News
Monthly VAT news - April 2011 - 2011-04-20
Compulsory online filing of VAT returns from April 2012
Businesses with a VAT turnover of less than £100,000 (excluding VAT) who registered for VAT before 1 April 2010 will be legally required to file VAT returns online and pay any VAT due electronically from April 2012. This means that virtually all VAT registered businesses will be filing online from this date.
Reduced penalties for tax point errors
Revenue & Customs Brief 15/11 announced a change in HMRC's approach to penalties which are imposed for tax point errors on VAT returns. Such tax point errors result in VAT appearing on the wrong VAT return; for example, input VAT claimed in the March period when it should have been claimed in the June period. In cases where HMRC is satisfied that, but for their intervention, the inaccuracy would have been automatically corrected on a subsequent return, taxpayers will receive the reduced penalty based on the rules for delayed tax. There may be scope for reducing tax point penalties imposed under the previous approach.
ECJ cases on takeaway hot food
The European Court of Justice (ECJ) decided in 4 joined German cases about hot takeaway food and catering that the provision of negligible supplementary services does not indicate that suppliers provide a catering type service. Not unsurprisingly, HMRC swiftly issued Revenue & Customs Brief 19/11, where it states that it does not consider the ECJ decision to have any implications on the treatment of UK supplies of hot food. It is clear that this issue will not be resolved without litigation, and we believe that businesses should consider submitting protective refund claims.
VAT and temporary workers
The Reed Employment First-Tier Tribunal upheld that supplies of temporary workers made by the employment bureau to its clients should be treated as introductory services. As a consequence of this, VAT ought to be accounted for on the commission it received for its introductory services rather than on the entirety of its charge. Although it is expected that HMRC will appeal this decision, there could be opportunities for retrospective refund claims for VAT wrongly accounted for.
Law firm wins disbursements case
The First-Tier Tribunal announced its judgment in the appeal by the personal injury and medical negligence solicitors, Barratt, Goff and Tomlinson (BGT). BGT had treated the recharge of medical reports to its personal injury clients as a disbursement, and therefore outside the scope of VAT. In 2008 however, HMRC changed its approach, and raised an assessment on BGT instructing VAT be paid on these charges, insisting that the supply of medical reports was a further supply of legal services. BGT appealed this and the Tribunal decided that the payments were correctly treated as disbursements and so were not subject to VAT.
Victory for small retailers
The March 2011 Budget saw the Low Value Consignment Relief (LVCR) reduced from £18 to £15 in an attempt to curb unfair competition of goods (CDs, DVDs etc.) being supplied to members of the public from the Channel Islands free of VAT. LVCR allows for the private importation of goods with a value below £15 to be imported VAT-free and some major on-line mail order companies took advantage of this and set up distribution vehicles in the Channel Islands, taking further advantage of preferential postage rates through Royal Mail. This loophole led to small high street retailers being unable to compete and many went bankrupt. Representation was made to HMRC on behalf of small retailers in 2005 with no success and a campaign group was established to take the case to the European Commission (EC). It is now understood that as a result of EC involvement the UK will be looking to remove LVCR for products from the Channel Islands to block this loophole. Bob Jones, Indirect Tax Partner, was involved in advising on the validity and chances of success of the representation to HMRC and the EC in 2005 and referred the campaign group to specialist lawyers.
For further information or advice about any of these issues please contact indirect tax partner Bob Jones on 020 7516 2295 or by email rjones@littlejohnllp.com
