Tag Archives: unsolicited delivery

CVC VAT Focus 12 April 2018


PARTIAL EXEMPTION

It is around this time of year that those businesses that are partially exempt are required to calculate their annual adjustment.  This adjustment must be made in the VAT return period ending June/July or August but can be made in the prior period (March/April/May) if a business wishes.  CVC is able to calculate or review these annual adjustments for clients if required.


HMRC NEWS

VAT: road fuel scale charge tables

VAT Updated Valuation Table: Road Fuel Scale Charges effective from 1 May 2018 added to the page.

VAT Notice 700/11: cancelling your registration

This notice tells you when and how to cancel your VAT registration.

VAT Notice 700/1: should I be registered for VAT?

This notice cancels and replaces Notice 700/1 September 2016.

Apply for the Fulfilment House Due Diligence Scheme (Notice FH1)

Page updated with link to new application service and further information what information needed to apply to register.


 CVC BLOG

Sale of donated goods by a charity – an opportunity to reclaim VAT incurred

 

Where certain conditions are satisfied, the sale of donated goods by a charity is zero-rated for VAT purposes. This can be beneficial because no output VAT is due on the income generated by these sales but a right to input VAT recovery on associated costs arises.


CASE REVIEW

First Tier Tribunal

 

1. Reasonable Excuses?

 

In this instance the Tribunal heard an appeal from an individual, Mr. Phillip Ashley Legg against HMRC’s decision to impose various surcharges ranging from VAT accounting periods 12/05 to 12/14.
During this period, Mr Legg only made two payments from 14 September 2006 and 29 June 2012. Mr Legg sought to contend that he had a reasonable excuse for his behaviour in that he had contacted HMRC to establish a payment plan for the surcharges and by 2014 he had cleared all actual VAT arrears. Mr Legg relied heavily on the fact that his profits took a large drop in the period in question, owing to a rapid decline in his area of business.
Whilst the Tribunal accepted a sharp decline in the business had taken place, it still held that this was not a reasonable excuse as the down-turn took place over a number of years and Mr. Legg should have, as a prudent businessman, made adaptations to evolve and fortify himself against changing market conditions. The Tribunal were more sympathetic towards Mr Legg’s catastrophic hard drive errors which led to a severe loss of data. They also took into account that during the period in question, Mr Legg’s father was ill and Mr Legg played a large role in his care.
The important test in relation to a ‘reasonable excuse’ relates to whether or not the taxpayer has behaved reasonably in his or her circumstances. Whilst the Tribunal confirmed that a down-turn in business could not constitute a reasonable excuse, the death of a close relative and fatal computer crashes losing to loss of accounts can. For these reasons, the Tribunal allowed the appeal in half, cancelling a selection of those surcharges not relating to the decline in business activity.


2. Supply or unsolicited delivery

 

This appeal related to whether the applicant, Quality Engines Direct Ltd (QEDL), supplied silver ingots to Microring, a potential purchaser of the company. Whilst in the process of dealing with a transfer of his business, the proprietor (Mr. Rafiq) engaged with a purchaser (Mr. Healey) who immediately began treating the business as his own; making deposits and withdrawals and using the business address. HMRC questioned two invoices relating to the sale of silver from Mr. Rafiq to Mr. Healey which took place before the transfer of QEDL. The veracity of these invoices was denied by Mr. Rafiq, who denied any supply of silver was made to Microring or to Mr. Healey, or that QEDL makes supplies of silver at all, and that he owes no VAT on this alleged supply. He contended that the invoices raised by Microring are not genuine and there had been no silver trade activity with Microring at all.

Mr. Rafiq claimed that delivery of the silver to his business address was not sanctioned, the packages remained unopened as they were unsolicited and he informed Mr. Healey to remove the packages, which he did.

The Tribunal agreed on appeal with Mr. Rafiq that the delivery of silver was unsolicited, the invoices had been recreated by Mr. Healey on behalf of Microring. The Tribunal found that as the packages of silver were unsolicited, unopened and removed as a matter of urgency, that QEDL had not made a supply to Microring and Mr. Healey had in fact made the order.


3. Omitted sales and disallowed input tax

 

In this case, Mr. Paul Shore, trading as “DP Contractors”  disputed a decision by HMRC in relation to his 04/11 VAT return. Mr Shore submitted that in this period of trading he was owed a £3,025.60 VAT repayment. HMRC submitted that due to under-declared output VAT of £16,599.40 and over-declared input VAT, Mr. Shore in fact owed £14,605.52 to HMRC.

Mr. Shore traded as DP Contractors which he claimed HMRC had confused with D&P Contractors, a separate firm to which he was a partner alongside Mr. David MacMillan. D&P Contractors had tendered for a contract with Southern Electrical Contracting Limited (SEC) using Mr Macmillan’s VAT registration number as Mr. Shore was not, himself, registered for VAT. Whilst Mr Macmillan was taken ill, Mr. Shore continued to trade using the VAT number of D&P Contractors whilst establishing himself as a sole proprietor “DP Contractors”.

Mr MacMillan played no role in the business being done for SEC by Mr. Shore and ceased to trade with D&P Contractors owing to injury and received no payment from Mr. Shore for on-going work. D&P Contractors issued over 190 invoices to SEC without declaring these on VAT returns and could offer no reasonable explanation for this. Mr. Shore attempted to highlight some discrepancy between the names of the firms but, as the Tribunal found, the same VAT registration number and bank account were used in continuing the trade by Mr. Shore and that the suppressed sales were correctly assessed on Mr. Shore, despite his pleas that Mr. Macmillan was jointly responsible.

Irrecoverable input tax which had also been deducted by Mr. Shore for items such as power showers were also disallowed and a forgery was uncovered for the purchase of a lorry. The Tribunal dismissed all appeals by Mr. Shore and upholds the assessments in full in relation to the suppressed sales.