VAT Insights – July 2023

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A VAT summary document for busy accountants in general practice

In this July 2023 edition, I have looked to cover the recently decided VAT case:

  • 3D Crowd CIC                                                              – VAT recovery rules  

I also make mention of two recent changes at HMRC:

  • HMRC Payment Plans                                             – VAT < £20k
  • HMRC updated its guidance…finally!               –  VAT & Roller Blinds

…in addition to a good house-keeping point

  • Partial Exempt Businesses                       

3D Crowd CIC

This decision considered the VAT recovery rules as they applied to the manufacture of PPE, at the start of the Covid-19 pandemic.

A number of individuals produced face shields for healthcare workers. At that moment in time, it was illegal to sell PPE without accreditation. In advance of receiving the accreditation, it donated the face shields to NHS trusts and healthcare organisations.

The dispute with HMRC concerned the recovery of VAT, on costs which were incurred. The court understood that there was a business activity, that of selling the shields in the future. However, it also considered that there was an altruistic non-business supply. It decided that VAT on the costs incurred would have to be apportioned between both business and non-business supplies.

This is a further case which looks at the rules regarding the recovery of VAT.

In the event that you are wrestling with these matters, please give me a call. We can look to understand what issues are at play in your specific scenario and can work out what you are entitled to.

HMRC Payment Plans (“Time to Pay” arrangements)

Where a VAT registered business has less than £20k owing to HMRC, a payment plan (otherwise known as a “Time to Pay” arrangement), may now be set up by the business, so long as the debt is settled within 6 months. This service is not available to every business and is done via its online business tax account where it has:

  1. Filed its latest VAT return;
  2. A liability to HMRC for VAT of £20,000 or less;
  3. Submitted the payment plan request within 28 days of the payment deadline; and
  4. It does not have any other payment plans or debts with HMRC.

This is helpful in light of the new VAT Penalty regime which has been introduced as from 1 January 2023, on the late submission and / or payments of VAT returns.

This also relieves the pressure on HMRC phone lines, as highlighted last month with the closure of the VAT registration helpline service.

At long last, I can report some good news in dealings with HMRC.

HMRC updated its guidance…finally!

HMRC Buildings and Construction VAT Notice 708, has finally been updated to take account of an earlier decision, reached nearly two years ago.

The installation of manual roller blinds is capable of VAT relief, providing all other conditions are met. They qualify for either the zero or reduced rates of VAT.

The notice has been updated and specifically states that where an electric mechanism is installed, the relief is not available. This is due to electric blinds not being an everyday installation in new builds or house renovations….so beware which blinds are being installed for VAT purposes.

Partial Exempt Businesses         

I understand that the area of Partial Exemption / VAT, is a frightening thought for any accountant or business, that is affected by it. How much more so does this time of the year create panic, when Partial Exemption adjustments may be required.

For those businesses which are restricted from recovering all of their VAT, VAT recovery throughout the year is provisional. An adjustment is required following the VAT year end which is ordinarily the VAT quarter ending March, April or May. This is referred to as the Annual Adjustment. The adjustment needs to be included in the specific quarter or the following one.

Furthermore, an override adjustment may be required, in certain instances. During a VAT control visit to a partially exempt business, HMRC may ask to see that this calculation has been performed so don’t forget to do this, if its relevant to you.

If you are such a partially exempt business grappling with the calculations and / or the adjustments which are necessary at this time of the year, you can give me a call and I can provide some assistance.

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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