Tag Archives: international-tax

Common VAT mistakes

By Marcus Ward 2 October 2025

VAT basics

None of us are perfect, and any business can make mistakes with VAT despite all intentions to take reasonable care. So what are the most common errors? Here’s a list of pitfalls to avoid:

Wrong rate of output tax charged

The default position is that a supply is standard rated unless it is specifically reduced rated, zero-rated, exempt or outside the scope of UK VAT

Land and property transactions

Misunderstanding the correct VAT treatment of a land and property transactions
Not recognising VAT issues
Issues with the Option To Tax
TOGC issues
A guide to triggerpoints here

Cross-border issues

Failing to meet the requirements to zero-rate exports
Incorrect import procedures
Ignoring the reverse charge

Inter-company charges

Misunderstanding the VAT treatment of management charges

Partial exemption

Not recognising partial exemption
Using an inappropriate method
Failing to carry out the annual adjustment
Failing to make Capital Goods Scheme adjustments

Business entertainment

Different rules apply to the recovery of input tax on entertaining depending on the type of recipient, eg: clients, contacts, staff, partners and directors depending on the circumstances

Registration

Late registration
Exception from registration
Misunderstanding pre-registration issues
Failing to appreciate voluntary registration
Deregistration issues

VAT groups

Failing to VAT group when beneficial or failing to disband
Recovery of input tax
Timing of transactions
Partial exemption issues

Tax points (Time Of Supply)

Failing to recognise a tax point for output tax
Incorrect treatment of deposits
Incorrect treatment of forfeit deposits
Recovery of input tax at incorrect time

Bad Debt Relief issues

Failing to claim Bad Debt Relief
Failing to repay a claim to HMRC when payment from customer is received
Failing to repay input tax when a supplier is not paid (after six months)

Overseas issues

Not recognising indirect tax obligations outside GB
Not recovering VAT incurred overseas
Place of supply misunderstandings

Claiming input tax without the correct documentation

A guide to alternative evidence here

Recovering irreclaimable input tax

A guide to what VAT is not claimable here

Return errors

A box-by-box guide here

Business promotion schemes

Incorrect treatment of vouchers, gifts and discounts

Composite or separate supplies

Treating a composite supply as individual supplies, or vice-versa

Changes to a business

Selling new products, acquisitions, share sales, disposals, re-structuring, and ceasing to trade can all have a VAT impact and this can be missed

Fuel and motoring costs

Not applying Road Fuel Scale Charges correctly
Incorrect input tax recovery on vehicle purchases/leases/repairs etc

Special schemes

Failure to use the most suitable alternative schemes for accounting for VAT

One-off transactions

Failing to recognise VAT issues of unusual or one-off transactions

Non-business (NB) and charitable activities

Failure to recognise NB activities
Failure to restrict input tax in connection with NB activities

Errors can lead to draconian penalties, and ignorance is not a defence.

A guide to VAT triggerpoints here .

A VAT Did you know?

By Marcus Ward 22 September 2025

Wigs for teddy bears are subject to Customs Duty, but the Upper Tribunal ruled that ‘realistic” hearts used for a Build-A-Bear toy are duty free.

I have to charge myself VAT?!

By Marcus Ward 22 September 2025

VAT Basics

I have to charge myself VAT? How comes?!

Well, normally, the supplier is the person who must account to the tax authorities for any VAT due on the supply. However, in certain situations, the position is reversed and it is the customer who must account for any VAT due. Don’t get caught out!

Here are just some of the situations when you have to charge yourself VAT:

Purchasing services from abroad

These will be obtained free of VAT from an overseas supplier. What is known as the ‘reverse charge’ procedure must be applied. Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must account for output tax, calculated on the full value of the supply received, and (subject to partial exemption and non-business rules) include the VAT charged as input tax. The effect of the provisions is that the reverse charge has no net cost to the recipient if he can attribute the input tax to taxable supplies and can therefore reclaim it in full. If he cannot, the effect is to put him in the same position as if had received the supply from a UK supplier rather than from one outside the UK. Thus creating a level playing field between purchasing from the UK and overseas.

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must

account for output tax, calculated on the full value of the supply received, in Box 1;
(subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;
include the full value of the supply in both Boxes 6 and 7.

Value of supply: The value of the deemed supply is to be taken to be the consideration in money for which the services were in fact supplied or, where the consideration did not consist or not wholly consist of money, such amount in money as is equivalent to that consideration. The consideration payable to the overseas supplier for the services excludes UK VAT but includes any taxes levied abroad.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

Deregistration

Any goods on hand at deregistration with a total value of over £1,000 on which input tax has been claimed are subject to a self supply. This is a similar mechanism to a reverse charge in that the goods are deemed to be supplied to the business by the business and output tax is due. However, in these circumstances it is not possible to recover any input tax on the self supply.

Flat Rate Scheme

There is a self supply of capital items on which input tax has been claimed when a business leaves the flat rate scheme (and remains VAT registered).

Domestic Reverse Charge (DRC)

The DRC makes supplies of standard or reduced rated construction services between construction or building businesses subject to the domestic DRC, which means that the recipient of the supply will be liable to account for VAT due, instead of the supplier. Consequently, the customer in the construction industry receiving the supply of construction services will be required to pay the VAT directly to HMRC rather than paying it to the supplier. It will be able to reclaim this VAT subject to the normal VAT rules. The RC will apply throughout the supply chain up to the point where the customer receiving the supply is no longer a business that makes supplies of construction services (a so-called end user, see below). More here.

Mobile telephones and computer chips

In order to counter missing trader intra-community fraud (‘MTIC’), supplies of mobile telephones and computer chips which are made by one VAT registered business to another and valued at £5,000 and over are subject to the reverse charge. This means that the purchaser rather than the seller is responsible for accounting for VAT due.

Road fuel and power for private use

When business fuel is used privately, self-supply charges apply based on HMRC’s published road fuel scale charges, applied per vehicle per quarter.

Alternatively, businesses can maintain detailed mileage records for actual business use percentage calculations.

Land and buildings…. and motor cars

There are certain circumstances where land and buildings must be treated as a self supply… but that is a whole new subject in itself… as is supplies in the motor trade.

Even if the result of a self-supply or reverse charge is VAT neutral HMRC is within its rights to assess and levy penalties and interest in cases where the charge has not been applied; which always seems unfair. However, more often than not simple accounting entries will deal with the matter…. if the circumstances are recognised and it is remembered to actually make the entries!

VAT: Tax representatives and tax agents – what is the difference and why it is important

By Marcus Ward 13 August 2025

VAT Basics

A Non-Established Taxable Person (NETP) may be required to appoint a tax representative or tax agent if they make taxable supplies in the UK. The term NETP is used to describe a person who is liable to be registered for VAT under the VAT ACT 1994 Schedule 1a. A NETP must register for VAT as soon as it makes its first taxable supply in the UK, or when it expects to make taxable supplies here within the next 30 days, that is; there is no turnover limit for a NETP.

A NETP is a business which has no place of belonging in the UK. So, what is the difference between a representative and agent, and does the NETP get a choice?

Tax representative

A representative maintains the NETP’s VAT records, submits VAT returns and accounts for UK VAT on behalf of the NETP and dels with communication with HMRC. A representative is jointly and severally liable for any VAT debts incurred by the NETP.

A NETP may only appoint one person at a time to act on its behalf, although a tax representative may act for more than one NETP.

Tax agent

An agent carries out a similar role to a representative, however, the important difference is that HMRC cannot hold an agent responsible for any of NETP’s VAT debts. HMRC reserve the right not to deal with any particular agent. In some circumstances, if HMRC deem think it necessary, it will insist that a tax representative is appointed.

As long as HMRC has not directed (see below) a NETP to appoint a tax representative, it can appoint an agent to deal UK VAT affairs. Any arrangement made will be subject to whatever contractual agreement the NETP and agent decide. In some circumstances, if HMRC think it is necessary, it may still insist that a tax representative is appointed.

Distinction

The tax representative and the tax agent both act on behalf of a NETP. However, while the tax agent operates in the name of the NETP, the tax representative operates in its own name. Consequently, a tax representative is personally committed to pay HMRC and must be accredited beforehand. Contracts between representatives/agents need to be clear on this point and fees charged for this work should reflect the difference in responsibilities. Should the NETP fail to pay VAT, penalties and interest due, HMRC will collect these directly from the tax representative, so, in effect, the tax representative represents a monetary insurance for HMRC.

Direction

HMRC can direct some NETPs to appoint a tax representative who must be:

based in the UK
fit and proper

this is via VAT Act 1994, section 48(1).

HMRC may choose to require some form of security from a NETP whether or not there has been any direction regarding the appointment of a representative.

Not appointing a tax representative or agent

If a NETP does not wish to appoint a tax representative or agent, and HMRC has not directed them to appoint a tax representative, it must meet all its obligations under UK VAT law itself. This includes, inter alia:

registering for VAT
keeping comprehensive record of all transactions in relation to business in the UK
keeping records required to complete VAT returns
producing records to HMRC for inspection
paying the right amount of tax on time

Post Brexit

For UK businesses making overseas supplies:

Businesses established within the EU are exempted from appointing a tax representative in other Member-States (MS) as international tax assistance is compulsory within the EU (the local tax administration can request assistance from the country of establishment to recover the money directly from the business). Since Brexit, the UK became a third country, so this rule does not apply, and MS have the choice to make the appointment of a tax representative compulsory for UK businesses. Most MS have done so, the notable exception being Germany.

New guidance for registration of a NETP here.

VAT: New guidance – Online Marketplace supplies

By Marcus Ward 24 June 2025

HMRC issued new guidance for businesses which sell goods using an online marketplace on 20 June 2025. It enables online marketplace (an e-commerce site that connects sellers with buyers where transactions are managed by the website owner) operators to check if a seller is established outside the UK, so that it can establish which party is liable for VAT on sales.

Background

An online marketplace operator is liable for VAT on goods of any value that are both:

located in the UK at the point of sale
sold by an overseas business through the operator’s online marketplace

The operator needs to establish who is liable for VAT on sales of goods which are facilitated. To confirm this, the operator needs to take all reasonable steps to check whether a seller is established outside the UK. A business is required to keep evidence to show that it has taken all reasonable steps.

This new guidance includes details about how to check where an online marketplace seller is established and provides information about checks and process businesses can put in place. HMRC will review this evidence and will consider all evidence which has been used to establish where the seller is established. In each case, it will consider:

what steps were performed, including any that are designed to address the risks of a particular case
to what extent steps were appropriate, adequate and timely in relation to addressing the risks identified
what the results of the checks indicate
whether a business took appropriate action in response to the results

Examples of checks

HMRC give the following examples of types of checks which might be undertaken to determine if an online seller is UK-established:

check for a UK principal place of business
check that the VAT registration available for the seller matches their legal name and details on HMRC’s Check a UK VAT number tool
check that the seller is registered at Companies House with a UK address
establish whether directors reside in the UK, eg; as shown on the Companies House register
check that payment or financial information shows a UK presence. This can include:
- UK bank or credit card details
- UK merchant address attached to the seller bank account
- other financial data provided by independent payment service providers
check other commercially relevant information such as credit checks and other background checks from third party sources
check that the device used by the seller has a UK IP address, or check another method of geolocation
establish whether the seller uses a phone number with a UK country code

Overview of online sellers

More general guidance from HMRC on online sellers:

The rules aim to avoid VAT evasion by non-UK online sellers.

VAT Success Stories

By Marcus Ward 22 April 2025

I often write about how it is important to seek VAT advice at the right time, see triggerpoints. So, I thought that I’d give some practical examples on where we have saved our clients money, time and aggravation.

Investment company

HMRC denied claims for input tax incurred on costs relating to the potential acquisition of an overseas business and threatened to deregister the plc as it was not, currently, making taxable supplies. Additionally, HMRC contended that even if VAT registration was appropriate, the input tax incurred did not relate to taxable supplies and was therefore blocked.

We were able to persuade HMRC that our client had a right to be VAT registered because it intended to make taxable supplies (supplies with a place of supply outside the UK which would have been taxable if made in the UK) and that the input tax was recoverable as it related to these intended taxable supplies (management charges to the acquired business). This is a hot topic at the moment, but we were able to eventually demonstrate, with considerable and detailed evidence that there was a true intention.

This meant that UK VAT registration was correct and input tax running into hundreds of thousands of pounds incurred in the UK was repaid to our client.

Restaurant

We identified and submitted a claim for a West End restaurant for nearly £300,000 overpaid output tax. We finally agreed the repayment with HMRC after dealing with issues such as the quantum of the claim and unjust enrichment.

Developer

Our property developing client specialises in very high-end residential projects in exclusive parts of London. They built a dwelling using an existing façade and part of a side elevation. We contended that it was a new build (zero rated sale and no VAT on construction costs and full input tax recovery on other costs). HMRC took the view that it was work on an existing dwelling so that 5% applied and input tax was not recoverable. After site visits, detailed plans, current and historical photograph evidence HMRC accepted the holy grail of new build. The overall cost of the project was tens of millions.

Charity

A charity client was supplying services to the NHS. The issue was whether they were standard rated supplies of staff or exempt medical services. We argued successfully that, despite previous rulings, the supplies were exempt, which benefited all parties. Our client was able to deregister from VAT, but not only that, we persuaded HMRC that input tax previously claimed could be kept. This was a rather pleasant surprise outcome. We also avoided any penalties and interest so that VAT did not represent a cost to the charity in any way. If the VAT was required to be repaid to HMRC it is likely that the charity would have been wound up.

Shoot

A group of friends met to shoot game as a hobby. They made financial contributions to the syndicate in order to take part. HMRC considered that this was a business activity and threatened to go back over 40 years and assess for output tax on the syndicate’s takings which amounted to many hundreds of thousands of pounds and would have meant the shoot could not continue. We appealed the decision to retrospectively register the syndicate.

After a four-year battle HMRC settled on the steps of the Tribunal. We were able to demonstrate that the syndicate was run on a cost sharing basis and is not “an activity likely to be carried out by a private undertaking on a market, organised within a professional framework and generally performed in the interest of generating a profit.” – A happy client.

Chemist

We assisted a chemist client who, for unfortunate reasons, had not been able to submit proper VAT returns for a number of years. We were able to reconstruct the VAT records which showed a repayment of circa £500,000 of VAT was due. We successfully negotiated with HMRC and assisted with the inspection which was generated by the claim.

The message? Never accept a HMRC decision, and seek good advice!

VAT: EORI – What is it? Do I need one?

By Marcus Ward 10 April 2025

VAT Basics

HMRC has published new guidance on Economic Operator Registration and Identification (EORI) numbers. Although most of the guidance is not new, it is a reminder of what EORI numbers are and who needs them.

What is an EORI?

EORI is an acronym for Economic Operator Registration & Identification.

An EORI number is assigned to importers and exporters by HMRC (EOs) and is used in the process of customs entry declarations and customs clearance for both import and export shipments moving to or from the UK.

What is the EORI number for?

An EORI number is stored both nationally and on a central EU EORI database. The information it provides is used by customs authorities to exchange information, and to share information with government departments and agencies. It is used for statistical and security purposes.

A business may need to demonstrate to HMRC that it has carried out proper due diligence in certain cases.

Who needs an EORI number?

You will require an EORI number if you are planning to import or export goods. EOs can be sole proprietors, partnerships, UK incorporated companies, registered charities, and overseas companies. However, private individuals bringing their own possessions to or from the UK do not need an EORI number. An EO does not need to be VAT registered to have an EORI number.

For VAT groups, each member who imports or exports goods needs an EORI number.

Format of the EORI number

VAT registered companies will see the EORI as an extension of their VAT number. Your VAT nine digit VAT number will be prefixed with “GB” and suffixed with “000”.

How do I apply for an EORI Number?

Non VAT registered companies can apply using this link – FORM C220

VAT registered companies can apply using this link – FORM C220A

Once completed, your form should be emailed to: eori@hmrc.gsi.gov.uk

How long will my EORI application take?

The process is straightforward and EORI applications usually take up to three working days to process.

Please contact us if you have any issues with importing or exporting.

EORI checker

Gov.uk has provided a new tool to check a business’ EORI number. (This used to be an EU resource now not available due to Brexit).

Access

Who has access to an EORI number?

The general public can access limited data, When a business is notified of its EORI number, it will be asked whether it objects to this data being published on the site.

VAT: Digital platform reporting

By Marcus Ward 14 January 2025

VAT and digital platforms

Via section 349 of the Finance (No.2) Act 2023, measures were introduced which require certain UK digital platforms to report information to HMRC about the income of sellers of goods and services on their platform. HMRC then exchange this information with the other participating tax authorities for the jurisdictions where the sellers are tax resident.

Under the Organisation for Economic Co-operation and Development (OECD) rules, digital platforms in participating jurisdictions will be required to provide a copy of the information to the taxpayer to help them comply with their tax obligations.

Now HMRC have recently (last month) issued a new series of guidance , or updated guidance, on digital platform reporting, which are:

Selling goods or services on a digital platform

This Guidance explains the details a business needs to give to digital platforms when selling goods or services in the UK. A section on what information sellers will receive from online platforms has been added.

It covers:

who is a seller
information which must be provided
reporting by platforms
information to be received
selling online and paying tax

Check if you need to carry out digital platform reporting

This guidance provides information on:

what qualifies as a digital platform
who should register
how to register
what needs to be reported
information required for reporting
carrying out due diligence
when to report
penalties

This sets out:

who should register
what you need to do
how to register
after you have registered

Managing digital platform reporting

This provides guidance on:

submitting reports to HMRC
ongoing account management
when to report
how to add or change a platform operator
how to add or change a reporting notification to tell HMRC if you are a reporting or excluded platform operator
how to add or change a reporting notification about the type of due diligence you choose
changing contact details
how to add team members
how to inform HMRC that another platform operator will report for you (assumed reporting)

VAT in the Digital Age (ViDA)

By Marcus Ward 16 December 2024

EU Member States (MS) recently agreed the much-discussed ViDA package. Since Brexit, this does not directly affect the UK, however, it is an important pointer to the future and where we are all heading, so it will impact the UK in some ways.

The ViDA package (or a version of the finalised package) was first discussed in 2022 and has gone through a tortuous process before all MS agreed it.

What is ViDA?

ViDA aims to tackle what have been identified as three main challenges:

Real-time digital reporting

The new system introduces real-time digital reporting for cross-border trade, based on e-invoicing. It will give MS the information they need to increase the fight against VAT fraud, especially carousel fraud. The VAT Gap – the difference between expected and actual VAT revenue, has been widening across the EU over a number of years.

It is said that the move to e-invoicing will help reduce VAT fraud by up to €11 billion a year and bring down administrative and compliance costs for EU businesses by over €4.1 billion per year over the next ten years. It should ensure that existing national systems converge across the EU, and this should pave the way for EU countries that wish to introduce national digital reporting systems for domestic trade.

VAT: Zero-rated exports. The Procurement International case

By Marcus Ward 7 November 2024

Latest from the courts

In the First-Tier Tribunal (FTT) case of Procurement International Ltd (PIL) the issue was whether the movement of goods constituted a zero-rated export.

Background

Both parties essentially agreed the facts: The Appellant’s business is that of a reward recognition programme fulfiller. The Appellant had a catalogue of available products, and it maintained a stock of the most ordered items in its warehouse. PIL supplied these goods to customers who run reward recognition programmes on behalf of their customers who, in turn, want to reward to their customers and/or employees (reward recipients – RR). The reward programme operators (RPOs) provide a platform through which those entitled to receive rewards can such rewards. The RPO will then place orders PIL for the goods.

A shipper collected the goods from PIL in the UK and shipped them directly to the RR (wherever located). The shipper provided the services of delivery including relevant customs clearances etc. on behalf of the Appellant. PIL had zero-rated the supply of goods sent to RRs located overseas. All goods delivered to RRs outside the UK are delivered duty paid (DDP) or delivered at place (DAP). As may be seen by Incoterms the Appellant remained at risk in respect of the goods and liable for all carriage costs and is responsible for performing or contracting for the performance of all customs (export and import) obligations. The Appellant was responsible for all fees, duties, tariffs, and taxes. Accordingly, the Appellant is responsible for, and at risk until, the goods are delivered “by placing them at the disposal of the buyer at the agreed point, if any, or at the named place of destination or by procuring that the goods are so delivered”.

Contentions

HMRC argued that in situations where the RPO was UK VAT registered, the appellant was making a supply of goods to the RPO at a time when the goods were physically located in the UK, and consequently there was a standard-rated supply. It issued an assessment to recover the output tax considered to be underdeclared.

PIL contended that there was a supply of delivered goods which were zero-rated when the goods were removed to a location outside the UK. It was responsible (via contracts which were accepted to reflect the reality of the transactions) for arranging the transport of the goods.

Decision

The FTT held that there was a single composite supplies of delivered goods, and these were a zero-rated supply of exported goods by PIL. The supplies were not made on terms that the RPOs collected or arranged for collection of the goods to remove them from the UK. The Tribunal found that the RPOs took title to the goods at the time they were delivered to the RR, and not before such that it was PIL and not the RPOs who was the exporter. This meant that the RPOs would be regarded as making their supplies outside the UK and would be responsible for overseas VAT as the Place Of Supply (POS) would be in the country in which it took title to the goods (but that was not an issue in this case).

The appeal was allowed, and the assessment was withdrawn.

Legislation

Domestic legislation relevant here is The VAT Act 1994:

Section 6(2) which fixes the time of supply of goods involving removal as the time they are removed
Section 7 VATA sets out the basis on which the place of supply is determined. Section 7(2) states that: “if the supply of any goods does not involve their removal from or to the United Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom”.
Section 30(6) VATA provides that a supply of goods is zero-rated where such supply is made in the UK and HMRC are satisfied that the person supplying the goods has exported them
For completeness, VAT Regulations 1995, regulation 129 provides the framework for the zero-rating goods removed from the UK by and on behalf of the purchaser of the goods.

Some paragraphs of VAT Notice 703 have the force of law which applies here, namely the sections on:

direct and indirect exports
conditions which must be met in full for goods to be zero-rated as exports
definition of an exporter
the appointment of a freight forwarder or other party to manage the export transactions and declarations on behalf of the supplier of exporter.
the conditions and time limits for zero rating
a situation in which there are multiple transactions leading to one movement of goods

Commentary

The Incoterms set out in the relevant contracts were vital in demonstrating the responsibilities of the parties and consequently, who actually exported the goods. It is crucial when analysing the VAT treatment of transactions to recognise each party’s responsibilities, and importantly, when (and therefore where) the change in possession of the goods takes place.