Size matters Part III – Bay plants are VAT free – as long as they are no bigger than 50cm and they have not been clipped or shaped.
Tag Archives: zero-rate
Extension of VAT energy-saving materials relief
HMRC have published a new Policy Paper on the extension of energy-saving materials (ESMs).
Installations of ESMs in residential accommodation currently benefit from a temporary VAT zero rate until 31 March 2027, after which they revert to the reduced rate of VAT at 5%.
This measure extends the relief to installations of ESMs in buildings used solely for relevant charitable purposes, such as village halls or similar recreational facilities for a local community.
It also expands the scope of the relief to the following technologies:
- electrical batteries that store electricity generated by certain ESMs and from the National Grid
- water-source heat pumps
- diverters that enable excess electricity from certain ESMs to be used within a building in which it is generated rather than exported to the grid
It also adds certain preparatory groundworks that are necessary for the installation of ground- and water-source heat pumps.
The changes apply from 1 February 2024
The policy objective is to incentivise the installation of ESMs across the UK to improve energy efficiency and reduce carbon emissions.
The measures are implemented by The Value Added Tax (Installation of Energy-Saving Materials) Order 2024.
A VAT Did you know?
Chestnuts roasting by an open fire…
Roasted nuts in shells are zero rated, but if the shell is removed they become standard rated.
Ho, ho ho… VAT and nuts in the same sentence. Merry Christmas everybody.
A VAT Did you know?
We know that size matters for VAT – see marshmallows. Also, if you buy a small amount of bicarbonate of soda it is VAT free. However, bigger tubs are VATable.
VAT: Changes to the DIY Housebuilders’ Scheme
The DIY Housebuilders’ Scheme is a tax refund mechanism for people who build, or arrange to have built, a house they intend to live in. It also applies to converting commercial property into a house(s). This puts a person who constructs their own home on equal footing with commercial housebuilders. There is no need to be VAT registered in order to make the claim.
The Scheme can be complex, but here is our Top Ten Tips for claimants.
The Changes
From 5 December 2023, the follow changes apply:
- claimants will be allowed to submit claims electronically
- the deadline for making claims will be extended to six months (from three)
- the list of documents required to support a claim has been amended
- a new requirement for additional evidence when a derelict building has been converted into dwelling(s) – to be made on a specific form
These changes are set out in The Value Added Tax (Refunds to “Do-It-Yourself” Builders) (Amendment of Method and Time for Making Claims) Regulations 2023 and guidance is provided by HMRC here.
The new deadline applies to claims made on, or after 5 December 2023. The deadline, broadly, begins when a dwelling is complete. There is sometimes a dispute on the completion date, so this case and commentary may be of assistance.
VAT: Updated guidance on zero-rated exports
has been updated. The Notice sets out how and when a business can apply zero-rate exported goods.
Information on the types of fuel that the Extra Statutory Concession 9.2 does not apply to, and when you cannot zero rate the export of a motor vehicle has been updated.
And: Information on evidence relating to zero rating and direct exports – paragraphs 6.1, 6.5, 7.3 and 7.4.
VAT reliefs for charities – A brief guide
Unfortunately, there is no “general” rule that charities are relieved of the burden of VAT.
In fact, charities have to contend with VAT in much the same way as any business. However, because of the nature of a charity’s activities, VAT is not usually neutral and often becomes an additional cost. VAT for charities often creates complex and time consuming technical issues which a “normal” business does not have to consider.
There are only a relatively limited number of zero rated reliefs specifically for charities and not for profit bodies, so it is important that these are taken advantage of. These are broadly:
- advertising services* received by charities
- purchase of qualifying goods for medical research, treatment or diagnosis
- new buildings constructed for residential or non-business charitable activities
- self-contained annexes constructed for non-business charitable activities
- building work to provide disabled access in certain circumstances
- building work to provide washrooms and lavatories for disabled persons
- supplies of certain equipment designed to provide relief for disabled or chronically sick persons
* HMRC have set out its views on digital/online advertising in Revenue and Customs Brief 13 (2020): VAT charity digital advertising relief.
There are also special exemptions applicable to supplies made by charities:
- income from fundraising events
- admissions to certain cultural events and premises
- relief from “Options to Tax” on the lease and acquisition of buildings put to non-business use
- membership subscriptions to certain public interest bodies and philanthropic associations
- sports facilities provided by non-profit making bodies
Although treating certain income as exempt from VAT may seem attractive to a charity, it nearly always creates an additional cost as a result of the amount of input tax which may be claimed being restricted. Partial exemption is a complex area of the tax, as are calculations on business/non-business activities which fundamentally affect a charity’s VAT position.
The reduced VAT rate (5%) is also available for charities in certain circumstances:
- gas and electricity in premises used for residential or non-business use by a charity
- renovation work on dwellings that have been unoccupied for over two years
- conversion work on dwellings to create new dwellings or change the number of dwellings in a building
- installation of mobility aids for persons aged over 60
Additionally, there are certain Extra Statutory Concessions (*ESCs) which benefit charities. These zero rate supplies made to charities, these are:
- certain printed stationery used for appeals
- collection boxes and receptacles
- lapel stickers and similar tokens, eg; remembrance day poppies
* ESCs are formal, published concessions but have no legal force.
We strongly advise that any charity seeks assistance on dealing with VAT to ensure that no more tax than necessary is paid and that penalties are avoided. Charities have an important role in the world, and it is unfair that VAT should represent such a burden and cost to them.
A VAT Did you know?
We know that burying a deceased person is exempt, but exhumation is standard rated and we now know, thanks to the UK Funerals On-line Ltd FTT case, that the service of the repatriation of the body of a deceased person can be viewed as either an exempt supply of funeral services or a zero-rated supply of transport services.
This being the case, zero rating trumps exemption via of The VAT Act 1994, section 30(1).
A VAT Did you know?
Hard or soft? Stiff or floppy?
Sssh at the back, this is important…
Whether cakes and biscuits go hard or soft when stale helps to determine whether they are indeed cakes or biscuits (cakes go hard, biscuits go soft). This is the difference between VAT at 20% and zero rating for some products – yes… Jaffa Cakes!.
Whether printed matter is stiff or floppy can also result in either 20% or zero rated treatment. In this case, for single sheet products, eg; leaflets, limp is good and hard can result in the VAT hit.
What did you think I was talking about? Stop making up your own jokes…
VAT: Land related services
Whether a service is “related to land” is important because there are distinct rules for this type of supply compared to the General Rule. The place of supply (POS) of land related services is where the land is located, regardless of where the supplier or recipient belong.
The rule applies only to services which relate directly to a specific site of land. This means a service where the land is a central and essential part of the service or where the service is intended to legally or physically alter a property.
It does not apply if a supply of services has only an indirect connection with land, or if the land related service is only an incidental component of a more comprehensive supply of services.
What is land?
For the purpose of determining the POS, land (also called immoveable property in legislation) means:
- a specific part of the earth, on, above or below its surface
- a building or structure fixed to, or in, the ground above or below sea level which cannot be easily dismantled or moved
- an item making up part of a building without which it is incomplete (such as doors, windows, roofs, staircases and lifts)
- items of equipment or machinery permanently installed in a building which cannot be moved without destroying or altering the building
What services directly relate to land?
HMRC provide the following examples:
- construction or demolition of a building or permanent structure
- surveying and assessing property
- valuing property
- providing accommodation in hotels, holiday camps, camping sites or timeshare accommodation
- maintenance, renovation and repair of a building
- property management services carried out on behalf of the owner
- arranging the sale or lease of land or property
- drawing up of plans for a building or part of a building designated for a particular site
- services relating to the obtaining of planning consent for a specific site
- on-site security services
- agricultural work on land
- installation and assembly of machines which, when installed, will form a fixture of the property that cannot be easily dismantled or moved
- the granting of rights to use all or part of a property (such as fishing or hunting rights and access to airport lounges)
- legal services such as conveyancing and drawing up of contracts of sale or leases, including title searches and other due diligence on a specific property
- bridge or tunnel toll fees
- the supply of space for the use of advertising billboards
- the supply of plant and equipment together with an operator
- the supply of specific stand space at an exhibition or fair without any related services
What services are only indirectly related to land?
The following HMRC examples are not deemed to be land related services:
- management of a property investment portfolio
- drawing up of plans for a building that do not relate to a particular site
- arranging the supply of hotel accommodation or similar services
- installation, assembly, repair or maintenance of machines or equipment which are not, and do not become, part of the building
- accountancy or tax advice, even when that relates to tax on rental income
- the supply of storage of goods in property without a right to a specific area for the exclusive use of the customer
- advertising services including those that involve the use of a billboard
- marketing, photography and public relations
- the supply of equipment with an operator, where it can be shown that the supplier has no responsibility for the performance of the work
- general legal advice on contractual terms
- legal services connected with fund raising for property acquisitions or in connection with the sale of shares in a company or units in a unit trust which owns land
- stand space at an exhibition or conference when supplied as part of a package with related services, eg; design, security, power, telecommunications, etc.
These examples are mainly derived from case law and the department’s understanding of the legislation and they are not exhaustive.
The Reverse Charge
If an overseas supplier provides land related services in GB, the POS is GB and the reverse charge applies if the recipient is GB VAT registered.
If a GB supplier provides services directly related to land where the land is located outside GB, the POS is not GB. This means that there is a supply in another country. VAT rules in different countries vary (even across the EU) – some countries use the reverse charge mechanism, but others require the GB supplier to VAT register in the country of the POS (where the land is physically located).