News

Monthly VAT news - Jan 2012 - 2012-01-31

Bad debt relief available on full amount of “VAT only” invoices

The Upper Tribunal has allowed an appeal by Simpson and Marwick, a firm of solicitors, ruling that Bad Debt Relief (BDR) claims can be made for the entire VAT amount invoiced on a “VAT only” invoice. In this case, the solicitors were instructed by insurance companies to provide legal services in respect of insurance claims. The solicitors would issue two invoices; one for the net fee charged to the insurance company, and one for the “VAT only” amount charged to the policy holder. If the latter remained unpaid, usually because the policy holder became insolvent, the solicitors would make a BDR claim for the entire amount invoiced. HMRC disagreed with this treatment, arguing that the BDR claim was limited to 7/47ths of the value of the total supply. The Upper Tribunal, however, found for the appellant, concluding that their claim for BDR was consistent with EU law, and strengthened by the Elida Gibbs case.

Advocate-General: compound interest on VAT overpayments unlikely

The Advocate General (AG) in the Court of Justice of the European Union (ECJ) has released her opinion in the Littlewoods case. The AG has decided that VAT overpaid byUKtaxpayers between 1 April 1973 and 4 December 1996, and which HMRC agreed to repay to them as a result of a breach of EU law, would only require simple interest applied to it. Essentially, this means that taxpayers are unlikely to be able to claim compound interest from HMRC on such overpayments. Although the AG's decision is not binding on the ECJ, the ECJ follows the AG's opinion in the vast majority of cases. The ECJ's decision in the Littlewoods case is expected within the next few months.

Salary sacrifice arrangements

From 1 January 2012, the new rules on salary sacrifice arrangements came into force, as announced by HMRC at the end of July 2011. There is now no distinction between the VAT treatment of deductions from salary, where VAT has always been accountable, and a salary sacrifice. VAT, where applicable, will apply to goods and services provided under salary sacrifice schemes. Please also be aware of the temporary transitional measures announced in October that enable you to defer implementation of the new rules if your salary sacrifice arrangements were in place on or before 27 July 2011. The following areas are likely to be affected by the change of VAT rules: face value vouchers, motor cars, food and catering, childcare vouchers, healthcare insurance, and the cycle to work scheme.

Intrastat thresholds for 2012 and changes to reporting procedures

The Intrastat thresholds from 1 January 2012 remain unchanged from those set in 2011. HMRC has also announced some changes to reporting procedures for Intrastats with a reference period of January 2012 onwards; to summarise, the low value consignment threshold has been increased from £130 to £180. Moreover, if you are required to provide delivery terms information, then you should note that there are now two new delivery terms codes for Intrastat purposes. More detail on this can be found in Notice 60 Intrastat General Guide,

Motor vehicles supplied to disabled people

As announced by the Government in December 2010, the concessionary arrangement which allows a motor vehicle supplied to a disabled wheelchair user to be treated as a zero rated supply, if the vehicle was adapted shortly after the initial supply, will no longer apply from 1 January 2012. The zero-rating, however, will continue to apply on a motor vehicle that is adapted before it is supplied to the disabled wheelchair user, providing all the qualifying conditions for zero-rating are met.

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