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VAT News

Changes to zero rating on caravans

As a result of a current European court case HMRC have been required to change the minimum size for zero rating of a caravan. Until 20th April any caravan with a width of 2.3m when supplied was zero rated for VAT purposes. From the 20th April 2010, caravans can only be zero rated if their width exceeds 2.55m. The reason for the change is identified in business brief 20/10

Comment: Caravan site operators need to be made aware of this change which affects not only the sale of new caravans but the disposal of caravans second hand.

Changes to partial exemption de minimis rules

With affect from 1st April 2010 there are some simplified tests for assessing the businesses partial exemption status. Use of these tests allows the business to avoid having to conduct a full partial exemption calculation each quarter. The two tests are:

  1. Total input tax occurred (excluding blocked input tax) is no more than £625 per month on average and the value of exempt supplies is no more than 50% of the value of all supplies
  2. The total input tax less the input tax directly attributable to taxable supplies is less than £625 per month on average and the value of exempt supplies is 50% or less of the value of all supplies.

More details of these changes can be found in VAT information sheet 04/10

Comment: Any business with exempt supplies should be made aware of these tests as they may simplify their VAT quarterly accounting.

Online filing

Just a reminder any business registering for VAT on or after 1st April 2010, must file their VAT returns online and pay their VAT electronically. All businesses with a turnover of excess of £100,000 must now be filing their returns online.

VAT return payments by cheque

From 1st April 2010, HMRC will only consider that payments are received on the date the payment reaches HMRC’s bank account. This means smaller businesses who are still completing paper returns will need to send them to HMRC in sufficient time to ensure that any attached cheques are cleared in HMRC's bank before the due date. If they don’t do this they could become liable to late payment penalties.

Comment: Most businesses should consider making payments electronically. Any small business with a turnover less than £100,000 can sign up to file their return electronically and it may save them having to submit their return a week early.

Time limits for assessments

The normal time limit for assessment is now 4 years. It was previously 3 years for VAT purposes.

Tour Operators Margin Scheme

From 1st January 2010 there is an alteration in the treatment of 'hotel billback' transactions. Hotel booking agents who receive invoices in their own name for hotel accommodation and recover the VAT charged must now account for VAT on their onward supplies under the TOMS and in turn their business customers will incur sticking tax. There are however, special arrangements agreed between the industry and HMRC whereby the agent can ensure that their customer is entitled to recover VAT input in respect of accommodation used for business purposes.

The details of these arrangements are set out in revenue and customs brief 21/10.

Comment: Any business involved in making supplies under the TOMS or businesses receiving supplies of business accommodation should familiarise themselves with this customs brief.

In conjunction with Académie Fiscale

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