News
Monthly VAT news - March 2011 - 2011-03-14
Reminder of deadlines for EU VAT refund claims
May we remind you that the deadline for submitting Cross-Border VAT refund claims for businesses established in EU Member States (8th Directive claims) for 2009 is 31 March 2011. Thus, there is still time to submit these if you haven't already. Claims for 2010 will need to be filed by 30 September 2011. Moreover, 13th Directive claims, covering the prescribed year from 1 July 2010 to 30 June 2011, will need to be submitted by 31 December 2011.
Business entertainment of overseas customvers - VAT update
Further to our December edition where we reported on the AstraZeneca and Danfoss cases and explained that input VAT incurred on the entertaining of overseas customers can now be reclaimed, HMRC has stated that subject to a four week consultation on the matter, it is intended that the changes be introduced on 1 May 2011. You will need to provide evidence in support of your claim, and claims can go back four years; please contact us for more details if you think you may be entitled to such a claim.
Commercial waste collection services - change in VAT treatment
Following a review by HMRC, the VAT treatment of commercial waste collection services provided by (or on behalf of) Local Authorities will no longer be subject to VAT at the standard rate. HMRC concluded that the provision of trade waste collection services should be classified as "non-business" and therefore these services should be outside the scope of VAT. A Business Brief will be issued in the near future.
Low value consignment relief (LVCR) - will it change?
It is thought the LVCR limit might be reduced from £18 to £7 to address unfair competition arising from what many consider is abusive practice by major on-line retailers. LVCR applies to low value items entering the UK free of VAT. However, some UK on-line retailers have taken advantage of this and made use of the Channel Islands to supply UK consumers with goods VAT free.
The problem first came to light in the CD/DVD retail market when small high street retailers found they could not compete with the major on-line retailers, such as Amazon (through a sister company), Play.com, HMV, Tesco and Asda, because of the "VAT-free" status of low value goods consigned from the Channel Islands.
The system works in relation to orders taken from UK customers; because of industry licensing regulations, CDs and DVDs are sourced in the UK, shipped to the Channel Islands as a zero rate export, and posted back to the UK customer VAT free under LVCR. Because the Channel Islands are part of the UK postal system, the additional shipping costs are significantly less than the VAT saving and the retailers are therefore able to charge a lower price for the product.
Some retailers only use this system for goods below the £18 limit; goods over £18 being delivered within the UK. The effect on independent record shops has been significant with more than 400 closing between 2000 and 2009. The system is also used for products other than CDs and DVDs.
In 2005 Littlejohn was asked to advise an independent retailer of the possibility of contesting the UK Government's position on its application of the LVCR. We advised that the UK Government was subject to EU regulation requiring it to take measures to prevent abuse of the tax system and distortion of trade. Littlejohn introduced the retailer to a major firm of lawyers who helped pursue the matter with the Government, the House of Lords and the European Commission. Following a long battle it now seems the Government might take action although sadly too late for many retailers; the question of claims for compensation still has to be addressed.
For further information or advice on any of these issues please contact indirect tax partner Bob Jones on 020 7516 2295 or by email rjones@littlejohnllp.com
