There have been a number of changes to existing VAT Notices
There have been a number of changes to existing VAT Notices:
Health institutions VAT Notive 701/37 is effective now and replaces the February 2007 edition of Notice 701/31 Health and care institutions. Its main change is to provide guidance on independent pharmacies operating within hospitals. The notice is guidance on VAT Act 1994, Schedule 9, Group 7, where item 4 provides exemption for the provision of care or medical or surgical treatment and, in connection with it, the supply of goods, in any hospital or state-regulated institution.
HMRC recommend that the notice should be read 'if you are:
The notice further explains that 'an institution is qualifying when either of the following conditions is met:
An institution may be qualifying regardless of whether its activities are carried out on a charitable or commercial basis.'
Health professionals and pharmaceutical products Notice 701/57 is effective now and replaces the January 2007 edition of Notice 701/57 Health professionals and pharmaceutical products. Its main changes are to provide guidance on changes in the law on supplies of services by psychologists, supplies of drugs and other goods on prescription and the changes to community pharmacy services in Scotland. The notice is guidance on VAT Act 1994, Schedule 9, Group 7, where item 1, 2, 3 and 5 and Group 12 item 1 provides exemption for the provision of professionals and for the services of a deputising doctor. It also provides guidance on zero-rating for qualifying goods dispensed to an individual on the prescription of an appropriate practitioner dispensed by a registered pharmacist.
HMRC recommend that the notice should be read 'if you are:
Insolvency Notice 700/56 is effective now and replaces the January 2006 edition of Notice 700/56 Insolvency. Its main changes are to improve readability and to update the notice to reflect penalty regime changes, an explanation of the impact of the capital goods scheme on insolvent businesses and communication with HMRC.
Seeds and plants Notice 701/38 is effective now and replaces the November 2003 edition of Notice 701/38 Seeds and Plants. This notice provides guidance on VATA 1994 schedule 8 group 1 explaining that zero-rating is dependent on how plants, seeds and seeds used directly as foods are held out for sale.
Its main changes are to improve readability and to make minor amendments to paragraph 4.3. This paragraph considers plants that do not have a culinary use but which, as long as certain conditions are fulfilled, can still be zero-rated. For example, the guidance states, “in the case of bay plants, they do not exceed 50 cm in height, nor have they been clipped, shaped or topiarised in such a way as to specialise them as ornamentals,” that they also meet the conditions required by the Food and Environment Protection Act, that they are held for sale for a culinary use and they are supplied in individual pots of a size less than 2 litres.
This is has always been an area where we have some of our most news-worthy, long-running and sometimes perverse case law. HMRC have updated their notice and it is effective now and replaces the 2002 edition of Notice 701/14 Food. It has been reissued to improve its readability. The notice is guidance on VAT Act 1994, Schedule 8, Group 1, on when food used for human consumption can be zero-rated and Section 30 on when the goods and services specified in Schedule 8 are zero-rated.
HMRC recommend that the notice should be read if you are a food:
Food Notice 701/14 doesn’t provide guidance on food supplied in the course of catering, apart from stating that you always standard-rate food supplied in the course of catering and recommending Notice 709/1 Catering and take-away food is read.
The core to the notice is section 3 where the exceptions to the basic rule that most food of a kind used for human consumption is zero-rated are listed.
Food processing Notice 701/40 is effective now and replaces the January 2002 edition of Notice 701/40 Food processing. It has been updated to reflect changes in the role of the Agriculture and Horticulture Development Board.
It explains the VAT rules for food processing services and provides examples of where new goods are produced, the consideration of readiness to use or eat and when zero-rating applies. The guidance provides the following example: 'the process of smoking salmon is zero-rated, as the new product, the smoked salmon, is a new zero-rated food item. The smoked salmon is immediately edible, making it distinct and different following the process of smoking [whereas] the process of smoking cod is standard-rated as it does not produce a new zero-rated food item, as the smoked cod is not immediately edible, and the essential characteristics have not changed following the smoking.'
Capital goods scheme Notice 706/2 is effective now and has been revised to improve readability and incorporates changes to the Capital Goods Scheme which took effect from 1 January 2011. This notice provides guidance as to how the scheme works and which items are covered by the scheme.
The scheme applies to:
HMRC states in the guidance that 'you should read this notice if you acquire, create or construct capital items for use in your business and you incur VAT on those items. The aim of this scheme is to provide a fair and reasonable attribution of VAT to taxable supplies and other supplies with the right to recover VAT.'
The notice also highlights the importance of recordkeeping and includes the comment that 'you are not required to keep VAT records for longer than 6 years. However the CGS requires you to make adjustments up to 10 years later. We would recommend that you keep records long enough to show us how you calculated each adjustment.'
Default surcharge Notice 700/50 is effective now and replaces the June edition of Notice 700/50 Default surcharge and explains how to avoid a surcharge, how default surcharge works, when default surcharge is applied, and what to do if you think you have a reasonable excuse for submitting your VAT return or payment late.
You may wish to read the current tribunal rulings.
Catering and take-away food Notice 709/1 is effective now and replaces the February edition of Notice 709/1 Catering and take-away food and aims to provide guidance to help a business decide whether or not its supply is one of catering. Its main changes are to improve readability, specifically in the sections that look at catering, hot take-away food and accounting for VAT.
Funded Pension Schemes Notice 700/7 is effective now and replaces the March 2002 edition of Notice 707/1 Funded Pension schemes and aims to provide guidance to help a business when input tax can be recovered on pension scheme expenditure. Its main changes are to improve readability.
Motoring expenses Notice 700/64 is effective now and replaces the May 2007 edition of Notice 700/64 Motoring expenses. The notice is guidance on The VAT (Input Tax) Order 1992 (SI 1992 No 3222) Article 2 defining what a car is, The VAT Act 1994, sections 56 and 57 covering scale charges and The VAT (Input Tax) (Reimbursement by Employers of Employees’ Business Use of Road Fuel) Regulations 2005 (SI 2005 No 3290)
HMRC recommend that all businesses review the notice and state that the aim of the notice is to provide guidance on:
The guidance also contains a number of recurring questions, for example:
'Can I recover the VAT incurred when a car is bought primarily for taxi, self drive hire or driving instruction?'
'Yes, but only if the car is a qualifying car and you intend to use it primarily for:
Earlier the guidance answers the question as to what is a qualifying car, giving the answer, 'a qualifying car is a car, which has not been subject to the full input tax block. This means that your business or any previous owner has recovered the input tax on the purchase in full. Such cars will be sold on a normal tax invoice with VAT charged on the full selling price.'
Business entertainment Notice 700/65 is effective now and replaces the May 2002 edition of Notice 700/65 Business entertainment. It has been rewritten and restructured and also updated to include guidance on the recovery of input tax on business entertainment provided to overseas customers. The guidance seeks to provide guidance on business entertainment, employee entertainment, business entertainment to overseas customers and how and when the private use charge will be applied where input tax is recovered.
Buildings and construction Notice 708 is effective now and replaces the February 2008 edition of Notice 708 and customs briefs 36/09, 39/09, 81/09, 88/09, 89/09, 92/09, 26/10, and 05/11. It has been rewritten and HMRC state that it is to 'reflect our current policy and to clarify those areas where previous advice may have been unclear.'
The main changes in content are as follows:
The guidance seeks to provide help on when zero-rating or reduced rates can apply on building works and material; where the sale or long lease of a building is zero-rated; blocks on recovery on input tax; and certificates.
HMRC recommend that the notice should be read 'if you:
It’s also highlighted that self-builders may wish to review the notice.