VAT Current Issues

Rebecca Benneyworth MBE BSc FCA

2020 Group Webinar

Place of supply changes

1 January 2015

Change in place of supply for EBT

services to consumers

◦ Electronic

◦ Broadcasting

◦ Telecommunications

Cross border, INTRA – EU

◦ Home supplies unaffected

◦ Non EU supplies unaffected

◦ B2B supplies unaffected

Electronic services

Supplied over the internet or a similar

network

Usually downloaded

No or very little human intervention in

the supply

A growing range of supplies

What is not an electronic supply

Where a person is needed to complete

the supply

◦ Advice etc given in writing delivered

electronically

◦ Webinars presented live

But download pre-recorded probably is

◦ Electronic examinations which are marked by

a person

But if marked by the machine it is an e-service

Who makes the supply?

Selling through an app store or other

portal?

Is the supply to the portal operator?

◦ Probably yes, so not MOSS implications

Or the customer/consumer?

Most of the big portals are making the

consumer supply so your client is OK

◦ A business reason for choosing to supply

through a portal in spite of the reduced

income

Advice regarding distribution

Where the platform operator:

◦ Sets general T’s & C’s for the consumer

◦ Authorises payment or delivery

◦ Does not clearly state the name of the

supplier on the receipt or invoice to the

customer

Then the platform operator is making the

supply

Your client is making B2B and not affected

Is the customer a consumer?

Safest test is that provision of a VAT

number is NOT a consumer

Could assume that all others are

consumers

◦ Remember that VAT limits everywhere else in

the EU are very low

Can rely on other evidence that someone

is a business customer

◦ But may need to satisfy the VAT authorities in

the member state concerned

Place of supply : B2C

Before the change : where the supplier

belongs

From 1 January : where the customer

belongs

◦ Permanent address, or

◦ Where they normally reside

HMRC presumptions

Phone box, internet café, wifi hotspot

◦ Where the place making the supply is located

On transport in cross border travel

◦ Point of departure

Telephone landline

◦ Where the landline is situated

Mobile phone

◦ Country code of SIM card

Decoder

◦ Where decoder is located

Determining where the supply is

made If one of the presumption cases you need

evidence of location (a single piece of

evidence)

If not one of the presumptions

◦ Two pieces of non contradictory evidence

If rebutting a presumption

◦ Three pieces of non contradictory evidence

Transitional rule – for first 6 months –

one piece of evidence

What sort of evidence?

Billing address of customer

IP address of customer’s device

Location of their bank

Country code of SIM card

Location of fixed landline

Other commercial information

VAT Invoices and rates

Need to use the Europa website

HMRC dubious about preparing a list of

rates

◦ Europa is regarded as the “source”

◦ BUT MOSS pages do include a list of rates

and link to europa

Table of rates and details about tax

invoices in the notes but as of Feb 2015

VAT invoices

Follow the rules for the member state of

supply

Member states cannot require the issue

of full tax invoices for cross border B2C

supplies

But some may require a less detailed tax

invoice to be provided

Table on page 6 helps

Supplies made in currency

You will be reporting for MOSS in home

currency (£ sterling)

Translate transactions undertaken in

other currencies into sterling at the ECB

rate on the last working day of the

reporting period

MSI – Member state of Identification –

home state of the supplier

The Union Scheme - MOSS

UK VAT registered businesses only

◦ But extended – see below

◦ The non union scheme is for countries

outside the EU

If client is not UK VAT registered, they

need to register for UK VAT

◦ They will not be required to account for UK

VAT on their supplies

◦ Do not recover UK input tax unless it relates

directly to the cross border electronic

supplies

MOSS registration

A voluntary or optional scheme

The “long hand” is to register in individual

member states and make returns direct

to them

If choose to leave MOSS then cannot re-

join until two calendar quarters have

passed

MOSS registration - dates

Register for MOSS by 10th day of month

after relevant supplies started

Registration will be backdated to date of

first relevant supply

If late then registered from next VAT

MOSS quarter

So register today for supplies from 1 July

– effective 1 July 2015

Chucked out of MOSS?

Practical disaster for business making

supplies across EU

Submit returns and payments on time

Reminders for payment sent out for three

successive quarters which are unpaid

after 10 days

◦ Persistent failure to comply

◦ Excluded

Moss returns

Calendar quarter returns

◦ Due 20 days after end of quarter

Return in sterling (end of quarter date)

Shows each member state

Value of supplies at standard and lower

rate

Amount of VAT

Payment due at the time the return is due

Payment of MOSS VAT

Due by the end of the submission period

◦ That is, within 20 days

Quote reference number of return

◦ Issued when return accepted

No direct debit facility

No time to pay agreements

Must clear HMRC’s bank by due date

Practicalities

Register for MOSS (this will enrol you in

online system)

Obtain data

Prepare and submit return

Take note of reference number

Make payment quoting reference number

To arrive with HMRC by 20th of month

Other Gems

Records must be retained for ten years

after 31 December of the year of the

transaction

Correct errors on the original return

◦ But need to know time period for correction

in each member state

Penalties arise in individual member states

Cross border agreement not to have

inspections in “close succession”

MOSS – other developments

Think about data protection registration

◦ May be covered by accounting exemption but

just be aware

UK lobbying for a threshold to exclude

small suppliers

◦ Will have to be a unanimous approval

◦ Many member states do not see it as a

problem

◦ Suggested level €1,000 or €5,000

Prompt payment discount

New requirement to raise invoice for

gross amount from 1 April 2015

Either issue credit note for prompt

payment discount (PPD)

Or adjust in accounting records – but see

the detailed requirements to permit this

Sample invoice as an appendix to the

Brief

Construction services - Zero

New Construction

Dwelling

Relevant residential

use

Relevant charitable

use

Charity Annexe

Adapting

Home

for

disabled

person

Construction services – 5%

Installation

Energy saving

materials

Aids for disabled

Support for over

60’s

Conversion

Empty

dwellings

Different number

Non residential

Relevant residential

Childrens’ home

Residential care home with personal care for

the elderly, disabled, mental health condition,

drug or alcohol addiction

Hospice

Students and school pupils

Armed forces accommodation

Monastery or nunnery

Institution – sole or main home of at least 90%

of residents

Construction services Zero rate new construction of “relevant

residential property”

Includes accommodation for school pupils

and students

Change of interpretation

◦ Generally recognised academic or

professional qualification

◦ Maintaining existing professional qualification

for which accreditation is received

◦ High level of academic content

Termination of concessions

Disregard use during vacations in

determining use

◦ Big change for new build halls of residence

Kitchen and dining rooms to count as

residential accommodation if

predominantly used by live-in students

Both ended 1 April 2015

Golf club bonanza?

Bridport and West Dorset Golf Club

successful at CJEU

Green fees to non members are also

exempt

◦ Not permitted to discriminate between

recipients of the supply

Reclaims possible

Unjust enrichment – so repay non

members

Adjust input tax claims

Road fuel

Road fuel private use – the third way!

Changed in 2013

Now three choices

◦ Recover 100% VAT and pay scale charge

◦ Recover 0% VAT

◦ Recover x% of VAT based on detailed mileage

record (of ALL miles travelled)

In practice the third option is probably

unworkable

Entertaining overseas customers

Reasonable in the circumstances

Non UK = not UK or IoM resident

Avails himself of the goods or services

supplied by the business or is likely to do

so

Retention of small interest

If there is a sale and a tiny interest is

retained can the sale still be a TOGC?

Robinson case – a property business

Grant a sublease of 125 years – 3 days

from a primary lease of 125 years

Was this still a TOGC

Tribunal – yes it is

◦ So no output tax due, and reduced SDLT

Sale of business with property

Extends the Robinson decision

In that decision the TOGC was of a rental

business

R & C Brief 27/14 looks at wider TOGC

issues

Also at surrender of a lease which can

now be a TOGC (this is new)

VAT and SDLT refunds?

Flat rate scheme

Taxable supplies net of VAT of no more

than £150,000 expected in next 12

months

Choose flat rate from list

If mixed supplies use the predominant

turnover

Apply flat rate to all business income

◦ Even exempt income

FRS - reminders

1% discount for first year from date of

registration (not first year of flat rate

scheme)

Capital items > £2,000 including VAT –

recover and charge VAT as normal

Review rate and turnover every year on

anniversary

Limit is £230,000 (including VAT) to leave

– last 12 months

Rental income

Regarded as business income

If registered as self employed and single

owner of property this will go on FRS

return

“Business entity” solution

◦ Business is a partnership or limited company?

◦ Property is jointly owned?

Inaccuracies on returns

Penalty rises according to behaviour

No penalty for mistake made despite

reasonable care

Issue of disclosure is the key aspect for

VAT

Disclosure is statutorily defined

◦ And is considerably more than putting the

error right!

Remember – overpaid VAT cannot attract

a penalty

The range of penalties

Disclosure

Unprompted = a disclosure made when

the taxpayer has no reason to believe that

his affairs are under investigation

◦ That is, not under fear of discovery

All others are prompted

Quality of disclosure determines whether

maximum discount is available

What is disclosure?

TELLING HMRC about the mis-

statement

Giving HMRC reasonable help to

establish the amount of the inaccuracy

(HELPING)

ALLOWING HMRC access to the books

and records to check that all is in order

Errors by tax agents

Taxpayer is not liable to a penalty in

relation to something done or not done

by the agent if HMRC is satisfied that the

taxpayer took reasonable care to avoid

inaccuracy

Reasonable care by the client

“Reasonable care in this context would

include appointing an agent competent to

deal with the person’s tax affairs, giving

the agent all relevant information and

checking the return, as far as possible,

before its submission.”

Mr & Mrs Lewis

Purchase of a property carrying VAT

Deposit paid in May on exchange of

contracts

Total purchase price £250,000

◦ 10% on exchange

◦ Balance on completion

Mistakenly believed that the taxpoint was

exchange of contracts

Penalty raised for careless error

15% of the £33,750 claimed too early =

£5,062

BUT this should have been calculated on

the “delayed tax” rule

◦ The potential lost revenue would then

have been £421.88

◦ Leaving a 15% penalty at £63.28

Change in HMRC policy announced

subsequently

Timing differences - policy

The potential lost revenue when the

inaccuracy self corrects is only 5% of the

amount of tax

Reduces the potential penalty to 1/20th

HMRC had been insisting that the second

return has been filed already

Correcting errors on returns

Errors of up to £10,000 can be corrected

on return by any trader

Limit is 1% x box 6 up to £50,000

Error – not deliberate mis-statement

Correct on return = no interest charge

◦ May still want to make a disclosure

◦ Form VAT 652

Assessment raised = interest charge