VAT Insights – July 2024

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A VAT summary document for busy accountants in general practice

I thought you might appreciate a quick summary of some recent key VAT cases and an update on recent changes by HMRC, which may be relevant to your clients. They may be worth raising, the next time you speak with them.

In this July 2024 edition, I have looked to cover the recent change announced by the government on private school fees. I have also covered the judgement in an interesting VAT case recently decided. In addition, there are a number of HMRC changes mentioned below.

Government clarification re VAT on Private School Fees

Queenscourt Ltd – Dip pots as part of KFC meal…standard rated as hot takeaway?

HMRC changes:

Form VAT 484

VAT Registration Estimator

Government clarification re VAT on Private School Fees

As you may have recently read in the press, the government is to include VAT on private school and boarding fees, as from 1st January 2025. Anti-forestalling measures introduced on 29th July 2024, will mean that pre-payments made from that date on, will also be caught. This may have been considered a “work-around”, as a potential solution had this uplift been introduced.

These measures will not affect those pupils with acute special needs, where those needs are provided by special private schools. Those fees remain to be VAT exempt.

VAT on other services e.g., nursery care, school meals and holiday clubs, will also not be caught by these changes. They remain to be VAT exempt.

The phrase “every cloud has a silver lining” may be applicable here, where there could indeed be a potential “silver lining”. One such silver lining could be the ability for private schools to reclaim VAT on their capital expenditure, which was not possible before.

With the introduction of VAT on school fees, private schools would be classified as VAT-registered businesses. As VAT-registered entities, they will be able to reclaim VAT paid on goods and services purchased, including those for capital expenditure. This reclaimable VAT can lead to substantial savings for the schools, offsetting some of the financial burden introduced by the VAT on fees.

While initially this added charge is a financial challenge, it does come with a significant benefit—the ability for schools to reclaim VAT on capital expenditure. This opportunity can lead to enhanced facilities and resources, ultimately improving the quality of education and making the negative aspect of VAT introduction a bit more bearable. Additionally, there may also be an opportunity to recover previous VAT expenditure, where this was previously blocked from VAT recovery.

In the event that you would like a conversation on this topic, please do not hesitate to be in touch.

Queenscourt Ltd (“Queenscourt”)

This case heard at the First-tier Tribunal (“FTT”), had two parts:

  1. VAT liability issue – whether dip pots provided as part of a KFC meal deal were separate zero rate supplies; and
  2. Procedural issue – should the appeal be dismissed.

VAT liability issue – In 2019, HMRC had repaid Queenscourt £75k VAT on the basis that the sale of dip pots were zero-rated supplies. A top-up claim was submitted in 2020. A separate officer dealt with this. He came to a different conclusion in that the sale of dip pots, were an ancillary element to better enjoy the principal supply, that of the KFC chicken takeaway meal deal. He ruled that the dip pots were part of the standard rated supply. He therefore raised a “recovery assessment” in respect of the earlier repayment.

Procedural issue – The two issues which were raised by Queenscourt to stop HMRC looking to claw back the original £75k, were that it was either:

  1. A “Recovery Assessment” which was out of time when it was raised – the FTT disagreed, in that it was within the two-year time limit; or
  2. “Legitimate Expectation” on the part of Queenscourt, would result in HMRC being stopped from raising the recovery assessment – the FTT disagreed. It ruled that HMRC had not been estopped from correcting their previous position.

The main point to be gained from this decision, is not the VAT liability issue. Where clients may have received a “recovery assessment” due to HMRC changing its mind, this case will provide a good summary of what they should be aware of.

As always, should there be something niggling you re a client who has received such an assessment, please feel free to give me a call.

VAT484

Recent attempts by fraudsters to redirect VAT repayments to that of the criminals’ accounts, has resulted in changes being made by HMRC.

As of 5th August 2024, any request to change any VAT registration details should be made via the HMRC online portal, rather than by a VAT484 or other postal or electronic means.

In the event of a business which is unable to use digital services, contact may still be made with HMRC requesting a VAT484 form.

VAT Registration Estimator

This is a digital tool that has been introduced by HMRC, which has been introduced to allow small businesses to estimate what registering for VAT may mean for them.

VAT registration is compulsory for businesses with a turnover of £90k or more. In addition, voluntary registration is available where turnover is less than £90k per annum.

Links are provided to information about the VAT registration process. In addition, it can also be used multiple times to compare different situations that could apply to a business in the future.

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.

Sharing is caring

Please share this with colleagues who might find it of value. They can register for future copies here by sending me an email to this address – raphael@thevathelpline.com.

Quarterly VAT webinars

I present quarterly webinars for many firms, during which I address the sorts of issues mentioned in my VAT Insights emails. If you do not currently receive this service and consider that it may be of value, please call me to be added to our list.

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