VATflash January 2012
What normally proves to be a quiet month for VAT issues, this January has been anything but.
Wasted Costs Claims
Successful appellants to the First Tier Tribunal do not normally get their costs back. However, we have seen several successful claims recently by businesses for 'wasted costs'. The moral is that if you feel aggrieved at your treatment by HMRC or have had to expend considerable costs just to prove you were right all along, it may be worth taking the point further.
VAT Clearances
HMRC are currently consulting on introducing a proper clearance system for VAT. The current system requires writing to a dedicated team in Southend, rather than raising a general enquiry. We shall provide details of the new system as it is revealed.
7-Day Filing Deadline
A reminder that if you file and pay your VAT returns electronically (as most are required to nowadays), you have an extra 7 calendar days for HMRC to receive the return and payment after the usual end of the month deadline. It is important to note, however, that the additional 7 calendar days only applies to payment returns. If you are filing a VAT return that claims a net repayment, the deadline remains at the end of the month following the period end. Although there are no tax-geared penalties for late filing of repayment returns under the current system, the Government's proposed new penalty system will, when it is introduced, impose both late filing penalties and, for payment returns, tax geared penalties as well. Speak to your Campbell Dallas partner if you would like assistance with your VAT administration or compliance procedures to ensure that your returns are filed on time.
Zero-Rating Clarification
A couple of recent announcements have clarified the zero-rating for new accommodation linked to healthcare and the sale of vehicles adapted for the disabled.
HMRC have confirmed that new accommodation constructed for the purpose of care will still qualify for zero-rating if it meets the fundamental condition of being 'designed as a dwelling'. This follows confusion over the way some local authorities treated such accommodation for planning permission purposes.
Unfortunately, it is not all good news. In a separate announcement, HMRC have also confirmed the withdrawal of zero-rating for motor vehicles adapted for disabled use after sale. HMRC have confirmed that the zero-rating for such vehicles only applies if the adaptations are carried out before being sold. This was originally pre-announced a year ago to give relevant businesses time to adapt to the change.
EU VAT Numbers
An interesting case has recently arisen concerning the sale of goods to businesses in other EU member states and an obligation upon the UK seller to verify their customer's own VAT number. In slightly unfortunate circumstances, the UK seller was given a false VAT number by her Spanish customer but because it conformed to the known format of Spanish VAT numbers she did not think it necessary to check any further. When justifying a penalty to the UK seller, HMRC relied upon their guidance which states that in such circumstances the UK seller will only be able to avoid liability for VAT if they can prove they have taken "all reasonable steps" to confirm that the VAT number was valid. In this instance, the taxpayer had not and the Tribunal found in favour of HMRC (although reducing the additional penalty by 50% for co-operation). UK businesses should always endeavour to check their EU customers' VAT numbers and if in doubt you should seek further advice before taking a chance.
Compound Interest
Finally, the long-awaited Opinion from the European Advocate General has been issued in the Littlewoods case, whereby compound interest was sought from HMRC on past VAT refunds. The Advocate General has opined that it is now for member states themselves to determine whether the domestic provisions for compensating taxpayers who have been required to pay VAT wrongly are in accordance with European law. We will now have to wait to see if the European Court agree with that opinion.
If you wish to review your circumstances or would like advice on any of the above please contact Veronica Donnelly on 0141 886 6644 or via email on veronica.donnelly@campbelldallas.co.uk.