VAT INSIGHTS

Articles

Deeks VAT News

Deeks VAT News

Keeping you up to date on VAT changes

January 2021

Issue 11

New year, new lockdown. We hope that this email finds you well and that above all else, you are managing through the worst of the Covid-19 pandemic.

Whether working from home, juggling home schooling, or maintaining a secure workplace, staying in touch has never been so important, on both a business and a personal level.

In our first edition since the end of the Brexit transition period, we look at the following areas:

  • Change in VAT Treatment of dilapidations and other compensation payments
  • Moving goods between GB and Northern Ireland post Brexit
  • Getting a Certificate of Status
  • HMRC’s VAT and Value shifting Consultation
  • A Reminder – New EU ‘B2C’ VAT rules delayed – now effective 1 July 2021
  • New Guidance documents on the import and export of low value consignments
  • Option to Tax notification updates
  • Revenue and Customs Brief 1 (2021): Introduction of the Zero rate of VAT for sanitary products
  • VAT Case Law – UKFTT – Gareth Bertram [2020] UKFTT 0018(TC)
  • VAT Case Law – UKFTT – A&S Import & Export Trading Limited [2020] UKFTT 0014 (TC)
  • VAT Case Law – UKFTT – 2 Strand Road Ltd t/a Hillbillys [2020] UKFTT 0031 (TC)

Change in VAT treatment of dilapidations and other compensation payments

As mentioned in our December update, we understand that HMRC is to withdraw Revenue & Customs Brief 12/2020 and will instead implement its previously outlined change in policy, with prospective effect, from 1 February 2021. HMRC has recently provided further clarification on the scope of the charge and issued draft guidance for comment.

HMRC is inviting comments on the draft guidance but, given the proposed effective date of these changes is 1 February 2021, we anticipate that these changes will be implemented as drafted. We look forward to confirming that the difficulties raised with the issue of the September brief have been rectified shortly.

Moving goods between GB and Northern Ireland post Brexit

 Following Brexit, HMRC has also updated its guidance on how businesses should account for VAT on the movement of goods between Great Britain and Northern Ireland from 1 January 2021.

https://www.gov.uk/government/publications/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021

Getting a certificate of status

On 31 December 2020, HMRC published guidance on how to obtain a certificate of status to confirm that a business is trading in the UK.

https://www.gov.uk/guidance/get-confirmation-from-hmrc-that-you-are-trading-in-the-uk

HMRC’s VAT and value shifting Consultation

HMRC has published a consultation on a proposed revision of the rules for apportioning the consideration paid for supplies with mixed liabilities in a single transaction. The current law – in section 19(4), Value Added Tax Act 1994 (VATA 94) – is non-prescriptive and some businesses pay less output VAT by apportioning more consideration (or ‘shifting the value’) to non-standard rated items.

This consultation will be of particular interest to businesses that sell goods or services for a reduced price as part of a wider package or ‘bundle’.

The closing date for comments is 30 March 2021.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/949767/VAT_and_value_shifting_-_consultation_document.pdf

A Reminder – New EU ‘B2C’ VAT rules to come into effect 1 July 2021

 A number of EU VAT changes were intended to come into force in January 2021, but have been delayed because of the impact of COVID-19. More VAT changes are anticipated and as always, regardless of the delay to implementation, UK businesses are encouraged to prepare where they can.

The main changes coming into effect on 1 July 2021 will be the adoption of a One Stop Shop system (similar to the existing MOSS scheme for digital services). The new rules do not change the place of supply, but offer a simplified procedure to declare the VAT due in the EU Member States where the supply takes place.

New guidance document on the import and export of low value consignments

From 1 July 2021, the EU will introduce new VAT e-commerce rules to ensure fair competition for EU businesses and reduce VAT losses resulting from the importation of low value consignments (i.e. goods with a value not exceeding EUR 22).

The new VAT e-commerce rules aim to increase compliance of e-commerce stakeholders by simplifying the collection of import VAT when consumers buy goods online. They introduce new obligations for marketplaces and platforms facilitating the online supply of goods imported from third countries in consignments with an intrinsic value not exceeding EUR150. The VAT Explanatory Notes contain detailed explanations and clarifications on these new e-commerce rules. Further information is available here.

https://ec.europa.eu/taxation_customs/sites/taxation/files/vatecommerceexplanatory_notes_30092020.pdf

 https://ec.europa.eu/taxation_customs/customs-procedures/customs-formalities-low-value-consignments_en

Option to Tax notification updates

 On 6 January 2021, HMRC announced that the period during which time limit extension for notifying an option-to-tax is available has been extended to end on 31 March 2021. HMRC have made temporary changes to the time limit (increased to 90 days) and how you notify an option.

https://www.gov.uk/guidance/changes-to-notifying-an-option-to-tax-land-and-buildings-during-coronavirus-covid-19

Revenue and Customs Brief 1 (2021): introduction of the zero rate of VAT for women’s sanitary products

 This brief sets out the changes in the VAT treatment of women’s sanitary products across the United Kingdom, following enabling legislation in Finance Bill 2016 and as announced at Budget 2020.

https://www.gov.uk/government/publications/revenue-and-customs-brief-1-2021-introduction-of-the-zero-rate-of-vat-for-womens-sanitary-products/revenue-and-customs-brief-1-2021-introduction-of-the-zero-rate-of-vat-for-womens-sanitary-products

VAT Case Law Update – First Tier Tribunal – Gareth Bertram [2020] UKFTT 0018 (TC)

In this case a builder who acquired properties with a view to converting them into Houses of Multiple Occupation (“HMOs”) was found to have failed to distinguish between standard-rated, reduced-rated and zero-rated work, and kept inadequate accounting records in order for costs to be allocated to its supplies in each category. The builder was required to pay undeclared VAT of £59,184.

Download the decision as a PDF from the First Tier Tribunal website.

VAT Case Law Update – First Tier Tribunal – A&S Import & Export Trading Limited [2020] UKFTT 0014 (TC)

This appeal concerns a dispute about the availability of zero rating for supplies of goods purportedly exported to China, specifically addressing the adequacy of the evidence provided to HMRC in support of such zero rating.  The Tribunal accepted that it is not a requirement that all the necessary evidence of export needs to be contained in a single document. However, where evidence is made up of a number of documentary sources, it must be possible to link up the various pieces of that evidence in a way which satisfied the requirements of paragraph 6.5 of Notice 703.

Download the decision as a PDF from the First Tier Tribunal website.

VAT Case Law Update – First Tier Tribunal – 2 Strand Road Ltd t/a Hillbillys [2020] UKFTT 0031 (TC)

This case relates to an assessment for under-declared output tax on VAT returns, resulting from what HMRC argued was an over-statement of zero-rated sales. An unusual part of this appeal was that it was not in dispute that the zero-rated sales were overstated, rather an argument that the proportion was applied by HMRC to four years rather than one year only. The Tribunal upheld the assessment as issued by HMRC.

Download the decision as a PDF from the First Tier Tribunal website.

ARE YOU READY TO MAKE THE MOST OUT OF VAT?

Let’s get started