helping you help your clients VAT Update Neil Owen BA CTA(Fellow) FBIAC AIIT
Brexit • HMRC guidance published re no deal • Confirms main points • No change to most services – But no EC Sales Lists (or narratives on invoices) • Acquisitions become imports – Postponed accounting • EC sales and distance sales become exports – Evidential requirements • MOSS – overseas registration required
Place of Supply • Where a supply is seen as taking place – Where VAT is chargeable on a sale – Only place where VAT chargeable – Not quite only place where VAT may need to be brought to account • Rules differ for goods and services • For goods, where they start their journey to the customer • For services, more complex
Place of Supply of Services • Land-related – Taxed where land is located – Hotel accommodation – Construction services – Architects, estate agents, etc – Conveyancing solicitors – Supplies of land – Holiday accommodation – Direct link with specific site
Other Services • Passenger transport – Mile for mile, where journey takes place • Admission to events – Where event takes place – Wide definition – Services ancillary to admission
Other Services 2 • Restaurant services and catering – Where services consumed – Hopefully self-explanatory • Short-term hire of a means of transport – Period of hire no more than 30 days – 90 days for a vessel – Where made available, not where used • Freight transport outside EU
Other Services 3 • Services affected by the override – Hire of goods – Telecoms and broadcasting – Electronically-supplied services • Electronically-delivered files • Web-hosting • Automated web services • Taxed where ‘use and enjoyment’ occurs if different from customer location – Only if one EU and one non-EU
B2B Services: the General Rule • Default position B2B for all other services • Known as ‘general rule’ • VAT due in customer’s location • All services bar designated exceptions • ‘Business’ includes VAT -registered • No VAT chargeable if customer overseas • Reverse charge due if supplier overseas • So nothing changes post-Brexit
General rule services B2B • UK supplier – No VAT chargeable if customer overseas and in business (or otherwise VAT- registered in EU) • UK customer – VAT due in UK – Customer liable to account – Reverse charge must be applied
The Reverse Charge • Applies where place of supply is customer’s location • VAT must be brought to account there • Avoids need for supplier to register • Customer accounts for VAT – Treats services as both supplied and received
The Reverse Charge 2 • Applies to services received into UK • Supplier may be EU or non-EU • Account in boxes 1 and 6 of return, as well as 4 (to extent claimable) and 7 • From 1 January 2010, all services except exclusions • Applies only to taxable services
B2C Services • Many “where performed” so no change post-Brexit • Many where supplier established so no change post-Brexit • Some where customer belongs if non-EU – Accountancy, consultancy, provision of information, supplies of staff • Some where customer belongs if in EU – BTE services (MOSS accounting)
Imports • Shipment of goods non-EU to EU • VAT a tax on importation • Chargeable as a duty of customs • Payable on goods subject to VAT • Normal input tax • C79 certificate evidence • Not agent's invoice
Exports • Shipment of goods EU to non-EU • Zero-rated regardless of customer • Ship and get evidence within 3 months • Supplier must ship – Except indirect exports • Indirect exports – Customer not established in UK – Caution with evidence
Export Evidence • Required by law • Official – C88 • Commercial – Primary or secondary • For sea, sea waybill of bill of lading • For air, air waybill • For post, certificate of posting • Within three months
Timing of Export Evidence • Musashi Autoparts Europe Limited • Sales to Germany • Insufficient evidence of shipment • C&E assess • Company obtains evidence • C&E refuse to withdraw asst, saying next return can be adjusted • Tribunal allows appeal • Overturned by High Court
EORI Numbers • All importers and exporters require EORI number • Application made on first import or export • Those dealing with EU need post-Brexit – Only if none already • Separate method of application – No evidence needed • HMRC were sending letters
Acquisitions 1 • Purchase by VAT-registered trader of goods from EU • Goods must move across border • VAT accounted for by customer – on standard- and reduced-rated goods • Claimed as input tax subject to normal rules – Caution where input tax irrecoverable
Acquisitions 2 • Customer provides VAT number to supplier, including country prefix • Acquisitions over threshold can cause registration • High values give rise to statistical obligations
EC Sales • Goods sold to a VAT-registered customer elsewhere in the EU • Goods must move • Customer must be registered in MS of acquisition (except triangulation) • Supplier must obtain customer VAT no. and quote on invoice • Evidential requirements • Transfer of own goods counts
Distance Selling • Sales to unregistered customers in EU • Initially as UK • If threshold exceeded in any MS, registration required • Higher threshold ( € 100k): Austria, Germany, Luxembourg, the Netherlands, the UK • Lower threshold ( € 35k): all others
MTD for VAT • HMRC VAT Notice 700/22 – Revised May 2019 – Also “stakeholder information pack” • Monthly and annual returns – Confirmed will continue • Ditto non-standard tax periods • Loss of seven-day extension? • Will accommodate FRS
MTD for VAT 2 • Principles are threefold – Digital retention of records – Digital links between accounting records – Digital submission of VAT returns • Liability exists if trading above VAT threshold – Taxable supplies only
Liability to MTD • Taxable supplies >£85,000 – i.e. standard-, zero- and reduced-rated – Same threshold for overseas businesses • Those voluntarily registered not liable • Intending traders not liable • Exclude exempt supplies and supplies outside scope of UK VAT – E.g. sales of services to businesses outside UK
Liability to MTD 2 • First VAT period beginning after 31.3.19 – For 96.5% (per HMRC) of those liable • First VAT period beginning after 1.10.2019 – Trusts and unincorporated not-for-profit bodies – Group VAT registrations (and divisional) – Overseas businesses – Annual accounting scheme users – Public corporations – Local authorities and public sector bodies
Liability to MTD 3 • If below at 1 April 2019, must commence wef beginning of first period after t/o exceeded – On historical basis – Need to monitor – Cannot get back out of t/o decreases • Those below threshold can participate voluntarily – Can get back out if still below
Digital Records • Certain records must be kept digitally – List in notes – Manual records only will be illegal • Cash accounting permissible – Payment date may be used as supply date – Issues with cash book records – Single entry for multiple purchases permissible but conditions • No requirement for electronic invoicing
Digital Records 2 • Many will use standardised accounting packages – May be HMRC’s unpublished aim • Spreadsheets count as digital records • Manual entry of transactions – Prime entry into digital records – Invoices, cash payments, etc – Results of specialised calculations
Digital Records 3 • For retailers, DGT item of prime entry – No requirement for digital record of individual transactions – EPOS will not need to link to other digital records • Also, where intermediary agents arrange transactions – Summary of transactions may be entered into digital accounting system
Digital Records 4 • Other records may be manual – Includes specialised computations, such as • partial exemption calculations • margin scheme records • error correction computations • FRS calculation • scale charge records • employee expenses • petty cash records (monetary limits) – Result entered manually (by journal) • But will need to be prior to submission
Digital Links • Links between accounting systems must be digital • This element postponed for 12 months – From main entry date • Will require systems to talk to each other – Export, upload, etc – Pages of an Excel spreadsheet – No manual intervention
Digital Links 2 • Issues for VAT groups, academy schools, large businesses with multiple accounting systems, etc • All parts must link digitally – Often a spreadsheet is used • No legislative definition of “digital link” – HMRC insist “copy and paste” not a digital link
Digital Submission of Returns • Software must talk to HMRC’s systems – Both to submit and to receive data • API (application program interface) or bridge required – Main software providers will facilitate – Others will need bridging program • Older versions of accounting software – Download to Excel and submit from that?
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