A VAT summary document for busy accountants in general practice
In this April edition, I have looked to cover three most recent VAT cases:
- Pavan Ltd – HMRC receive a slap on the wrists;
- CPR Commercials Ltd – inaccuracy not being deliberate; and
- Greenspace (UK) Ltd – VAT and installation of Roof Panels.
I also mention a recent change to HMRC’s procedures concerning VAT / property and the Option to Tax.
Pavan Ltd – HMRC receive a slap on the wrists
In this recent First Tier Tribunal (“FTT”), HMRC looked to assess the business for VAT at the 20% VAT rate, in light of not having followed the conditions that were required for zero-rating its supplies.
This revolved around specified time limits which were necessary for obtaining official or commercial evidence, following the export of goods. The business has a requirement to hold such evidence, in the event of a HMRC control visit, not to provide such evidence to them, in advance of a HMRC visit taking place.
The FTT did not take kindly to this heavy handed approach taken by HMRC. This appeal was successful and resulted in HMRC being reprimanded for the actions taken.
Furthermore, in an Upper Tribunal (“UT”) decision released last month, that of CPR Commercials Ltd, it partially remade the decision of the FTT. This decision revolved around the making of sales to customers in Ireland, without the necessary export evidence being made available. Here the UT ruled that the inaccuracy in this case was not deliberate, but rather only a careless error.
These two cases indicate that HMRC is not correct all of the time, in raising assessments and/or penalties. These cases demonstrate that the Tribunals will call out HMRC where it has done something wrong. From an article which I read only this weekend; the author’s view was that:
“…HMRC has become too reliant on the imposition of penalties as a stick to encourage compliance…”; an opinion which I would be wholly in agreement with.
If these issues might be relevant to any of your clients and you would like more details, please call me.
Greenspace (UK) Ltd – Installation of Roof Panels
The question here was whether the installation of insulated roof panels was subject to 20% or 5% VAT. The two earlier courts both decided that the installation was akin to a new roof, rather than being insulation for a roof. Accordingly, VAT was chargeable at 20%.
The business had hoped they could limit the VAT charge to 5% so the case went to the Court of Appeal (“CoA”). The judge decided that the earlier courts had asked the wrong questions BUT had reached the right conclusion, that VAT was due at 20%.
The explanation given is useful as it provides the first time the CoA has considered the definition of energy saving materials.
If this might be relevant to any of your clients and you would like more details, please call me.
Option to Tax – VAT change
I wanted to highlight the recent Revenue Customs Brief 1/23 which sets out changes to the way taxpayers need to notify their intention to Opt to Tax (“OTT”).
Previously, regarding a basic OTT, HMRC would respond within a short period of time, confirming the date of the said OTT.
With effect from 1st February 2023, an automated response will be generated by HMRC’s systems. It is this which you must keep a record of. Furthermore, the address and postcode of the property should be included within the header email, submitted to HMRC.
It would appear that this procedure was not running as efficiently as HMRC had hoped. This has been rectified. However, if this process is not working correctly for any of your clients, please call me.
You are welcome to call me any time to get my opinion on any VAT issues, challenges or potential opportunities faced by your clients.
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