Deeks VAT News Issue 5

Deeks VAT News

Keeping you up to date on VAT changes

 Issue 5                                                                                                23 July 2019

Welcome to the latest edition of Deeks VAT News.

In this week’s issue we look at the following areas:

• Pachangas Mexican Restaurant Ltd [2019] UKFTT 0436 (TC) – Security Deposit
• VAT Rule Changes for Higher Education
• Changes in accounting for VAT after prices altered
• Thorsteinn Gardarsson t/a Action Day [2019] UKFTT 0441 (TC) – VAT Liability

Pachangas Mexican Restaurant Ltd [2019] UKFTT 0436 (TC) – Security Deposit

Pachangas Mexican Restaurant Limited appealed a decision against HMRC requiring it to provide security in the sum of £29,450 against future VAT sums due. The requirement was made by written notification. That notification was a bare requirement to provide security. It gave not a single reason to explain why the respondents were making the requirement.

It is a very serious requirement. The HMRC informed Pachangas Mexican Restaurant Limited by their letter that if the appellant made taxable supplies without the security being provided, the appellant would be committing a criminal offence contrary to section 72(11) Value Added Taxes Act 1994.

The Tribunal set aside and quashed the decision on the basis that to issue a security deposit, HMRC should give a reason for its decision to allow the taxpayer to defend itself and if necessary, appeal the decision

VAT Rule Changes for Higher Education

HMRC published Revenue and Customs Brief 2019/05: VAT rule changes for higher education on 12 July 2019 to update the guidance in Revenue and Customs Brief 2018/11, which is no longer available from the HMRC website.

HMRC says this in the introduction to the Revenue and Customs Brief:

“The previous brief announced that the government would be amending the VAT law from 1 August 2019 to ensure continuity of the VAT treatment for English higher education (HE) providers. An update is required as a result of changes being made to the way in which providers will be funded by the Office for Students (OfS) from the start of 2019 to 2020 academic year.”

The change in legislation removes the VAT exemption for English HE providers which are currently designated as eligible to receive support from central funding or are higher education corporations. The VAT exemption will apply to those providers who are registered with the OfS in the Approved (fee cap) category from 1 August 2019.

Changes in accounting for VAT after prices altered

On 17 July 2019 HMRC published a policy paper: Revenue and Customs Brief 2019/06: changes in accounting for VAT after prices are altered setting out changes to the Value Added Tax Regulations 1995. HMRC say give these reasons for the change:

“There is evidence that some businesses are trying to use the current Regulations to gain a tax advantage by making VAT adjustments for reductions in price without refunding their customers.

Some businesses also incorrectly attempt to treat errors as price adjustments for the purpose of avoiding the relevant time limits. Regulation 38 cannot be used in these circumstances. Instead, the error correction procedure explained in How to correct VAT errors and make adjustments or claims (VAT Notice 700/45) should be used. These error corrections are limited to 4 years following the time of the original sale.”

The change takes effect on 1 September 2019 provided the Value Added Tax Regulations 1995 are amended in time.

The Revenue and Customs Brief sets out the changes to be made, including time limits, and what information has to be put on a debit or credit note.

• Thorsteinn Gardarsson t/a Action Day [2019] UKFTT 0441 (TC) – VAT Liability

 This case concerned the VAT liability of an Action Day planner. HMRC raised an assessment on the basis that it was not a book and should have been standard rated as it was more akin to a dairy.

The court held that is was a book as it had detailed instructions on time management. Therefore, it was held to be zero rated.

Please note that Deeks VAT News is not intended to be a comprehensive guide to every development in VAT. It should not be used as a substitute for specific advice in individual circumstances. Deeks VAT Consultancy Limited cannot accept any liability for any action/inaction as a result of any reliance on Deeks VAT News’s contents.

Deeks VAT Consultancy Limited

Managing Director: Jane Deeks LLB (Hons) LPC CTA

T: 07710 553831        E: jane@deeksvat.co.uk        W: deeksvat.co.uk