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The perils of submitting a VAT return even one day late were highlighted in a recent case where a company was hit with a £227,185 penalty. Our latest VAT update highlights this, other recent case law and various HMRC and European Commission publications.

Recent VAT case law
VAT Default Surcharge Penalty
An appellant, Blue Ocean Associated Limited, lost its case against a VAT default surcharge penalty of £227,185 for submitting a VAT return one day late. The case brought together the relevant case law and analysis on how proportionality should be looked at in terms of the VAT penalty regime.

Importantly, this case again highlights the necessity for businesses and organisations to submit their online VAT returns and ensure any VAT payments due to HMRC are submitted and cleared by the proper due dates.

Holding Companies
In another loss to the appellant, HMRC successfully challenged that a UK holding company was not carrying on an economic activity for VAT purposes.

The Upper Tribunal decision involved Norseman Gold plc's supplies of management services, as a UK holding company, to its overseas subsidiaries. HMRC argued that these did not amount to taxable supplies and, consequently, there was no entitlement to claim credit for input tax (VAT).

The case fell down where at the time of Norseman Gold's plc VAT registration as an intending trader, nothing was undertaken in agreeing the amount of the management charge, the frequency with which invoices would be sent, to which subsidiary they would be sent, and the detail of the services to be provided in exchange for the charge.

This case demonstrates the importance that, in order for UK holding companies to be entitled to claim input tax (VAT), then any intention to make taxable supplies must be established at the time when the input tax (VAT) is incurred and that these future supplies are agreed between the relevant parties and documented in writing (i.e. provide for an immediate and direct link with the services provided which EU VAT legislation requires).

HMRC news
VAT MOSS: Simplifications for businesses trading below the VAT registration threshold
In its Revenue & Customs Brief 4 (2016), HMRC announced details of a further simplification to the evidential requirements for supporting decisions on the place of taxation.

These simplifications apply to businesses that fall below the UK's VAT registration threshold. The Brief also suggests that those who have registered for VAT MOSS, but have very small levels of trading, should consider if it is correct for them to be registered as a business for VAT purposes. The Brief can be accessed here

Reminder of withdrawal of misdirection concession in cases of VAT liability change

HMRC issued its Revenue and Customs Brief 7 (2016) on 1 February 2016, as a reminder, that the misdirection class concession no longer exists. The Brief can be accessed here

HMRC continues to receive registrations for VAT where businesses specifically request HMRC not to pursue any net tax due on supplies when a business has to correct VAT accounting errors arising from a change in HMRC's interpretation of VAT law and the tax has not been passed on to customers. HMRC has decided to issue the above Brief to provide notice that, with effect from 1 August 2016, HMRC shall no longer routinely consider requests not to pursue the tax due with effect from 1 August 2016. Affected businesses may wish to submit relevant registrations by 31 July 2016.

Publication of exporter information
HMRC issued its Revenue & Customs Brief 8/2016 announcing that, from 8 April 2016, it will start to publish certain information relating to exporters and the goods they export. This will include individual exporter's name and address, commodity code, description of the commodity code covering the goods and the month and year of export. This information shall mirror the importer information already published by HMRC.

HMRC inform that confidentiality safeguards will be put in place to protect commercially sensitive information and businesses will be able to opt out from having their exporter and importer information published. The Brief can be accessed here

TOMS Notice update
HMRC has updated its notice 709/5 covering the Tour Operators Margin Scheme. This notice explains how businesses and organisations must account for VAT if they buy-in and re-sell travel facilities as a principal or undisclosed agent. The updated notice can be accessed here

New company car advisory fuel rates from 1 March 2016
HMRC has published new advisory fuel rates for company cars which are effective from 1 March 2016. HMRC will also accept these fuel rates for VAT purposes, although, businesses and organisations will still need to retain receipts as evidence for reclaiming input tax (VAT) on fuel costs and mileage allowances. The new rates can be accessed here

VAT and import duty: reducing financial guarantees
Following the introduction of the Union Customs Code ('UCC'), HMRC has amended its guide to VAT and import duty to include numerous changes including the use of the Simplified Import VAT Accounting ('SIVA') to lower the financial guarantees business and organisations must give for the Duty Deferment Scheme. The amended guidance can be accessed here

European Commission news
VAT registration thresholds applied by EU Member States
The European Commission has published an updated list of the various different VAT registration thresholds applied by EU Member States as of January 2016. This includes the 'regular' VAT registration threshold for small locally established businesses, as well as the thresholds for intra-Community acquisitions and distance sales. The updated list can be accessed here

Contact us

Should you wish further information on the above, please do not hesitate to contact Gary using the details outlined below.

Gary Moore
Direct line 0141 636 9353
Mobile 07812 061 582
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