Tag Archives: marcus-ward

VAT Penalties: A Discussion Document by HMRC

By   11 February 2015
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A discussion document is seeking views by 11 May about potential improvements to how HMRC applies penalties for failing to pay what is owed or to meet deadlines for returns or registration.

As HMRC designs a tax system for the modern, digital world, it wants to ensure that its approach to penalties also keeps up to date with both technology and behavioural science. HMRC is considering whether and how it should differentiate between those who deliberately and persistently fail to meet administrative deadlines or to pay what they should on time, and those who make occasional and genuine errors for which other responses might be more appropriate.

HMRC is looking for feedback from individuals and businesses. The purpose of the discussion is to seek views on the policy design and any suitable possible alternatives, before consulting later on a specific proposal for reform.

I look at the main points below and identify where changes to the penalty system are most likely to be made.

The document may be accessed here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/400211/150130_HMRC_Penalties_a_Discussion_Document_FINAL_FOR_PUBLICATION__2_.pdf

 Summary

In terms of Indirect Tax there are two main areas which HMRC is focussing on:

VAT default surcharge – HMRC highlights two issues with the current VAT default surcharge regime. The first is the concern that while the absence of penalty for the initial offence in a 12 month period gives business the chance to get processes right, some customers simply ignore this warning.

The second concern is the issue of proportionality which fails to distinguish between payments that are one or two days late or many months late.

 Excise regulatory penalties – This also considers proportionality, noting that regulatory failures can lead to very large penalties, because the penalty is fixed as a percentage of the duty. The size of such penalties might be viewed as disproportionate.

The existing, long-standing default surcharge regime has always had issues with the principle of proportionality.  The regime has been challenged in the Courts –  notably in the Trinity Mirror Plc case (soon to be heard at the UT) where the earlier FTT allowed the appeal against a default surcharge on the grounds of proportionality.

If you would like assistance in making a representation please contact me.

The penalty regime….the dark side of VAT!

By   9 February 2015
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I have made a lot of references to penalties in my other articles. So what are they, and how much could they cost if a business gets it wrong?

HMRC detail three categories of inaccuracy. These are significant, as each has its own range of penalty percentages. If an error is found to fall within a lower band, then a lower penalty rate will apply. Where the taxpayer has taken ‘reasonable care,’ even though an error has been made, then usually HMRC will not apply a penalty.

Penalty Categories 

–  An error, when reasonable care not taken: 30%;

–  An error which is deliberate, but not concealed: 70%;

–  An error, which is deliberate and concealed: 100%.

Unhelpfully, there is no definition of ‘reasonable care’. However, HMRC have said that they would not expect the same level of knowledge or expertise from a self-employed person, as from a large multi-national.  HMRC expect that, where an issue is unclear, advice is sought, and a record maintained of that advice. They also expect that, where an error is made, it is adjusted, and HMRC notified promptly. They have specifically stated that merely to adjust a return will not constitute a full disclosure of an error. Therefore a penalty may still be applicable.

The amount of the penalty is calculated by applying the appropriate penalty rate (above) to the ‘Potential Lost Revenue’ or PLR. This is essentially the additional amount of VAT due or payable, as a result of the inaccuracy, or the failure to notify an under-assessment. Special rules apply where there are a number of errors, and they fall into different penalty bands.

Defending a penalty

The percentage penalty may be reduced by a range of ‘defences:’

–  Telling; this includes admitting the document was inaccurate, or that there was an under-assessment, disclosing the inaccuracy in full, and explaining how and why the inaccuracies arose;

–  Helping; this includes giving reasonable help in quantifying the inaccuracy, giving positive assistance rather than passive acceptance, actively engaging in work required to quantify the inaccuracy, and volunteering any relevant information;

–  Giving Access; this includes providing documents, granting requests for information, allowing access to records and other documents.

Further, where there is an ‘unprompted disclosure’ of the error, HMRC have power to reduce the penalty further. This measure is designed to encourage businesses to have their VAT returns reviewed.

A disclosure is unprompted if it is made at a time when a person had no reason to believe that HMRC have discovered or are about to discover the inaccuracy. The disclosure will be treated as unprompted even if at the time it is made, the full extent of the error is not known, as long as fuller details are provided within a reasonable time.

HMRC have included a provision whereby a penalty can be suspended for up to two years. This will occur for a careless inaccuracy, not a deliberate inaccuracy. HMRC will consider suspension of a penalty where, given the imposition of certain conditions, the business will improve its accuracy. The aim is to improve future compliance, and encourage businesses which genuinely seek to fulfil their obligations.

Appealing a penalty

HMRC have an internal reconsideration procedure. A business should apply to this in the first instance. If the outcome is not satisfactory, the business can pursue an appeal to the Tribunal. A business can appeal whether a penalty is applicable, the amount of the penalty, a decision not to suspend a penalty, and the conditions for suspension.

The normal time limit for penalties to four years. Additionally, where there is deliberate action to evade VAT, a 20 year limit applies. In particular, this applies to a loss of VAT which arises as a result of a deliberate inaccuracy in a document submitted by that person.  These are just the penalties for making errors on VAT returns. HMRC have plenty more for anything from late registration to issuing the wrong paperwork.

Help

In my view there is generally a very good chance of success in a business challenging a penalty.  Each case should at least be reviewed by an adviser, and experience insists that a robust defence often results in full or part mitigation.  We have a very good track record in appealing HMRC decisions and have taken cases right up to High Court.  However, most cases can be settled before they get to Tribunal, and indeed, the greatest chance of success is usually at the beginning of the process before HMRC become entrenched.

VAT – Splitting a business to avoid registration doesn’t work

By   30 January 2015
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I have a cunning plan to avoid registering for VAT…….

….I’ll simply split my business into separate parts which are all under the VAT registration turnover limit – ha!

I’ve heard this said many a time in “bloke in the pub” situations. But is it possible?

You will not be surprised to learn that HMRC don’t like such schemes and there is legislation and case law for them to use to attack such planning known as “disaggregation”. This simply means artificially splitting a business.

What HMRC will consider to be artificial separation:

HMRC will be concerned with separations which are a contrived device set up to circumvent the normal VAT registration rules. Whether any particular separation will be considered artificial will, in most cases, depend upon the specific circumstances. Accordingly it is not possible to provide an exhaustive list of all the types of separations that HMRC will view as artificial. However, the following are examples of when HMRC would at least make further enquiries:

Separate entities supply registered and unregistered customers

In this type of separation, the registered entity supplies any registered customers and the unregistered part supplies unregistered customers.

Same equipment/premises used by different entities on a regular basis

In this type of situation, a series of entities operates the same equipment and/or premises for a set period in any one-week or month. Generally the premises and/or equipment is owned by one of the parties who charges rent to the others. This situation may occur in launderettes and take-aways such as fish and chip shops or mobile catering equipment.

Splitting up of what is usually a single supply

This type of separation is common in the bed and breakfast trade where one entity supplies the bed and another the breakfast. Another is in the livery trade where one entity supplies the stabling and another, the hay to feed the animals. There are more complex examples, but the similar tests are applied to them too.

Artificially separated businesses which maintain the appearance of a single business

A simple example of this type of separation includes; pubs in which the bar and catering may be artificially separated. In most cases the customer will consider the food and the drinks as bought from the pub and not from two independent businesses. The relationship between the parties in such circumstances will be important here as truly franchised “shop within a shop” arrangements will not normally be considered artificial.

One person has a controlling influence in a number of entities which all make the same type of supply in diverse locations

In this type of separation a number of outlets which make the same type of supplies are run by separate companies which are under the control of the same person. Although this is not as frequently encountered as some of the other situations, the resulting tax loss may be significant.

The meaning of financial, economic and organisational links

Again each case will depend on its specific circumstances. The following examples illustrate the types of factors indicative of the necessary links, although there will be many others:

Financial links

  • financial support given by one part to another part
  • one part would not be financially viable without support from another part
  • common financial interest in the proceeds of the business

Economic links

  • seeking to realise the same economic objective
  • the activities of one part benefit the other part
  • supplying the same circle of customers

Organisational links

  •  common management
  • common employees
  • common premises
  • common equipment

HMRC often attack structures which were not designed simply to avoid VAT registration, so care should be taken when any entity VAT registers, or a conscious decision is made not to VAT register. Registration is a good time to have a business’ activities and structure reviewed by an adviser.

As with most aspects of VAT, there are significant and draconian penalties for getting registration wrong, especially if HMRC consider that it has been done deliberately to avoid paying VAT.

What is the value of a sale for VAT? – Prompt Payment Discounts

By   15 December 2014
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The value of a supply is crucial for VAT.

The area of discounts has always been problematic, particularly in respect of prompt payments discounts (which customers sometimes do, and sometimes do not take advantage of).

HMRC has clarified the position and has published:  which confirms that from 1 April 2015, all businesses that offer Prompt Payment Discounts will be obliged to account for VAT on the sum actually received in return for the goods or services supplied (rather than the reduced value offered – as is the current position).

VAT – Medical practices and property

By   18 November 2014
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This article is specific to medical practices (or any other professional practice which makes predominantly exempt supplies) which wants to buy or improve property.

Registration when purchasing practice property – what you need to know:

The majority of the services provided by medical practices are exempt from VAT.  Good news one would think; there is no need to charge VAT on most goods and services supplied, and no need to deal with VAT returns, records and inspections.  Additionally, there is no exposure to the increasingly widely applied and swingeing penalty regime. However, there is one often repeated question from practices; “How can we reclaim the VAT we are charged?”  This is an even more pressing question when the VAT incurred (input tax) is on significant expenditure such as purchasing a property of undertaking a major refurbishment. This article looks at the basic VAT rules applying to practices and what opportunities are available. The first point to make is that if a practice only makes exempt supplies (of medical services) it is not permitted to register for VAT and consequently cannot recover any input tax.  Therefore we must look at the types of supplies that a practice may make that are taxable (at the standard or zero rate).  If any of these supplies are made it is possible to VAT register regardless of the value of them.  This is called a voluntary registration and provides the practice with the ability to reclaim, at least some, input tax.  Of course, if taxable supplies are made, the value of which exceeds the current turnover limit of £81,000 pa, registration is mandatory. Examples of services and goods which may be taxable are;

  • Drugs, medicines or appliances that are dispensed by doctors to patients for self-administration
  • dispensing drugs against an NHS prescription is zero-rated.
  • drugs dispensed against private prescriptions is standard-rated.
  • Signing passport applications.
  • Medico legal services that are predominately legal rather than medical – for example; negotiating on behalf of a client or appearing in court in the capacity of an advocate.
  • Clinical trials or market research services for drug companies that do not involve the care or assessment of a patient.
  • Paternity testing.
  • Certain rental of rooms
  • Providing professional witness evidence
  • Any services which are not in respect of; the protection, maintenance or restoration of health of a patient.

So what does VAT registration mean?

Once you join the “VAT Club” you will be required to file a VAT return on a monthly or quarterly basis.  You will have to issue certain documentation to patients/organisations to whom you make VATable supplies.  You may need to charge VAT at 20% on some services and the range of services which may become VATable in the future is likely to grow.  You will be able to reclaim VAT charged to you on purchases and other expenditure subject to partial exemption rules (see below).  You will have to keep records in a certain way and your accounting system needs to be able to process specific information.

Specific considerations

Because doctors usually provide services which attract varying VAT treatment, a practice will be required to attribute VAT incurred on expenditure (input tax) to each of these categories.  Generally speaking, only VAT incurred in respect of zero-rated and standard-rated services may be recovered.  In addition, there will always be input tax which is not attributable to any specific service and is “overhead” eg; property costs, professional fees, telephones etc.  There is a set way in which the recoverable portion of this VAT is calculated.  VAT registered entities which make both taxable and exempt supplies are deemed “partly exempt” and must carry out calculations on every VAT return.

Partial Exemption

Once the calculations described above have been carried out, the resultant amount of input tax which relates to exempt supplies is compared to the de-minimis limits (broadly; £625 per month VAT and not more than 50% of all input tax).  If the figure is below these limits, all VAT incurred is recoverable regardless of what activities the practice is involved in. Therefore, any accounting system must be capable of attributing input tax to the following headings; taxable (at 20% or zero) exempt and overhead (attributable to both taxable and exempt).

VAT registration in summary

Benefits:

  • Recovery of input tax; the cost of which is not claimable in any other way.
  • Potentially, recovery of VAT on items such as property, refurbishment and other expenditure that would have been unavailable prior to VAT registration.
  • Only a small amount of VAT is likely to be chargeable by a practice.
  • May provide opportunities for pre-registration VAT claims.

Drawbacks

  • Increased administration and staff time.
  • Exposure to VAT penalties and interest.
  • May require VAT to be added to some services provided which were hitherto VAT free.
  • Likely that only an element of input tax is recoverable as a result of partial exemption.
  • Uncertainty on the VAT position of certain services due to current EC cases.
  • Potential increased costs to the practice in respect of professional fees.

How to register

Practices will need to consider how they should be registered, for example individually as sole proprietors or jointly as partnerships. The legal entity chosen should reflect actual working arrangements, so if several doctors work together in a practice, they would normally be registered together as a partnership. VAT registration will cover all the supplies made by the doctors involved in the registered legal entity. For example, where a doctor is registered as a sole proprietor all the income he or she receives, for both medical and non-medical purposes, is subject to the VAT rules relating to such supplies. It may also be possible to VAT register as a company or an LLP depending on the structure of a practice and associated entities. Registration may be applied for using a form VAT1 on-line.

Specific VAT issues for property transactions

Purchase

If possible, it would obviously be preferable to purchase a property without VAT.  These properties are likely to be older buildings as new commercial properties (under three years old) will be mandatorily standard rated.  If the property being purchased is residential, then it will be VAT free.  It is also possible for a vendor to “opt to tax” a commercial property, meaning that a unilateral choice has been made to add VAT to the sale price.  If the property is subject to VAT on the sale or long lease then we must consider the ability to recover this. If there is VAT on a property, it may be used as a lever to reduce the agreed sale price. Assuming a VAT registration is in place for a practice the VAT on the purchase will be an “overhead” for partial exemption purposes so the input tax will feed into the partial exemption calculation and some of it will be recoverable.  If the property is >£250,000 then something known as the Capital Goods Scheme (details Capital Goods Scheme – Guide) will apply and the amount of input tax claimed will need to be adjusted annually over a ten year period. If part of the property is to be sub-let to a third party, it is possible for the practice to opt to tax the rent.  This will improve the practice’s ability to recover input tax on the purchase. Alternatively, a third party entity (eg; a company, an LLP or an individual doctor – the entity must not be “connected” to the entity occupying the premises) may purchase the property, VAT register, opt to tax the building itself, and charge rent to the practice which uses the property.  This means that the purchasing party may immediately recover 100% of the VAT incurred on the purchase, but will need to add VAT to the rent to the practice.  Care should be taken with a structure such as this and professional help should be sought.

Sale

The sale of a property will be VATable if it has been subject to the option to tax and exempt if there is no option and the property is over three years old.  If the property was purchased by a third party (as above) it may be possible to treat the sale of the building as a VAT free “transfer of a going concern”.

Summary

As may be seen; VAT is not straightforward for doctors’ practices but it is worthwhile looking to see if it is possible to reduce or mitigate the actual cost that VAT represents to practices

Tax Points (Time Of Supply)

By   30 October 2014
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The tax point for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because it’s included on VAT invoices and it tells you in which VAT period the transaction should be accounted for.  The tax point may be summarised (in most circumstances) as the earliest of:

  • The date an invoice is issued
  • The date payment is received
  • The date title to goods is passed, or services are completed.

Some brief examples:

Situation Tax point
No invoice needed Date of supply
VAT invoice issued Date of invoice
VAT invoice issued 15 days or more after the date of supply Date the supply took place
Payment or invoice issued in advance of supply Date of payment or invoice (whichever is earlier)
Payment in advance of supply and no VAT invoice yet issued Date payment received

The date of supply is:

  • for goods – the date they’re sent, collected or made available (eg installed in the customer’s house)
  • for services – the date the work is finished

There are certain exceptions, so care should be taken when establishing a tax point.

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.