayment interest ends when HMRC either repays the VAT or sets it off against a different VAT or tax amount that is deemed to be owed.
Notes
HMRC has published new guidance for use when a business sells goods using an online marketplace (an e-commerce site that connects sellers with buyers where transactions are managed by the website owner) or direct to customers in the UK.
It can be used to check when a seller is required to pay UK VAT.
It is important, especially for sellers based outside the UK, to understand the tax consequences when such marketplaces are used. It is not always possible to rely on the platforms to deal with output tax on sales made to UK recipients.
The guidance covers:
More on online business here.
HMRC has published updated guidance for agents registering business for VAT. Broadly, the new document covers what information agents require, which may be summarised as:
Limited companies
If an agent is registering a limited company client, they must have a Company Registration Number and a Corporation Tax Unique Taxpayer Reference (UTR) to complete the VAT registration process.
Individuals and partnerships
These applications do not need to have a Self-Assessment UTR to register for VAT, but if they do, it must be supplied.
An agent will be asked to verify the entity it is registering, therefore it is prudent to obtain the basic history and background of the applicant’s business before starting the process. Cleary this is good practice generally!
Via Revenue & Customs Brief 11 (2022) HMRC now accepts that face masks should properly be considered to be items of clothing.
This means that face masks designed and marketed as suitable for young children (under the age of 14) qualify for zero rating.(VAT Act 1994 Schedule 8 Group 16).
VAT Notice 714 – Young children’s clothing and footwear has been updated.
Businesses which have been treating these sales as standard rated will be due a refund, subject to the unjust enrichment rules.
Changes to the notification process
The Option To Tax (OTT) procedure generally turns an exempt supply of land and/or property into a taxable one. More details here.
HMRC have announced, following a recent trial, that its processing of OTTs has been amended to speed up the process.
Previously, when a business submitted an OTT (Form VAT1614A) HMRC would undertake certain checks to the notification before sending an acknowledgement. Now, HMRC will simply issue a receipt confirming that the OTT notification has been received without checking it.
It was, and remains, the taxpayer’s responsibility to ensure that the OTT is valid. The change removes the deemed uncertainty where taxpayers may have believed HMRC’s acceptance of the OTT confirmed that it was valid. Of course, it also reduces HMRC’s resources in processing the notifications and should result in quicker turnarounds. It is hoped that now HMRC will process notifications within 30 working days.
Changes to OTT forms
In addition to the changes to the process of notifying an OTT, HMRC has also removed the ‘print and post’ versions of the following forms:
VAT1614B: Stop being a relevant associate to an option to tax
VAT1614E: Notification of a real estate election
These can now only be completed online. Please note the online form can still be posted but it must be completed in full before it can be printed. The form can also be emailed to optiontotaxnationalunit@hmrc.gov.uk.
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.
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.