The perils of failing to ask for a VAT invoice

There was a company that was making a good profit by sourcing desirable consumer items like tablet computers, smartphones, etc. that were in short supply. It was unable to get these products by buying from the suppliers because there was such high demand for them that supplies were limited. Most retailers were only allowing customers to buy two of these products each.

The company was sending its staff to the retailers to buy the items two at a time. Each item generally cost several hundred pounds. Buying two was certainly more than £250.00. What’s so important about £250.00? I’ll tell you in a moment. So, the company’s staff returned with their purchases and the company was able to meet the demands of overseas customers who were unable, at that time, able to buy the products in their home countries.

Are you still with me?

The sale of the items the company had bought was outside the scope of UK VAT because the goods were exported. The company had full evidence of the export so the VAT man was happy that there was no VAT to account for on the sale.

Remember that £250.00 I mentioned earlier? Well, there’s a VAT rule that says that where the amount paid is no more than £250.00 including VAT the retailer can issue a less detailed VAT invoice. Less detailed VAT invoices contain significantly less information than a full VAT invoice. In particular the name and address of the customer is one item that is missing from them. The VAT man noticed that the company had lots of these less detailed VAT invoices where the value of the supply was over the £250.00 limit. The VAT man has assessed the company for the VAT it had claimed against these invoices.

So the moral of this tale? Remember to get full VAT invoices for purchases where you are paying more than £250.00 if you want to be able to recover the VAT on your next VAT return.

Got a view on this? Leave a comment below.

Need help with a VAT issue? Give me a call on 01293 734545.

 

Related posts:

1. Notes for the newly registered business – Part 2
2. New Invoicing rules in the UK
3. What VAT can’t ever be claimed?

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HMRC targeting businesses that trade above the VAT registration limit

HMRC has published a press release in which it has announced a compaign to target businesses that have turnover above the registration limit which have failed to register for VAT. HMRC will use information to which it already has access, e.g. direct tax data, to assist in its search for such businesses, as well as other means.

HMRC intends to invite such businesses to voluntarily register during the campaign and is likely to offer a reduced penalty over that usually applied for late registration. For late registration the penalty is a percentage of the amount of VAT due from the date from which registration started to the date on which HMRC was notified. The longer the delay the higher the penalty. Although the penalty might be reduced there is no guarantee, and it is still likely to be on a sliding scale.

If you are trading above the registration limit and have yet to register for VAT, you need to take action sooner rather than later because the longer you wait the bigger the penalty you will have to pay.

For more information on registration limits visit my VAT Registration Limits page.

If you need help deciding whether you must register for VAT, ask your accountant or find a local VAT specialist to advise you.

Got any views on this? Leave a comment below.

 

Related posts:

1. HMRC move the goal posts on making VAT payments to them by cheque
2. 17 and a half things you need to know about VAT – Part 1
3. Be careful where you get your VAT number

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Evading VAT on cars brought into the UK

It seems that there are some people who are avoiding paying VAT on vehicles they bring into the UK. The issue only affects vehicles that are brought into the UK permanently. Vehicles that are in the UK temporarily have no need to be registered with the DVLA and any VAT due paid to HMRC.

Under the current system it is possible for vehicles to be registered with the DVLA without paying any VAT due to HMRC. This is to be addressed in a joint initiative between HMRC and the DVLA which will result in a new online system being set up.

HMRC and the DVLA have indicated they will be issuing a consultation document on this by the end of May 2011. So if you have any views on the matter respond to the consultation.

The proposal is to have the online system in place by early 2013. The new system is expected to reduce the number of vehicles that remain permanently in the UK without registering with the DVLA or paying VAT.

Have a view on this? Leave a comment below.

 

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1. Still doing your VAT Return on paper?
2. Online filing for VAT Returns
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Be careful where you get your VAT number

This may sound a little odd. It seems that there are ‘businesses’ out there that are offering to get a VAT number in return for a payment: taken in advance. According to the note I received from the European Commission on this the proposals apparently appear to be official EU documents.

Of course, in the UK you can apply for a VAT number to H M Revenue & Customs for free. If you need to know whether or when you have to register in the UK you can find more information on the VAT Registration Limits page on this website.

For information on other VAT registration in other EU countries the European Commission provides information on its website.

If you have any views on this please leave a comment.

 

Related posts:

1. HMRC targeting businesses that trade above the VAT registration limit
2. 17 and a half things you need to know about VAT – Part 1
3. Five Things You Need to Know About VAT Accounting

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HMRC pour cold water on hot take-away food?

I wrote about this in my article Good news for hot take-away food suppliers? a few days ago after the release of the European Court of Justice’s (ECJ) decision in Manfred Bog and others. HMRC has now published a Revenue & Customs Brief which almost makes clear HMRC’s position in relation to the impact of the decision. The case was referred to the ECJ by the German tax authorities. In Germany there is a reduced rate of VAT for foodstuffs.

The question considered by the ECJ was whether the supply by the vendors from places such as mobile snack bars was a supply of goods or a supply of services. In press articles HMRC was quoted as saying they treated all supplies of food as a supply of goods. There is no mention of that in the Revenue & Customs Brief. The brief is a lot of waffle with very little substance, although it does make clear that HMRC will entertain no claims for zero-rating.

The question has to be whether UK legislation is in line with the EU legislation. Is the supply of catering services, e.g. a restaurant, a supply of foodstuffs and thus a supply of goods? Or is it a supply of services?

One thing is clear, to get HMRC to change its stance on this will require someone to take the matter to Court. I think HMRC might be wrong about the application of the zero-rate to hot take-away food being impossible – would it be an extension of the zero-rate? Or just a redefining of hot take-away food so that it falls within the zero-rating?

Have a view on this? Leave a comment: let’s start a discussion.

 

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HMRC has withdrawn the Flat Rate Scheme ready reckoner that I referred to in The VAT Flat Rate Scheme for Small Businesses – a brief description.

This is sad news as it means that it is currently harder to work out whether using the Flat Rate Scheme is harder. You will have to do all the calculations yourself.

It is possible that a new version will be made available on another Government website. As soon as I become aware of this happening I’ll let you know.

 

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1. New Flat Rate Scheme percentages from 4 January 2011
2. Good News for users of the Flat Rate Scheme
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I have added the latest table, as published in the Budget 2011 papers, to the site.

Fuel Scale Charge from 1 May 2011

 

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2. Fuel scale charge for periods starting before May 2009
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The registration limits from 1 April 2011 are:

Past VAT registration and deregistration limits:

 

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1. VAT Registration limits – updated for 2009
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HMRC’s online service will be offline

Important

This is important for any business that is intending to do it’s VAT return online (or use any of HMRC’s other online services) in the first few days of April.

You need to do your VAT return by 1 April 2011 to avoid problems that might arise if the “engineering work overruns.”

HMRC has announced that its online services will be offline from 2 April to 6 April 2011. They have provided some additional information which says:

We wanted to let you know that there will soon be a short period of disruption to our online services to allow for planned system changes and enhancements. Some HMRC IT services will be unavailable from normal service closure time (this differs from system to system) on Friday 1 April 2011 but they will be fully restored from 6.00am on Wednesday 6th April.

This means that customers who want to submit returns online – notably SA and VAT – will be unable to do so throughout this period. This is what agents can expect:

• On Saturday 2nd and Sunday 3rd April returns can be submitted as normal using the HMRC portal but these transactions will not be processed until Wednesday 6th April.
• On Monday 4th and Tuesday 5th April customers will not be able to submit returns using the HMRC portal. They will receive an acknowledgement from the Government Gateway but the returns won’t be validated or processed until Wednesday 6th April. Agents will not be able to view their client lists and details through the SA portal throughout this period and our telephone helpline advisers may not have access to the full range of IT systems to enable them to deal with customers’ enquiries

We apologise for any inconvenience that this may cause but we believe that the impact upon our customers during this short period of IT upgrades will be minimal.

The HMRC website www.hmrc.gov.uk will remain available throughout for customers to access guidance, forms and other information and agents can keep up to date by checking the service availability pages on the website.

So, there you have it, HMRC customer service standards think it’s acceptable to make the service unavailable at a critical time for business that do their VAT returns online.

Do you think it’s acceptable? Leave your views in the comments below.

 

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1. Still doing your VAT Return on paper?
2. Do your VAT returns online?
3. Online filing for VAT Returns

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Good news for hot take-away food suppliers?

Recently there have been two decisions released by the Courts which suggest that the UK is applying the wrong VAT treatment to supplies of hot take-away food.

In the first case the Upper Tier Tax Tribunal ruled in the case of Deliverance Ltd that it was important to take into account the intention of the supplier in supplying hot-food. This seems to be the wrong way to approach the matter as it leaves us with a position where the supplier has to prove that it intended to do something, rather than looking at the basic rules for determining the VAT treatment.

In the decision released last week on several cases referred to it by the German authorities it is clear that the correct view is to consider whether the supply being made is of goods (i.e. food) or services (i.e. catering). In the German cases many of the taxpayers were making supplies from kiosks or stands in public areas. The ECJ decision indicates that where there is little or no additional supply, other than hot-food, the supply is one of goods. In the instances referred to the ECJ by Germany the supplies were, as goods, eligible for a reduced rate of VAT.

How might this apply in the UK?

That is a very good question to ask!

It is clear that the simple approach of looking at whether the supply is of goods or services might provide one way of applying the ruling of the ECJ. The difficulty arises from how HMRC might approach the issue. I’ll avoid commenting on that further here as I’m sure HMRC need no help from me in considering its position – although if they ask I’ll happily answer!

The upshot of all this is that there might be a change to the current rules that would make supplies of hot take-away food zero-rated. If that happens it will be good news for Fish and Chip shops, and other take-away outlets, as it is likely to see them able to reduce their prices.

What’s your view? Leave a comment below.

 

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1. HMRC pour cold water on hot take-away food?
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