x-vat x-vat update pro

Transcription

1 x-vat x-vat update pro august 2014

2 x-vat update pro Welcome to the August 2014 issue of the x-vat update pro. In this issue: VAT Notes No. 3 of 2014; VAT place of supply of service rule changes and introduction of the VAT Mini One Stop Shop; Improvements to the Online VAT Registration Service; Electronic Filing of VAT Returns; Annual Accounting Direct Debits; Withdrawal of HMRC 0845 Helpline Telephone Numbers; from the UK Tribunals: The Commissioners for Her Majesty s Revenue and Customs v British Film Institute [2014] UKUT 0370 (TCC); from the UK courts: CLP Holding Company Ltd v Singh & Anor [2014] EWCA Civ 1103; from the CJEU: GMAC UK (Judgment of the Court) [2014] EUECJ C- 589/12. Also, we are receiving a variety of queries on assessments, penalties and special schemes such as the Flat Rate Scheme, the Cash Accounting Scheme and the Retail Schemes and we would be interested in hearing about these if there are problems with HMRC. We understand that HMRC are targeting the Flat Rate Scheme in particular. The rigidity of the scheme can be disadvantageous to the taxpayer where there are zerorated or exempt supplies and while HMRC have powers to challenge the trade category used by the taxpayer where they believe it does not accurately reflect the activities of the business the taxpayer has no corresponding power to retrospectively change these where there is an unfair result. Martin Kaney Director VAT Alerts! Registration for MOSS th October 2014 Revised Place of Supply Rules for Electronic Services 1st January 2015 Withdrawal of ESC on new student accommodation 1st April 2015 Withdrawal of ESC on student dining halls 1st April 2015 Withdrawal of ESC on breaks in long stay hotel accommodation 1st April 2015 Withdrawal of ESC on TOMS shore excursions 1st April 2015 Withdrawal of ESC on the TOMS airline charter option 1st April 2015

3 hmrc updates VAT place of supply of service rule changes and introduction of the VAT Mini One Stop Shop In VAT Notes 2 of 2014, HM Revenue & Customs (HMRC) reminded taxpayers of the changes being made to the VAT place of supply of services rules from 1 January The changes affect businesses that supply digital services (broadcasting, telecommunications and e-services) to consumers (private individuals). Fro m the 1 January 2015, the place of taxation of these supplies will be determined by the location of the consumer who receives the service, rather than the location of the supplier of the service. To save digital service suppliers having to register for VAT in every European Union (EU) Member State where they have consumers, they can opt to use the VAT Mini One Stop Shop online service (VAT MOSS). By using VAT MOSS a business can register and account for the VAT on all its EU business to consumer digital service supplies to just one EU Member State tax authority for example HMRC. Businesses can register to use VAT MOSS from 20 October To find out more about the changes: Improvements to the Online VAT Registration Service From August 2014 changes have been made to the online VAT registration service. The improvements will verify certain key pieces of information at the point of registration to prevent unnecessary follow up contact. Additionally, applicants who do not provide a UK National Insurance number when registering will be required to provide evidence of their identity before their VAT registration will be processed. For more information about how to register online for VAT, go to: Electronic Filing of VAT Returns The majority of businesses must file their VAT returns online but following a formal consultation exercise HMRC have amended legislation to: allow some businesses to use an alternative method of electronic filing (telephone filing) provide an additional exemption from electronic filing where it is not reasonably practicable to file VAT returns in that way ( such businesses may be able to file on paper) Changes to legislation took effect from 1 July For more information see Revenue & Customs Brief 29/14.

4 Virtually all VAT-registered businesses are required by law to submit their returns online and pay electronically. A business does not have to do this if either of the following apply: HMRC is satisfied that your business is run entirely by practising members of a religious society whose beliefs prevent them from using computers HMRC is satisfied that it is not reasonably practicable for you to use a computer to submit your returns, for reasons of age, disability or remoteness of location If either of these apply then a business can contact the VAT Helpline on (Monday - Friday, 8am to 6pm, closed weekends and Bank Holidays) to discuss alternative arrangements. A business does not have to file returns online if it is subject to an insolvency procedure - but if there is an approved Voluntary Arrangement returns may be submitted online. The benefits of online submission include: a safe and secure method of sending the VAT return an on-screen acknowledgement that HMRC has received the return an option to receive an electronic reminder when the VAT return is due automatic calculations to reduce errors when completing the return up to 7 extra calendar days to submit the return and pay any VAT due (compared with the due date for paper returns and cheques sent by post) - and if paid by Direct Debit online at least 10 extra calendar days to pay There are legal conditions that apply to submitting VAT returns online and receiving the extra time for paying electronically. These are on the HMRC website under Legal conditions, Submit a return conditions and Incentives for making an electronic return and paying VAT due by an approved electronic method. Annual Accounting Direct Debits Businesses which have a Direct Debit set up and subsequently move onto the Annual Accounting Scheme should complete a VAT623 form and cancel their previous Direct Debit. Please refer to HMRC guidance at: This notice helps the taxpayer complete the VAT return and provides information on how to submit the completed return to HMRC. It also contains some special advice for those using VAT accounting schemes and information about submitting the return electronically. The changes provide new information on exemptions from online filing and assistance for those who find it difficult to submit their return online. Details of any changes to this notice since October 2010 can be accessed on the HMRC website.

5 Withdrawal of HMRC 0845 Helpline Telephone Numbers HMRC has announced that it will stop using the 0845 helpline numbers in December After the numbers are withdrawn callers that use the numbers will hear a message advising them of the new 03 number. HMRC is still updating its forms with the new 03 numbers.

6 uk tribunals The Commissioners for Her Majesty s Revenue and Customs v British Film Institute [2014] UKUT 0370 (TCC) Exemption for cultural services - supplies of right of admission to cinema by body governed by public law - whether Article 13A(1)(n) Sixth Directive sufficiently clear and precise to have direct effect - appeal dismissed. This was an appeal by HMRC against the Decision related to a preliminary issue in an appeal by the British Film Institute ( the BFI ), namely whether Article 13A(1)(n) of Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment ( the Sixth Directive ) had direct effect between 1 January 1990 and 31 May 1996 ( the Claim Period ). Article 13A(1)(n) of the Sixth Directive exempted supplies of certain cultural services and goods closely linked thereto by bodies governed by public law or other cultural bodies recognised by the Member State concerned. During the Claim Period, UK domestic legislation did not provide exemption for cultural services and the BFI accounted for VAT at the standard rate on the sale of tickets for admission to screenings of films. The FTT decided that Article 13A(1)(n) of the Sixth Directive had direct effect during the Claim Period. In doing so, the FTT rejected HMRC s submission that the opening words of the provision, certain cultural services, gave the United Kingdom (and other Member States) discretion not to exempt some cultural services. The FTT concluded, at [68] of the Decision, that those words meant all cultural services and, accordingly, that supplies of the right of admission to cinemas by the BFI in the Claim Period were exempt supplies for VAT purposes without the need for any national implementing legislation. Conclusion The Court concluded that Article 13A(1)(n) of the Sixth Directive was (a) sufficiently precise and (b) not in terms intended to allow latitude to Member States in its application so that (c) it had direct effect during the Claim Period and in their view, the FTT made no error of law in the Decision and dismissed the appeal. This opens up the possibility of other claims under the cultural exemption.

7 uk courts CLP Holding Company Ltd v Singh & Anor [2014] EWCA Civ 1103 This case was concerned with a contractual dispute between parties on whether the sale price was exclusive of VAT on a commercial property on which the option to tax had been exercised (HMRC were not involved). The property was sold for 130,000 and that amount was paid by the purchaser. HMRC assessed the vendor for the VAT and the vendor requested the purchaser pay it the VAT. The purchaser refused arguing that it had paid all that was due under the contract. The Court concluded that there was a conflict between parts of the contract, and that the consideration paid was inclusive of VAT: Taking all these matters into consideration and considering, as I must, the matter from the perspective of the reasonable person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, I have little doubt that such a person would conclude that the parties intended that nothing was or could become payable by the defendants over and above the specified purchase price of 130,000. In the particular circumstances of this case it is not possible to interpret "Purchase price" as the price exclusive of VAT. In my judgment the reasonable person would therefore consider the special conditions are not reconcilable with clause 1.4 of the general conditions and that the parties intended that, in these circumstances, the special conditions must prevail. This is a decision based on contract law rather than tax law however there is a question mark over it. Public law statute such as revenue law has repeatedly been held by the Courts to supersede any private law agreement in contract law. The contract actually included the following provisions: "1.4.1 An obligation to pay money includes an obligation to pay any value added tax chargeable in respect of that payment All sums made payable by the contract are exclusive of value added tax." The Court has also taken the view that it is the supplier who must pay the VAT. It is, of course, a fundamental principle of the tax that the VAT is paid by the recipient or consumer (albeit accounted for by the supplier). There are certainly grounds for appeal.

8 cjeu cases GMAC UK (Judgment of the Court) [2014] EUECJ C-589/12 Reference for a preliminary ruling VAT Sixth Directive 77/388/EEC Article 11C(1), first subparagraph Direct effect Reduction of the taxable amount Two transactions concerning the same goods Supply of goods Cars, sold on a hire purchase basis, repossessed and sold at auction Abuse of rights The Court ruled: The first subparagraph of Article 11C(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes Common system of value added tax: uniform basis of assessment must be interpreted as meaning that, in circumstances such as those of the case in the main proceedings, a Member State may not prevent a taxable person from invoking the direct effect of that provision in respect of one transaction by arguing that that person may rely on the provisions of national law in relation to another transaction concerning the same goods and that the cumulative application of those provisions would produce an overall fiscal result which neither national law nor Sixth Directive 77/388, applied separately to those transactions, produces or is intended to produce. The taxpayer was permitted to apply the EU law as regards one defective rule while at the same time relying on its rights to apply UK law in regard to another kind of transaction where that also gave rise to a lower tax burden. An HMRC spokesman said: "We are carefully considering this judgment concerning the effect of former UK VAT legislation in force before This case only concerns the position of businesses that prior to 2006 repossessed and re-sold goods and benefited from VAT relief on the resale."

9 x-vat Martin Kaney is the founder and Director of x-vat online services. He has over 30 years experience in the tax including 8 years with HM Customs & Excise (4 years in Investigation Division), and various senior roles with Liaison, RSM Tenon and latterly, Deloitte. He is a graduate of Edinburgh University, a member of the VAT Practitioners Group, a council member of the Gerson Lehrman Group, a provisional member of the Expert Witness Institute and an associate member of the Healthcare Financial Management Association, as well as holding an external law degree from Strathclyde University. He is also the author of VAT & the NHS (Spiramus 2012) with a second edition due in late 2014 together with the companion volume: VAT & Government Departments.