VAT Question of the Week: VAT – Too Late to Claim?

Q- My client has been approached by a builder, who carried out repair work to the client’s factory some years ago. The builder was late registering for VAT and is now looking to issue VAT only invoices to my client for the supplies in question. I have several concerns: is the supplier liable to account for the VAT if the supplies were made more than 4 years ago? Is my client obliged to pay and if so can he now recover the VAT given that the original invoices were dated more than 4 years ago?

A- The supplier will be liable to account for VAT on supplies made since the effective date of registration. HMRC will treat the income as VAT inclusive, but the supplier has the option of issuing VAT only invoices if the customers agree to pay the extra, usually on the basis they can recover it. Read More

VAT Question of the Week: A Building for a Charity – VAT or Not?

Q. My client owns and rents out commercial properties; mainly office blocks. A local charity has asked to take a lease on one of his buildings but is saying that VAT should not be charged on the premium or rent. My client has opted to tax all of his properties because he does not want to be partly exempt and, more importantly, this particular building is within the capital goods scheme. I have forewarned my client that if he were to make exempt supplies during the term of the scheme he may have to repay some of the VAT he claimed on the building and, understandably, he isn’t happy about that. Does he have any choice in this matter? 

A. To be fair to both parties, if the amount of VAT at stake for your client is relatively small it may be possible to factor this in when negotiating the lease. However, whether a property owner facing a significant VAT loss has any scope to refuse to disapply his option to tax depends on how the charity intends to use the property. Read More

VAT Question of the Week: Working on Goods From Outside the EU

Q- My client is a VAT registered business operating as a garage. An individual based in Guernsey is sending his car to the UK for a service, and once the service is completed, my client will send the car back to the customer. Will my client be required to charge VAT?

Q- The first thing to establish here is the place of supply, and to do that your client has to consider the nature of the service being provided, and whether his customer is a business (B-B) or an individual (B-C).  The service here is that of working on someone else’s goods and you have said that the customer is an individual. The general (or default) rules for B-B supplies and B-C supplies are different. If this had been a B-B supply, it would have fallen under the general place of supply rule, being where the business customer belongs, i.e. Guernsey, and therefore outside the scope of VAT.  However, as a B-C supply it is one of the exceptions to the B-C general rule (being where the supplier belongs), and the place of supply is where the work takes place. As it happens, in this particular case both rules achieve the same outcome.  The work takes place in the UK so the supply falls within the scope of UK VAT; however, this does not necessarily mean VAT must be charged.

Section 16 of VAT Notice 741A sets out those services that may, in certain circumstances, be subject to the zero-rate of VAT when supplied in the UK.  These services include work on goods for export (legal reference: VAT Act 1994 Schedule 8 Group 7 item 1).

Zero rating under this provision applies where:

  • the goods on which the work is to be carried out have been obtained, acquired within, or imported into the EC for the purposes of being worked on; and
  • the goods are not used in the UK between the time of leaving the supplier’s premises and exportation; and
  • on completion of the work, the goods are intended to be, and in fact are, exported from the EC either:
  • by the supplier of the service (or someone acting on their behalf); or
  • If the customer belongs outside the EC, by the customer (or someone acting on the customer’s behalf).

The information you have provided indicates that your client will meet these conditions and therefore the supply is zero-rated.  Your client must obtain and keep satisfactory official or commercial evidence of the export of the car to a place outside the EU. Examples of acceptable evidence are set out in VAT Notice 703 VAT on goods exported from the UK.


VAT Question of the Week: Recharges V Disbursements

Q- My client is an IT consultant, operating through a VAT registered UK company. He is supplying consultancy services to another UK IT business. He has incurred hotel, travel and meal expenses, and is charging these on to the company he is supplying. Can he treat these as disbursements, and therefore not charge any VAT on them?

A- The treatment of recharged expenses is a common cause of VAT errors. A disbursement is where you act on behalf of your customer in arranging and paying for goods or services, but the underlying supply remains between the supplier and your customer. Read More

VAT Question Of The Week: Installed Goods

Q- My client is a VAT registered luxury carpet and flooring specialist, and they have a contract to supply and fit a hand-woven carpet in a VAT registered boutique hotel in Italy. Will my client need to charge VAT? He will be using a VAT registered fitter in Italy to actually install the carpets.

A- When a business is contracted to install goods on land or within a property, it can be difficult to decide whether that is a supply of a land-related service or of installed goods. Whilst the place of supply for both would be the same, being in the first instance where the land is, and in the second instance where the goods are installed, the rules to determine who must account for the VAT differ. Read More

VAT Question Of The Week: Building Work for a Disabled Customer

Q- I have a client who is carrying out extensive building modifications to a disabled person’s home. He has had conflicting advice from various contacts in the trade about VAT. Can all the work be zero-rated or are there limitations?

A- Your client cannot automatically zero rate his supply as the liability will depend on the nature of the work supplied. There is no general VAT relief on building modifications for disabled people or on purchases of building or construction materials. However, a number of specific reliefs exist within VATA1994 Schedule 8 Group 12.

The Group 12 construction reliefs were Read More

VAT Question Of The Week: VAT and Welfare Services

Q- My client provides domiciliary care services to the elderly and they are approaching the VAT registration threshold. The client is regulated by the Care Quality Commission and the individuals receiving the supply are under the instruction of a care plan and require help with personal care and domestic tasks. Can you confirm if my client is required to register for VAT?

A- Under VAT Act 1994 Schedule 9 Group 7 supplies of welfare services and connected goods by charities, public bodies, state regulated institutions or agencies are exempt from VAT.
The legislation defines welfare services as: Read More

VAT Question Of The Week: Clawback

Q- My client is a housing developer and bought some land in August 2016 on which he incurred VAT. At the time of purchase, he intended to build new dwellings for sale (zero-rated taxable supplies) and therefore he claimed back the VAT incurred on the October 2016 return. However, upon completion of the site in January 2018 the developer changed his mind, and now, for the first time, he intends to rent 50% of the properties out (exempt). What happens to the VAT he has claimed?

A- Input tax can be reclaimed on goods or services where they are used, or intended to be used to make taxable supplies.

As your client intended only to make taxable supplies with the land, he was correct to claim back the input tax in full at the time.Had your client changed his intention within the same partial exemption year as the claim for input tax (i.e. by April 2017), then any input tax claim would Read More

VAT Question Of The Week: Private Tuition

Q- When two of my clients retired from teaching in schools they set up a partnership to deliver tuition for GCSE Maths and English. They each tutor their own individual students, as well as delivering tuition to a group, but most of the time they use third-party teachers to take the group sessions. Their turnover is £140,000 looking back over the last 12 months but they are not VAT registered as they believe their services are all exempt; is this correct?

A- Where a sole trader or a partner in a partnership teaches a subject ordinarily taught in schools or universities, this is an exempt supply of

Read More

Brexit From a VAT Perpective

Q- One of our clients has a small manufacturing business and all of his trade is with the EU. With Brexit on the horizon, how will this affect the business?

A- Unless all member states agree to an extension, the UK leaves the EU on 30 March 2019. The UK intends to leave the EU Customs Union, meaning the re-introduction of a UK-EU Customs border. A negotiated outcome of a Free Trade Agreement (FTA) with no customs duties imposed is still the most likely scenario. However, Read More