VAT update June 2011

VAT cost sharing

HM Revenue & Customs (HMRC) has opened up a consultation on European VAT cost sharing that runs up until 30 September 2011. The consultation is seeking views particularly from businesses and organisations in the charity and educational sector that have exempt and non-business activities.

The VAT Cost Sharing Exemption is:

…a European law provision that allows businesses and organisations making VAT exempt and/or non business supplies to form groups to achieve cost savings and economies of scale.  Once formed the groups are relieved of a VAT charge on their supplies if all the conditions of the exemption are met.

For further details please view the Consultation documentation.

Refund scheme for academies

Following the introduction on Section 33B VAT Act 1994, HMRC has issue guidance for the following relevant groups:

• academies

• free schools

• 16 to 19 academies

• alternative provision academies

• university technology colleges for 14 to 19 year olds.

As announced in the Budget this year and from Royal Assent a VAT Refund Scheme will be enacted. This scheme will allow academies to recover some input tax. For further details please view the VAT Information Sheet 09/11.

Youth clubs

The VAT Notice on youth clubs has been updated, restricted and rewritten to improve readability and replaces the previous February 2004 version.

For further details please view the VAT Notice 701/35.

Partial exemption

HMRC has updated VAT Notice 706: Partial Exemption. The notice has been revised to improve readability, in addition to the following key changes:

• changes to simplify the standard method 

• changes to simplify the de minimis rules 

• the combined business/non-business and partial exemption (PE) method 

• changes to the Capital Goods Scheme (CGS) and clawback/payback rules.

For further details please view the VAT Notice 706.

Young children’s clothing and footwear

There has been an amendment to the VAT Notice 714: zero rating young children’s clothing and footwear. The main changes are:

• the scope of the definition of the term ‘fur skin’

• the eligibility for the zero rating of fur lined headgear

• the inclusion of collars and cuff for the zero rating

• the VAT position of items of clothing for children’s organisations.

For further details please view the VAT Notice 714.

VAT on postal services

From 1 August 2011 there will be VAT on more postal services provided by the Royal Mail, which has stated:

From 1 August 2011 some of our bulk account packet services will be removed from price control and therefore will become VAT rated. This means that VAT will be charged on packets weighing more than 1kg sent via our Mailsort 3 1400, Presstream and Packetpost services.

This will affect businesses that either do not or cannot recover the VAT, the cost of the VAT being an additional burden. Therefore if you are using The Royal Mail for postal services, care must be taken for packages weighing more than 1kg.

For further details please view the Royal Mail's site.

EU VAT update: Greece

The Greek government has been in discussion with the IMF, EU and the European Central Bank to reduce the rate of VAT. The proposal is to reduce their standard rate of VAT from 23% to 20%. There is also a proposal to reduce the lower VAT rate from 13% to 10% which applies to food and some basic supplies. So far no date has been set for this implementation.

VAT on protective equipment

VAT Notice 701/23 Protective Equipment has been updated and amended, which has not been amended since March 2002. The key changes are to:

• reflect the formation of HMRC

• reflect the updates in safety standards

• reflect the developments in child seat and the ‘lie-flat’ system.

For further details please view VAT Notice 701/23.

VAT Notes No. 2 2011

The latest VAT Notes have been released and include details on:

• HMRC has been on twitter since 20 December 2010

• from April 2012 all VAT returns must be submitted online

• details on how to correct mistake on your VAT returns

• HMRC’s new VAT fraud guidance

• updated VAT Notice 701/21A Investment gold coins

• changes to Lennartz accounting and the capital goods scheme

• details of the recently revised VAT publications updates in February, March and April this year.

For further details please view VAT Notes No. 2 2011.

Climate change levy: changes to acquisition

HMRC has issued Revenue & Customs Brief 22/11 which provides guidance where electricity from a Combined Heat and Power (CHP) station can be acquired by an electricity utility. The guidance can be found in the full Notice CCL1/2 Combined heat and power schemes.