VAT Notes November 2014

VAT charged as duty on the import of goods from outside the EU is not actually input VAT but can be claimed as such on a VAT return. This claim can only be made if a Form C79 supporting the claim has been issued by Customs. A purchase invoice is not sufficient as evidence of the claim and HMRC will disallow the input VAT if no C79 is available on inspection.

The sale of goods to clients in other EU Member states can only be zero rated if the VAT number obtained from the client is issued in the country where the goods arrive.

HMRC have strict guidelines on the evidence required to support the zero rating of goods exported to the EU and outside the EU. If this evidence is not available the transaction reverts back to its normal UK VAT charge which is usually standard rated.

Where the flat rate scheme is used, Box 6 (value of outputs) should only contain sales that have occurred within the UK. This is different to a normal VAT return where you would include all sales in Box 6.

Most clients are aware that they can claim VAT on bad debts that remain unpaid six months from the due date of payment but are they aware they are need to carry out the same exercise on unpaid creditors? HMRC will review this and disallow any input vat on creditors that remain unpaid six months after the due date of payment. If payment terms have been renegotiated then there may be case for not repaying the input vat over, if there is sufficient evidence.

Where management charges are accounted for by journals, a VAT invoice should be raised using the date of the journal and entered on the VAT return this date covers. HMRC will review late invoicing of material management charges.

Changes to the place of supply of certain services will be introduced from 1st January 2015 which will alter the place of supply of services supplied to customers not in business whose place of belonging is in a member state of the EU other than the UK. The services affected by this change will be telecoms, broadcasting and electronically supplied services. From 1st January 2015 the place of supply for such services will be the place where the customer belongs (this is currently where the supplier belongs). This will involve UK providers of these services to complete a new “MOSS” return, short for VAT Mini One Stop Shop, instead of them having to register in each member state. More information on this will be available in the future but note the strict filing deadline of 20 days after the return date, if late 3 times then you are out of the scheme and you will need to register for VAT in each state you sell to. Any errors found on the return will be dealt with by the customs authority in the country where the service was supplied.

For most businesses VAT is not recoverable on the purchase of a motor car because they are subject to a high degree of private use. However, input VAT is recoverable on all of the running costs of a motor car, without the need to make any restriction for private use. There only has to be an element of business use. The reason for this is that the VAT due on the private use of the asset is regarded as having been accounted for through the inability to claim any input VAT on the purchase of the car in the first place.

The five myths of the Option to Tax.

  • In order to claim VAT back on the purchase of a property that bears VAT, it is necessary to opt to tax.
  • There is such a thing as an “opted property”
  • Opting to tax consists of sending a notification form to HMRC
  • You can opt to tax at any time, provided you advise HMRC on time
  • If you charge VAT on rent means you have opted to tax.

Should you wish to discuss this further then please do not hesitate to contact Colin Deegan or your usual Beavis Morgan partner.