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VAT update – all the current hot topics

My thanks go to John Shearer of VAT consultants Mayell Shearer for this update on current VAT issues.

Do you intend buying a yacht for your business?
Where a business acquires a yacht (or any other asset – but a yacht is the popular example in this scenario) from a supplier in another EC country and uses a UK VAT number to gain zero-rating by the supplier… however, does not bring the asset into the UK but instead has it removed to another EC state because, say, it is used elsewhere for chartering, then the acquisition tax cannot be recovered until it can be evidenced that VAT has been accounted for in the other EC state.

This ruling is effective from 1st June and follows two cases judged by the Court of Justice of the European Union.

Hot gossip! Attention everyone selling or buying takeaways! Update on supplies of hot food
HMRC has published guidance with regard to the treatment of hot food made in the course of catering. This follows the recent cases in Germany which have caused so much excitement for those with an interest in pizzas, fish and chips and other delights. German folk can now enjoy Mehrvertsteuer-free take-aways (some mit chips and some mit-out, as the old joke goes).

However, here in the UK our national dishes (including hot take-away haggises for people in the far north) are still subject to VAT at the standard rate.

Basically, HMRC advises that the liability of foodstuffs in the UK is treated under a very specific legal structure and is not on the same plate as the position in Germany. Accordingly, HMRC very firmly rejects any claim that the German ruling will prevail.

We understand that some accountancy firms seek to encourage the submission of so-called ‘protective’ claims. No doubt HMRC has taken very strong legal advice on its stance so it would not be a simple matter to counter this view.

That said, certainly if anyone does win a case against this position, those who have submitted claims may feel smugly happy.

A hint of things to come?
This may come as no surprise following the merger of my own dear HM Revenue &Customs with The Inland Revenue. However, HMRC is to pilot trials of ‘single compliance’ enquiries in lucky areas including Reading/Slough, Newcastle, Warrington, York, Exeter, London Euston and Southampton in England; Cardiff in Wales; Belfast and Edinburgh/Dundee. Single compliance means all-encompassing (VAT/CT/PAYE/IT).

This project will start on 1st June and will run for six months after which, from January 2012, it will operate nationally if all has proceeded satisfactorily. According to HMRC this will ‘improve customer experience’. Let us hope so.

Retail schemes
There has been some updated guidance on ‘bespoke retail schemes’ and this prompts me to remind you that retailers use ‘schemes’ to calculate the VAT they must account for.  There are a number of schemes and sometimes a retailer has a choice to make.  Obviously, any two different calculations will produce different results and it follows that some schemes work better than others for individual outlets.

Many retailers are paying more VAT than they may need to and so these issues should be reviewed.  It goes without saying, but I shall… I have chosen the appropriate schemes in past years for one of the largest superstores in the UK and also many small ones, so shall be more than happy to assist with advice regarding this sector. Why pay more tax than you legally need to?

Penalties for rendering paper VAT returns
Where paper returns are submitted instead of on-line, there will be a penalty of £100. This appears quite harsh considering the return will have been submitted; however, this is the way things are heading. This will apply to accounting periods ending on or after 31 March 2011.  You need to check if you or any clients are still using paper returns contrary to the requirements!

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