Welcome to the June edition of our monthly VAT update, including a selection of news and updates relating to the world of VAT.
Claim once, and not early
The DIY scheme enables someone doing a self-build project to reclaim certain VAT back. The claim process can be detailed and complex.
HMRC’s approach that there can only be one claim after the project is complete (and within strict deadlines of that completion) makes it more likely to be rejected. A couple made more than one claim and took HMRC to tribunal when they refused to process the second claim. The First-tier Tribunal ruled that the legislation did not prevent multiple claims being made.
However, HMRC has recently issued guidance to state that its policy remains one project, one claim.
This highlights the fact that in these circumstances HMRC seems to hold all the cards. The First-tier ruling does not create a precedent, so HMRC can effectively ignore the ruling for other cases. It also seems that the department does not want to take the case to the Upper-tier, as if it loses there, it sets a precedent for other taxpayers to rely on.
Partial exemption? Google it
When searching for a sofa online, Google has some advertised links to two of the biggest retailers in the UK (Sofology and DFS). If you clink on one of these links, Google gets a payment from the relevant firm for directing online traffic to their website.
The two retailers claimed the VAT due on the supplies by Google as it related to the taxable supply of sofas. HMRC took the view that as the retailer also offered insurance for the products then the VAT on Google’s fee was linked to taxable and exempt supplies so was only partially reclaimable.
The tribunal ruled that whilst there were exempt supplies made to customers directed to the websites, the main intention was the purchase of a sofa and therefore there whilst there was a link; there wasn’t a direct and immediate link, with the supply of exempt insurance, as required by law.
The tribunal then set out at length why the VAT on these costs was not treated as an overhead. With reference to several previous cases, the tribunal reminded us that “the allocation of costs to the category of overheads is a last resort”. Bearing this in mind and taking into account the commercial intent of the advertising to drive enquiries to the relevant retailer’s website or stores for the purchasing of sofas, it was seen to have a direct and immediate link to these taxable supplies.
Therefore, the retailers were able to reclaim the VAT incurred in full.
Partial exemption can be complex, if you need to talk to someone about the issues raised here, or just how we can help please contact us.
Sausage wars postponed again
Detailed checks on imports into Great Britain - which have already been postponed four times since Brexit - have been delayed again. However, it would seem that this time it may be indefinite.
The proposed checks would have required certificates and checks on sanitary and phyto-sanitary goods. This includes most foods, plants and other organic materials (wood, wool, feathers, etc.).
The statement from the government envisages any future checks to fall into the new trading models for international trade due at the end of 2023.
The last post
The ongoing case of certain customers of Royal Mail trying to reclaim VAT which was not separately charged (as the supplier mistakenly though that the supply was exempt), has been dismissed by the Supreme Court. There were several other claimants lining up behind the lead litigator, with an estimated £1 billion of VAT at stake.
Plastic Packaging Tax
Businesses being supplied by importers of or manufacturers of plastic subject to the Plastic Packaging Tax (PPT) are starting to receive invoices showing the PPT charges made. This is part of the purpose of PPT in getting customers to see if suppliers to see if more environmentally friendly materials (or plastic with a recycled content in excess of 30% which is exempted from the tax).
Reverse charge call
The revenue-protecting scheme of a domestic reverse charge is not limited to construction services.
There is also a similar scheme for carbon emissions allowances, gas and electricity, telecommunications services, renewable energy certificates, construction services and mobile phones and computer CPU chips. However, the last of these also required suppliers to complete sales lists. HMRC has announced these sales lists will no longer be required due to the enhanced intelligence at HMRC’s disposal.
Import One-Stop Shop
The Import One-Stop Shop (IOSS) is to enable online retailers in Great Britain to account for VAT on sales below €150 to EU consumers, so that the consumers don’t get a nasty surprise of being asked for VAT at point of import.
The system appears to have ‘issues’ - to the extent that guidelines have been published that if the consumer can show it was charged import VAT, the seller can enter a credit on their IOSS submission and repay this cost to the consumer.
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