VAT Update - February 2014

Notice 702: Imports

The notice provides guidance on how imports are treated for VAT purposes.

The section covering VAT territory of the European Union (EU) has been updated.

The excluded column under France now includes the following: Martinique, French Guiana, Guadeloupe, Reunion, Mayotte and Saint-Martin (French Republic).

Brief 5 (2014) Tour Operators Margin Scheme (TOMS)

This notice outlines HMRC's position following European Court of Justice (ECJ) infraction decisions.

HMRC highlights that 'some tour operators may gain a benefit from including wholesale supplies within TOMS' but for most the scheme remains unchanged following the decision.

Brief 4 (2014): VAT information sheet 2

This brief highlights the issuing of VAT information Sheet 02/14 which provides guidance on the application of the zero-rate for VAT on buildings:

  • designed as a dwelling or dwellings; 
  • intended to be used for a relevant residential purpose (RRP).

The brief highlights that some properties could qualify for zero-rating under both provisions and that taxpayers can rely on either provision when considering zero-rating for buildings.

Brief 3 (2014): construction works to buildings used 'for a relevant residential purpose'

This brief applies to providers of residential accommodation for students.

It provides a definition of the term ‘student’ which is important to the understanding of the VAT treatment of construction works used for a relevant residential purpose.

The revised guidance is in VCONST15360 - 'Relevant residential purpose' - interpretation of terms: Note (4)(d) to Group 5 of Schedule 8 VATA - residential accommodation for students or school pupils: what is a 'student'?

The following is highlighted in the note: 

'The term "student" in this context refers to a person undertaking a course of educational study or instruction.

'It covers any person who is receiving education or vocational training from a university (or a centrally funded higher education institution or a further education institution) or from any other supplier who is providing similar, or the same type of, education or vocational training to a similar, or the same, academic standard. 

'Examples include (but are not necessarily limited to) individuals who have left school and are undertaking higher or further education or training with a view to:

  1. obtaining a generally recognised academic or professional qualification;
  2. maintaining an existing professional qualification for which accreditation is received; and
  3. undertaking a course of study which, whilst not leading to a recognised qualification, has a high level of academic content and is intended to improve the knowledge and understanding of the student in an area of academic interest.

'The maintenance of existing professional qualifications would include Continuing Professional Development (CPD) applicable in cases where either: 

  • a professional body requires from its members the continuing recognition of a qualification; 
  • an employer requires employees to maintain or improve relevant technical skills'

Brief 6 (2014): deduction of VAT on pension fund management costs

VAT: CJEU judgment regarding deduction of VAT on pension fund management costs highlights the HMRC's position following the case, which has resulted in employers being able to deduct:

'VAT it paid on services relating to the administration of its employees’ pensions and management of the assets of the pension fund set up to safeguard those pensions, where the pension fund was a legally and fiscally separate entity.'

The guidance goes on to state that as 'a result, HMRC is changing its policy on the recovery of input tax in relation to the management of pension funds.

'This means that there are circumstances where employers may be able to claim input tax in relation to pension funds where they could not previously.'

HMRC also highlights that claims for unclaimed input tax can be made.