HMRC confirms change to ‘fallback’ provisions
HMRC has published Brief 20/11, which sets out a change in VAT treatment where a business uses a UK VAT registration number (other than for triangulation purposes) to secure zero-rating of goods sent from one EU member state to another, without their arriving in the UK. Under what is often referred to as the ‘fallback’ provision, use of a UK VAT registration number in these circumstances makes the customer liable to account for acquisition VAT in the UK. The change in VAT treatment has arisen following the judgment of the European Court of Justice in the joined cases of Staatssecretaris van Financiën v X (C-536/08); Staatssecretaris van Financiën v fiscaleeenheid Facet BV/ Facet Trading BV (C-539/08).
Hot food: VAT treatment remains unchanged
In Brief 19/11, HMRC sets out its position following the European Court of Justice (ECJ) judgment in the joined German cases of FinanzamtBurgdorf v Bog (joined cases C-497/09, C-499/09, C-501/09 and C-502/09). The significance of the decision for German taxpayers is that certain supplies of hot food may now be eligible for the reduced rate. The UK treats most basic supplies of foodstuffs as zero-rated, but along with other specified items there is a specific exclusion from the zero rate for supplies made in the course of catering. The decision goes further to specifically legislate for certain supplies of food that are for consumption on and off premises, including the supply of hot food. Article 110 of VAT Directive 2006/112 allows the UK to retain its zero-rate for food as long as there are clearly defined social reasons and the supplies are for the benefit of the final consumer. There can be no extension to the zero-rate provisions and the courts have determined that exemptions (including zero rating) must be construed strictly, but exceptions from the exemption (including Note 3) should not be construed restrictively. The zero rating provisions form a specific legal framework and subject to the conditions of the derogation the UK has discretion as to what supplies fall within those provisions. Since the UK has specifically legislated to exclude supplies of hot food it is clear that the intention was not to include such supplies within the zero-rate. HMRC considers that the ECJ judgment has no implications for the UK treatment of supplies of hot food and businesses should continue to treat their supplies in accordance with published guidance.
New and revised publications issued
HMRC has issued revised versions of the following notices:
Notice 8: Sailing your pleasurecraft to and from the United Kingdom, which includes VAT and excise duty aspects and replaces the December 2002 version. Notice 8 is available on the HMRC website at www.hmrc.gov.uk/thelibrary/
import.htm. Supplement to Notices 700/1 and 700/11, which cover registration and deregistration. The supplement cancels and replaces the April 2010 edition. The supplement updates the VAT registration and deregistration thresholds as announced in Budget 2011.The supplements is available on the HMRC website at www.hmrc.gov.uk/thelibrary/vat.htm.
Notice 727/2: Bespoke retail schemes, which cancels and replaces the March 2006 version. Among the changes are the inclusion of a suggested model framework for a bespoke retail scheme agreement and the introduction of an option to sign up to a scheme gradually if full agreement cannot be reached initially. The notice is available on the HMRC website at www.hmrc.gov.uk/thelibrary/vat.htm. VAT Information Sheet 08/11: Motor manufacturer’s company cars, dealer demonstrators, daily rental cars. HMRC has updated the tables that apply when using the simplified method of calculating VAT on private use of company cars, demonstrator vehicles and rental cars (also known as the ‘car averaging’ calculation). The tables affect motor manufacturers, importers and wholesale distributors, retail motor dealers and daily rental companies. The updating takes into account changes to the standard rate of VAT.
Notice 718: The VAT margin scheme and global accounting, which cancels and replaces the version of January 2010. It has been updated to reflect changes to the VAT rate and invoicing requirements.
Notice 60: Intrastat general guide, which cancels and replaces the version of January 2010. HMRC has also issued the following VAT information sheets:
06/11: Implementing the VAT technical directive and changes to the partial exemption and capital goods scheme rules;
07/11: Special scheme for non-EU businesses – exchange rates for period ending Mar 2011.
Business entertaining: restriction on right to recover VAT removed
The Value Added Tax (Input Tax) (Amendment) Order 2011 (SI 2011/1071) came into force on 1 May 2011. This order amends the Value Added Tax (Input Tax) Order 1992 (SI 1992/3222), and removes the restriction on the right to recover VAT in respect of business entertainment where the entertainment is provided to overseas customers and is of a kind and on a scale that is reasonable, having regard to all the circumstances. An explanatory memorandum accompanying the statutory instrument is available on the legislation.gov.uk website at www.legislation.gov.uk/uks/2011/1071/memorandum/contents.
Registration threshold is increased
The Value Added Tax (Increase of Registration Limits) Order 2011 (SI 2011/897) applies from 1 April 2011. The order increases the VAT registration threshold from £70,000 to £73,000, the deregistration threshold from £68,000 to £71,000 (taxable supplies), and from £70,000 to £73,000 (acquisitions from other EU member states). New fuel scale charge table substituted The Value Added Tax (Consideration for Fuel Provided for Private Use) Order 2011 (SI 2011/898) came into force on 1 May 2011 and has effect from the beginning of prescribed accounting periods beginning on or after that date. The order substitutes a new fuel scale charge table in VATA 1994, s 57(3) to ensure that the flat rates reflect changes in fuel prices and that the CO2 bands maintain alignment with those used for direct tax purposes. An explanatory memorandum accompanying the statutory instrument is available on the legislation.gov.uk website at www.legislation.gov.uk/uksi/2011/898/ memorandum/contents.
HMRC launches VAT registration initiative
HMRC has announced details of an initiative to crack down on individuals and businesses who are trading above the VAT threshold but who have not yet registered for VAT. The initiative will be launched later this summer. Previous campaigns have targeted offshore investments, medical professionals and people working in the plumbing industry. So far HMRC has raised over £500 million from voluntary disclosures and a further £100 million from follow-up activity.
Sarah Laing CTA