I can’t believe it’s already the end of July! I’m sure that many of you will be off on holiday in the next month or two, but, of course, the VAT world doesn’t stop.
There were only a couple of VAT changes in the recent budget and these only affect a limited number of businesses; i.e. shared service centres and UK insurers. So this month I’ve discussed a number of issues that I’ve seen on various forums and client queries.
Confusion about MOSS businesses and UK VAT returns
There is still some confusion about UK VAT returns and those MOSS registered businesses whose turnover is below the UK VAT registration limit.
If you or your client is in this category, remember that you have to submit UK VAT returns. You don’t have to pay VAT on your UK sales, but if you don’t submit the return, HMRC will issue an assessment. The only way to cancel the assessment is to submit the return. Most UK businesses in this situation will be able to submit “NIL” VAT returns, unless they want to claim VAT on any UK costs relating to their MOSS sales.
See my recent article which discusses about the issue and will tell you where to find information on HMRC’s website: http://tinyurl.com/p7oaj93
Direct marketing services: single or multiple supply?
HMRC has recently reviewed its policy about the VAT liability of certain direct marketing services, which include a range of different services from supplying printed matter to designing and managing marketing campanies. This essentially means that suppliers of such services will have to charge VAT on at least part of their invoice to reflect the standard rated service element. You can find further information about the changes in HMRC’s R&C Brief 10/15 http://tinyurl.com/ptvgoem. The Brief explains certain changes to Notice 700/24: Postage, delivery charges and direct marketing that are central to HMRC’s revised policy.
Many direct marketing companies have previously treated their supply as a single composite supply of zero-rated printed matter, so the change suggests that HMRC will be looking more carefully at similar arrangements in other industries in the future. It’s probably a good time to review the application of the “composite” supply especially if you’re relying on it to treat sales income as zero-rated or at the reduced rate of 5%. Remember that if you’re not applying the rule properly, HMRC can require you to pay VAT at 20% on the total sales income.
When you mustn’t charge VAT on opted properties
The option to tax is the facility that allows owners of “non-qualifying” properties (i.e. properties that aren’t dwellings or used for relevant residential or relevant charitable purposes) to charge VAT on their sales or rental income, which means that they can claim VAT incurred on related costs.
The principle itself is quite logical, but as with most VAT rules, the devil is in the detail and the subject of many client queries. One particular issue that confuses people is when the option to tax is “disapplied” – which basically means that even though you’ve opted to tax a property, there are certain transactions that are not subject to the option, so your sale or rental income is VAT exempt. A good example is the sale of a commercial property for conversion to dwellings.
See my article “When the option to tax is disapplied” http://tinyurl.com/ndoxgvr for more information about this subject.
You can’t claim VAT that has been overcharged…
I wanted to remind you all of a very simple but misunderstood principle: i.e. that VAT registered businesses can only claim VAT on their expenditure if it has been correctly charged. I’ve recently seen a couple of discussions on accountancy forums where the advice has said that it doesn’t matter if VAT is charged incorrectly because you can claim it on your VAT return. Unfortunately this isn’t true and HMRC will assess you for VAT claimed in these circumstances, so make sure that you ask your supplier to issue a credit note if you think that the VAT has been charged in error.
Changes to vatexchange.co.uk
Our website has now been open for business since September 2008 and is desperately in need of an overhaul! Please bear with us over the next couple of months while we road test a new look and some improved functions, including a proper content management system that will make it easier to find stuff.
Marie
p.s. Don’t forget to check out my new ebook: “VATWoman’s Guide to intercompany services, management charges, cost sharing and much more…” http://tinyurl.com/p7gl38h which is still available for the introductory price of £27 plus VAT. Also check out my “Guide to VAT and residential property development” http://tinyurl.com/n9q8lje if you’re planning a property development or have property developers among your clients.