Author Archives: helen

Christmas and New Year closure

20th December 2022

This year, as in previous years, we have not sent Christmas cards and instead made a donation to a local food bank to support families struggling in these extremely difficult times. However,  we would like to take this opportunity to thank all our clients and regular readers for your support in 2022 despite the continuing challenges the year brought. We hope that you and your families have a safe and peaceful break over the holiday season and that 2023 is a better year for all.

We will be closing on the afternoon of  Friday 23 December and will reopen on Tuesday 3 January 2022 at 9am. If you have any urgent queries during this time please contact your usual CVC partner by email and they will respond to you as soon as possible.

AUTUMN STATEMENT 2022

17th November 2022

The Chancellor has announced the Autumn Statement 2022, which included the following VAT related items:

Maintaining the VAT registration and deregistration thresholds

The VAT registration and deregistration thresholds will not change for a further period of 2 years from 1 April 2024 to 31 March 2026. The UK’s VAT registration threshold of £85,000 remains more than twice as high as the EU and OECD averages.

However, considering the current levels of inflation, some businesses may be forced to increase their prices. Those businesses trading just below the VAT registration threshold may be at risk of breaching the threshold in the near future if the value of their taxable supplies rise.

If you or your business needs any advice around VAT registration or deregistration, please do not hesitate to get in touch and one of our experts will be pleased to assist.

VAT free shopping scheme

The proposed VAT free shopping scheme for overseas visitors to Great Britain has now officially been cancelled.

There were no further VAT changes announced, however, Constable VAT will continue to closely monitor all VAT developments, and we will discuss any future announcements as they arise.

Office closure 19 September 2022

13th September 2022

As the State Funeral of Her Majesty Queen Elizabeth II is taking place on Monday 19 September, we have made the decision to close our office for the day as a mark of respect. Clients with urgent VAT queries can email their usual Constable VAT partner contact for assistance if required.

Changes to HMRC Option to Tax process

27th June 2022

Background

The option to tax land and property is a mechanism that allows sales of land and rent charges to be made liable to VAT.  Demonstrating that an option to tax has been made can be important.  A property purchaser may require proof before paying VAT or a seller may require proof that the purchaser has opted to tax and notified HMRC before agreeing that the sale is outside the scope of VAT as the transfer of a property rental business as a going concern (TOGC). The obligation to demonstrate the making and notification of an option to tax will usually be written into Sale & Purchase agreements.

Historically demonstrating that an option to tax has been made has been relatively straightforward insofar as when HMRC has been notified of an option to tax it has issued an acknowledgement letter confirming that an option to tax is in place, usually within 30 days of the notification being made. However, HMRC are currently taking a significant amount of time to process and issue acknowledgement letters.  Typically it is the provision of that acknowledgement letter that is written into the contract between the seller and the purchaser.   There has never been a legal obligation for HMRC to issue such letters but as it has issued them as a matter of practice since the option to tax was introduced lawyers dealing with land sales assume that such a letter will be available.

What has changed

HMRC has adopted a 6 week trial starting at the end of May 2022 (but not widely publicised) during which it will issue a letter acknowledging receipt of an option to tax notification rather than an acknowledgement that the option to tax is valid, bearing in mind that there are conditions that mean that in some situations a taxpayer cannot opt to tax without HMRC approval and (even when such an approval is not required) a technical deficiency in the process may invalidate the option.  This change in policy will allow HMRC to issue acknowledgement letters with limited checks and reduce the admin burden on HMRC, bearing in mind that there is a huge backlog of unacknowledged options to tax leading to delays that disrupt commercial activity.  Whether the trial will be extended remains to be seen, but unless there are significant objections we think it likely that it will be.

What impact will this have

The immediate impact will be on contract wording.  There is little point in a clause in a Sale & Purchase agreement that cannot be complied with because the document that a seller or purchaser has undertaken to obtain/provide does not exist.  It will be important that any clause references an obligation to provide evidence of an “HMRC acknowledgement of receipt” rather than an “HMRC acknowledgement that an option to tax has been accepted” .  Where contracts are already in place, but not complete, then it will be for the lawyers to decide whether the revised format of HMRC’s acknowledgement will suffice or HMRC will need to be pushed to provide more.

In the long term more thought may need to be given to the due diligence associated with the option to tax.  HMRC is correct that the law does not place any significance on the acceptance letter it issues, for example when a purchaser notifies a valid option to tax to secure a TOGC then that particular TOGC condition is met irrespective of whether the purchaser holds a letter from HMRC confirming its acceptance of a valid option.  However, if HMRC is not confirming its view on the validity of the option to tax then the seller may wish to carry out additional investigations to satisfy itself on the point.  VAT liabilities arising from land transactions tend to be for significant sums and someone that pays and reclaims VAT that should not have been charged or fails to charge VAT in the mistaken belief that a sale is a TOGC could at a later date face a significant VAT liability.

Our view

We do not have a strong view on this change insofar as (with appropriately worded contracts and adequate due diligence/warranties) there is no reason why it should be disruptive.  In fact, if acknowledgements of HMRC’s receipt of an option to tax notification can be issued quickly this may deal with the significant problems that HMRC’s backlog is causing.  Our main problem with the change is that HMRC did not announce the trial (still has not done to other than a very limited audience).   The commercial problems that the lack of an advance warning (or any notification) of this policy change may cause was raised with HMRC during the Joint VAT Consultative Committee at its meeting on 15 June 2022.   HMRC has undertaken to consider this – although it is now a little late!

If you do require help with any current or prospective property transactions on which this may present an issue please let us know.  Dean Carey represents the ACCA on the JVCC and having raised the matter with HMRC during the meeting on 15 June 2022 anticipates being kept in the loop on any further developments in HMRC policy.

 

DIY Claims-only a single claim is possible

17th May 2022

UPDATE: HMRC has amended the rules in relation to the Scheme, effective on 5 December 2023 and new guidance has been issued, which can be viewed on HMRC’s website. The updated rules extend the time limits for making a claim in respect of buildings completed on or after 5 December 2023 and also allow for claims to be submitted online.

In the case of Andrew Ellis and Jane Bromley, 2 DIY housebuilders claims were submitted to HMRC. HMRC repaid the first claim having accepted valuation for council tax purposes as evidence of completion. HMRC received a further claim following the grant of planning permission by the Local Planning Authority for further required works. The second claim was rejected as it was out of time and as a valid claim had already been made and paid.

The court found that the first claim was paid in error as the evidence of completion given by the Valuation Office was invalid and should not have been accepted. As the first claim was paid in error the second claim should have been allowed and was not outside the 3 month time limit. We covered this case in a VAT Focus on 8 October 2021 and at that time HMRC had made no comment on the case. As this case was only heard at the First Tier Tribunal it could not be relied on by anyone other than the Appellants.

HMRC has now issued a Revenue and Customs Brief 08 (2022) dated 13 May 2022 in which it confirms that HMRC policy remains that only a single claim is allowed under the DIY Scheme. However,  the Brief goes on to say that where it is agreed that a claim has been repaid in error, HMRC will accept a subsequent claim with evidence that the claim has been made within 3 months of completion.

HMRC already allow (on a case by case basis) acceptance of supplementary claims. This is for invoices and works carried out before the claim was submitted, which may have been left out in error or invoices issued late by the contractor.

It appears that HMRC do not see the case as a basis for allowing multiple claims for a single DIY project and therefore the recommended approach remains to be the submission of a single claim covering a full build, submitted within 3 months of completion. Where there is any difficulty in meeting this deadline; where a property is occupied prior to completion or where there is any other uncertainty over time limits we would be happy to advise. Please call or email Helen Carey or your usual Constable VAT contact to discuss.

Delay to new VAT penalty regime

18th January 2022

It was announced in a Written Ministerial Statement last Thursday that planned reforms of the VAT penalties and interest regime for late filing and payment will be delayed until 1 January 2023. This had originally been due to take effect in April this year, but extra time is needed to update HMRC’s IT systems. The existing rules will continue in the meantime.

 

Christmas and New Year closure

6th December 2021

We will be closing on the afternoon of  Friday 24 December and will reopen on Tuesday 4 January 2022 at 9am. If you have any urgent queries during this time please contact your usual CVC partner by email and they will respond to you as soon as possible.

We have not sent Christmas cards this year and instead made a donation to a local food bank to support families struggling in these difficult times. However,  we would like to take this opportunity to thank all our clients and regular readers for your support in 2021 despite the continuing challenges the year brought. We hope that you and your families have a safe and peaceful Christmas and that 2022 is a good year for all.

Update on delays at Option to Tax Unit

27th September 2021

We recently shared that we had been advised by HMRC’s OTT unit that they were working to a ‘target’ of 120 working days to process OTT notifications. Following this we were advised by HMRC staff that the delay was 6 months.

We have today been informed that HMRC hopes to improve this situation by the end of the financial year (31 March 2022). In the meantime they say they are prioritising cases where evidence of commercial need is provided with the option to tax application.

Please bear this in mind and if there is likely to be a commercial need to evidence that an option to tax has been notified. We continue to recommend that the option is notified by email as this will result in a receipt of that email, which may be accepted as evidence by a party who requires this. However, if other evidence is available to show a sale or rental is imminent and that formal acknowledgement is required to complete the transaction this should also be forwarded to HMRC.

Constable VAT would be happy to assist in any cases of difficulty or urgency.

 

Delays at Option to Tax Unit

9th September 2021

We have recently been advised by HMRC’s OTT unit that they are currently working to a ‘target’ of 120 working days to process OTT notifications. Please bear this in mind and if there is likely to be an urgent need to evidence that an option to tax has been notified we would recommend that the option is notified by email as this will result in a receipt of that email, which may be accepted as evidence by a party who requires this.

 

Covid-19 measures

14th April 2021

To assist throughout this difficult period, the UK Government made a wide range of reliefs available for businesses and individuals alike. Many of these were temporary and so the dedicated web page has now been archived as news on the date of the final update to that page. Details of the measures up to that date can be found below.

Archived web-page

The Chancellor has announced that VAT payments will be deferred between 20 March and 30 June 2020. Businesses taking up this option will be given until the end of the financial year to clear any VAT due which is not paid in the suspension period.

It is important at this time for businesses and charities to stay abreast of VAT updates from HMRC. This page provides a synopsis of the announcements which have been made as well as coverage of topics which we think businesses and charities may wish to consider. We will continue to update this page as the situation progresses. If you would like to discuss any of the options available to your business or charity to assist in this difficult period, please do not hesitate to contact Constable VAT.

14 April 2021

If you deferred VAT payments due between 20 March 2020 and 30 June 2020, you can arrange to pay in instalments. HMRC has now updated its guidance to clarify “You may be charged a 5% penalty or interest if you do not pay in full or make an arrangement to pay by 30 June 2021.”

23 March 2021

HMRC has announced that it will be using an accelerated process to make sure coronavirus-related changes to partial exemption methods are considered, and where appropriate, approved swiftly. Check the new guidance to find out where to send PESM change requests relating to Covid-19 here.

10 March 2021

If you’re on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you can join the new repayment scheme from 10 March 2021. The new scheme lets you:

  • pay your deferred VAT in equal instalments, interest free
  • choose the number of instalments, from 2 to 11 (depending on when you join.

3 March 2021

HMRC has released Revenue & Customs Brief 2 (2021). This brief sets out the changes in the VAT treatment of certain supplies of hospitality, hotel and holiday accommodation, and admission to certain attractions as announced at Budget 2021.

23 February 2021

Opt-in to the new repayment scheme has now been opened. The new scheme lets you:

  • pay your deferred VAT in equal instalments, interest free
  • choose the number of instalments, from 2 to 11 (depending on when you join)

For registration and further information, see HMRC guidance.

9 February 2021

Opt-in to the new repayment scheme has now been announced and will be open from 23 February up to and including 21 June 2021. If you’re on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you’ll be invited to join the new payment scheme later in March 2021. Find out more here.

2 December 2020

Businesses which have deferred VAT payments under Coronavirus exceptions will be given the choice to opt into a new scheme allowing them to pay back VAT in 11 instalments, interest free, before the end of March 2021. Opt in will start at a future date.

2 November 2020

The extended time limit (90 days) for notifying an option to tax land and buildings has been extended to decisions made between 15 February 2020 and 31 March 2021. HMRC’s guidance can be read here.

24 September 2020

The Chancellor has given a statement outlining new and revised measures which are being introduced to assist businesses through the ongoing COVID-19 outbreak, including an extension to the temporary reduced rate for hospitality and tourism and allowing businesses which have deferred their VAT payments more time to clear their VAT debt. Read our coverage here.

9 September 2020

Constable VAT has received enquiries from many businesses asking about how the temporary reduced rate of VAT for certain supplies of hospitality, hotels and holiday accommodation applies to their operations. One of the most common areas of confusion is in relation to wedding packages. Here we discuss how the temporary VAT reduced rate interacts with wedding packages.

18 August 2020

Since the introduction of this temporary reduced rate, we have been asked many questions and there is some confusion as to when it actually applies. This piece discusses the Guidance as it stands and aims to assist taxpayers in identifying the key points to consider.

9 July 2020

The Chancellor made some important announcements regarding VAT in his ‘A Plan for Jobs’ Speech. We have summarised these here including the temporary reduction in VAT for certain sectors such as hospitality and tourism.

28 May 2020

HMRC has revised its temporary change to the time limit for notifying an option to tax. Taxpayers still have 90 days to notify HMRC. However, this measure now applies to decisions to opt made between 15 Feb and 30 June 2020.

22 May 2020

If you or your business have been affected by coronavirus (COVID-19), HMRC will give you an extra 3 months to appeal any decision dated February 2020 or later. Send your appeal as soon as you can, and explain the delay is because of coronavirus.

15 May 2020

As a result of COVID-19, it has been difficult to notify HMRC about options to tax. Taxpayers now have 90 days to notify HMRC of an option to tax, rather than the usual 30 days. This applies to elections being made between 15 Feb and 31 May. The Guidance can be read here.

14 May 2020

HMRC has released guidance to assist businesses which may struggle to meet the time limit for removing the goods from the UK which must be met in order for the export to be zero-rated. The guidance details when HMRC may waive the formal requirements and can be read here.

30 April 2020

HMRC has released a Brief announcing changes to UK VAT, introducing a temporary zero rate for supplies of PPE for use for protection from COVID-19. The zero-rate applies from 1 May to 31 July 2020. Revenue & Customs Brief 4 (2020) contains the details on what types of goods are considered PPE.

HMRC has also announced that the zero-rate for electronic publications, originally intended to take effect from 1 December 2020, will now be applicable from 1 May 2020. The types of publication which qualify for the zero-rate are listed in HMRC’s Guidance.

21 April 2020

HMRC has updated VAT Notice 701/57: Health Professionals & Pharmaceutical Products, adding EEA health professionals to the list of “relevant practitioners” for the purposes of zero-rating certain supplies.

15 April 2020

HMRC announce that the service of new legal proceedings and pre-action letters on HMRC should be via email during the COVID-19 pandemic. New legal proceedings which are required to be served on the Solicitor for HMRC should be sent to newproceedings@hmrc.gov.uk.

10 April 2020

The CIOT advised that HMRC has announced that Duty deferment account holders who are experiencing severe financial difficulty as a result of Covid-19 and who are unable to make payment of deferred customs duties and import VAT due on 15 April 2020 can contact HMRC for approval to enter into an extended period to make full or partial payment, without having their guarantee called upon or their deferment account suspended. The account holder should contact the Duty Deferment Office 03000 594243 or by email cdoenquiries@hmrc.gov.uk  or the COVID-19 helpline on 0800 024 1222. Account holders will be asked to provide an explanation of how Covid-19 has impacted their business finances and cash flow.

Duty Deferment account holders will be able to use their accounts during the extended payment period agreed unless they default on a subsequent payment in that period, in which case HMRC may consider suspending their account. The outstanding payment will not affect their duty deferment limit so they will not need to increase their guarantee to cover the outstanding payment. Where HMRC agree to an extended payment period, interest will not be charged on the outstanding payments provided they are paid in full by the agreed date.

Further information can be found here.

8 April 2020

COVID-19 Answers to your VAT questions and other useful information
Constable VAT has produced a useful document summarising VAT measures in place and highlighting other useful points (updated 21 May 2020).

7 April 2020

COVID-19: European VAT Awareness
We have updated our European VAT Awareness document to reflect the ongoing implementation of different VAT measures across Europe. UK, Norway, Ireland, Italy and The Netherlands have all been updated.

3 April 2020

Help and support if your business is affected by coronavirus (COVID-19)
HMRC has announced a new webinar! Register for the free to learn more about the support available to help businesses deal with the economic impacts of COVID-19.

31 March

Import duty and VAT on medical supplies, equipment and protective garments (COVID-19)
Find out how to import protective equipment, relevant medical devices or equipment brought into the UK from non-EU countries VAT and duty free during the coronavirus (COVID-19) outbreak.

30 March


COVID-19: European VAT Awareness
As the ongoing situation with COVID-19 continues to impact businesses, charities and individuals alike, European countries have implemented various measures to assist in reducing the financial consequences. This newsletter aims to provide a synopsis of the VAT related measures being taken in different Member States to aid those struggling to meet financial obligations.

Making Tax Digital Update
HMRC has announced that, due to the impact of COVID-19, businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place. This is a 12 month extension.

27 March

VAT Payments on Account
HMRC has updated its Guidance around VAT payments on account. VAT payments due between 20 March 2020 and 30 June 2020 can be deferred. If you choose to defer a VAT payment, it must be paid on or before 31 March 2021.

26 March


Cash Flow Considerations: VAT Cash Accounting
Businesses and charities can encounter cash flow issues for a variety of reasons. This blog covers one VAT scheme that can be helpful when considering cash flow problems arising as a result of customers who do not pay on time. The VAT Cash Accounting Scheme is available to some businesses and allows payment and recovery of VAT based on payments rather than invoices. This can be useful if customers are slow to pay and your business pays more VAT than it recovers.

25 March

Non-Statutory Clearances 
Due to COVID-19, HMRC are currently unable to process applications for Non-Statutory Clearances which are made by post. Applications should be submitted to nonstatutoryclearanceteam.hmrc@hmrc.gov.uk

24 March

Stay on First Tier Tax Tribunal Hearings
Due to Covid-19, the FTT has announced a stay on all cases for 28 days from 24 March 2020. Time limits in any current proceedings are extended by 28 days. To discuss your VAT appeal please contact Constable VAT.

17 March

Constable VAT COVID-19 Preparedness and Response plan
Follow the link to see Constable VAT’s plan to continue delivering our services to our clients throughout the ongoing situation.

Christmas and New Year closure

14th December 2020

We will be closing on the afternoon of  Thursday 24 December and will reopen on Monday 4 January 2021 at 9am. If you have any urgent queries during this time please contact your usual CVC partner by email and they will respond to you as soon as possible. We are aware that some of our clients may have concerns around Brexit as the transition period ends and we will be available to assist if required.

We have not sent Christmas cards this year and instead donated essential groceries to a local food bank. However,  we would like to take this opportunity to thank all our clients and regular readers for your support in this difficult year. We hope that you and your families have a safe and peaceful Christmas and that the new year is less challenging than 2020!

Making Tax Digital (MTD)

5th December 2020

Most businesses whose taxable turnover exceeded the VAT registration threshold at any time after 1 April 2019 are now required to keep their records digitally, using MTD functional compatible software (which will allow HMRC to upload VAT return data).  MTD for VAT is also now mandatory (since 1 October 2019) for businesses falling into one of the following categories(the ‘deferral group’) considered by HMRC to be ‘more complex’ businesses:

  • Trusts
  • ‘not for profit’ organisations that are not set up as a company
  • VAT divisions
  • VAT groups
  • local authorities,
  • public corporations,
  • traders based overseas,
  • those making payment on account, and
  • annual accounting scheme users

On 17 June 2019 HMRC announced that for those organisations who  use the GIANT (Government Information and NHS Trust) service, the deferral period would be further extended. HMRC has not announced the new mandation date for these organisations as yet.

Businesses with a turnover below the VAT registration threshold or registered on an ‘intending trader’ basis will only be subject to MTD rules from the beginning of the VAT return period following the date when their taxable supplies breach the VAT registration threshold.

Initially there was to be a  ‘soft landing period’ for one year, ending on 31 March 2020, following the mandatory date of entry into MTD, during which time most businesses were to put all digital links in place within their business records.

However, due to the Covid-19 crisis HMRC has announced that businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place. This is a 12 month extension.

It is still likely that many businesses, large and small, will find the implementation of the digital links required by MTD a challenge, even within this new time frame and it is important to begin preparations as soon as possible. Constable VAT can help you identify any weaknesses in your current system giving you time to resolve the problem or to request more time from HMRC. HMRC are continuing to allow businesses with complex or legacy IT systems to apply for additional time to put the required digital links in place, subject to meeting certain qualifying criteria. If a business qualifies then the additional time will be granted as a specific direction. Constable VAT can assist with preparing a case for the issue of a direction.

HMRC issued an updated VAT Notice 700/22: Making Tax Digital on 7 April 2020 which offers explanations to some of the questions surrounding the initiative.

The Notice explains which records must be kept as well as ways to digitally record transactions when required.  It also sheds some light on what constitutes “functional compatible software” and some of the issues which may arise where a combination of programs is used and where these may or may not require to be digitally linked with one another.

The following publications may also be useful

If any doubt arises around the way in which your organisation may be affected by Making Tax Digital then please do not hesitate to contact Constable VAT at any time.

Coronavirus (Covid-19) Preparedness and Response plan

17th March 2020

Constable VAT Consultancy LLP: Continuity Plan

The UK Government’s advice regarding Covid-19 Coronavirus continues to develop in response to a rapidly changing situation. The health and welfare of our staff, clients and suppliers is of the utmost importance to us at this difficult time.

VAT is not a priority when compared to the more serious health implications of Covid-19. Nevertheless, legal obligations to deal with VAT will continue.   We recognise the importance of our service at this time and wish to assure our clients that we are taking what seem to us sensible steps to ensure that our services will remain available and have put the following general measures in place:

For the time being we have asked partners and staff to work from home where possible and avoid all meetings on issues that can be dealt with remotely to prevent unnecessary risk to those staff and our clients. We deal with clients around the world as a matter of routine, usually without face-to-face contact. Conference calls and video conferencing should allow most work to continue.

All staff will be able to continue to work using remote access to our electronic files and technical information systems.

At times when the office is unmanned we will divert the number to a selected person so that telephone calls can still be taken and directed to the appropriate person. All consultants who are will be diverting their direct dial number to either their mobile phone or home phone unless they are unwell. The mobile number of your main contact will remain operational unless they are unable to work, in which case it will be diverted to a colleague.

Existing knowledge sharing arrangements within Constable VAT mean that it is unlikely you will have to deal with a new person who has no background knowledge on your issues. If your main contact is unable to work then we will try to advise you of the best alternative contact immediately.

Where we are unable to attend a meeting in person we will organise remote attendance by telephone or video conference where that is possible.

We appreciate that the uncertainty of the developing situation is a concern both from an individual perspective and as a business. We want to reassure you that Constable VAT will be taking practical steps to remain available to provide advice and support.

Most other businesses will be undertaking similar contingency planning and, insofar as this relates to VAT, we hope that the steps we are taking mean that we will continue to be available to help you if the need arises.

Should you have any questions please contact Georgina Clover our Practice Manager on georgina.clover@constablevat.com or your normal Constable VAT partner contact.

 

VAT and partial exemption post Brexit

4th February 2020

Leaving the European Union has implications for partial exemption special methods (PESMs) that incorporate provisions relating to VAT recovery in relation to non-EU transactions, since the pre –Brexit legislation would have allowed recovery of VAT on UK transactions that became ‘non EU’ when the UK left the European Union. To mitigate this problem a new regulation 102(2A) has been inserted into the VAT Regulations 1995.

The new regulation enables the current VAT recovery position – exempt from VAT and with no recovery available – for UK to UK supplies of financial services to be maintained within all PESMs.   This removes the need for PESMs to be redrafted by the business and reapproved by HMRC with the associated administrative burden this would have created.  No action by business is necessary as a result of these regulations as they retain the status quo.

 

The new regulation can be found here  SI 2019513

Christmas and New Year closure

13th December 2019

We will be closing on the afternoon of  Tuesday 24 December and will reopen on Thursday 2 January 2019 at 9am. If you have any urgent queries during this time please contact your usual CVC partner by email and they will respond to you as soon as possible.

We have not sent Christmas cards this year and instead donated to a local shelter providing support to homeless men and women. However,  we would like to take this opportunity to wish all our clients and regular readers a Merry Christmas and a happy and prosperous New Year.