Constable VAT Focus 11 September 2020


Revenue & Customs Brief 13 (2020): VAT Charity Digital Advertising Relief
HMRC has released a new Brief which discusses HMRC’s policy in respect of the VAT treatment of digital advertising when supplied to charities.

This is an important Brief  and good news for charities as it confirms that VAT is no longer considered due on internet search browsing advertisements, except where they appear on personal social media accounts. In addition HMRC now accepts that ‘Location Targeting’ is also within the zero rate.  Full details of the application of the new rules can be found in the Brief.

We will issue more detailed guidance on this brief shortly, in the meantime if you have any questions as to how this may benefit your organisation please contact us

Revenue & Customs Brief 12 (2020): VAT Early Termination Fees and Compensation Payments
HMRC has released a new Brief, following recent judgments from the CJEU, which announces an important change to policy. Fees and payments charged where a contract is terminated early were previously outside the scope of VAT, now HMRC regards them as taxable in line with the main contract.

Pay Less Import Duty & VAT When Re-importing Goods to The UK and EU
HMRC has published new Guidance discussing how to claim Returned Goods Relief in order to pay less duty and VAT when re-importing goods.


We have 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. Readers may wish to read our coverage of how the temporary reduced rate of VAT interacts with wedding packages here.

Following HMRC’s announcement in R&C Brief 13 (2020) that its policy regarding early termination fees has changed to now regard these fees as taxable in line with the main contract, we have drafted the following piece which aims to assist businesses in determining the key points to consider and whether they need to take any action. Any organisations which is concerned that this policy change may affect it should contact Constable VAT. Read in full here.

We have recently released a blog entitled “Does the Temporary Reduced Rate Apply to Me?” This piece discusses the way in which the temporary reduced rate of VAT interacts with supplies of food and beverages and aims to assist taxpayers in identifying the key points to consider. Additionally we have now released a blog on the related topic of whether the reduced rate applies to ‘Wedding Packages’.

To discuss the temporary reduced rate and how it may impact on your business, please do not hesitate to contact Constable VAT.


First Tier Tribunal

1. Default Surcharge: Whether Reasonable Excuse

In this case, Concept Multi-Car Ltd (CMC) appealed against a default surcharge amounting to £4,090.90. issued in respect of the 04/19 VAT period.

CMC entered the default surcharge regime from the 10/18 period onwards after its VAT return due on 7 December 2018 was received late by HMRC, on 3 January 2019. The direct debit payment for the 10/18 period failed. CMC argued that HMRC cancelled the direct debit but HMRC denied this and produced a letter dated 9 January 2019 from HMRC to CMC which stated that the direct debit had been returned as unpaid as the direct debit instruction had been cancelled with CMC’s bank. The letter also made clear that if CMC wished to pay its VAT by direct debit again in the future, it would need to issue a new direct debit instruction to its bank.

Following this the 01/19 return, payment of which was due on 7 March, was paid late on 12 March and a default surcharge was issued against CMC. CMC argued that it thought that the VAT would be taken by direct debit but when it realised that it had not been, it paid the amount in full immediately via CHAPS. VAT for the 04/19 period was due on 7 June but payment was not received by HMRC until 11 June. Therefore, a second default surcharge was imposed on CMC.

In its Notice of Appeal, CMC stated that it issued a new direct debit instruction when submitting its 04/19 return and so believed that payment would be taken. However, as the Tribunal commented, CMC produced no evidence to support this claim. The director of CMC, Mrs Shortland, claimed that she had been told by HMRC on the phone that if she paid the 04/19 return on 11 June that CMC would not be in default. However, HMRC produced a transcript of this conversation which showed that she had not been told this, but rather had been assured that the payment was late and a 5% surcharge would be imposed.

The Tribunal considered whether CMC’s submissions were capable of representing a reasonable excuse, observing that a reasonable excuse can only apply where the actions of the taxpayer were the actions of a responsible trader, conscious of and intending to comply with his obligations regarding tax.

Noting that CMC was aware that its direct debit was not functional for the 01/19 return as it received a surcharge for this period, the Tribunal commented that a reasonable and responsible trader would have made sure that such an instruction had been given and would have made sure that it was given in good time for the payment to be made on time.

In the absence of any evidence that CMC attempted to set up a new direct debit instruction, the Tribunal found that CMC did not have a reasonable excuse and upheld the default surcharge amounts.

Constable Comment: Within the obiter of this decision, there is some interesting discussion about what constitutes a reasonable excuse with regard to the default surcharge regime. The judgment in The Clean Car Company Limited is repeated to stress that just because a taxpayer honestly and genuinely believes that what it did was in accordance with its obligations does not give that taxpayer a reasonable excuse. It is essential that all businesses and charities familiarise themselves with their tax duties and operate as a responsible and reasonable trader which is conscious of all of its obligations – ignorance is no excuse.

This article is intended to give general guidance only and cannot be relied on in respect of any individual business. The facts may change as more information on the application of the reduced rate in particular circumstances is issued by HMRC. If you require advice specific to your business please contact Constable VAT or your usual adviser.