HM Revenue and Customs (HMRC) has released VAT Notice 20/11 on changes to the Intra-EU supplies.
There is a change to the VAT treatment where a business uses a UK VAT registration number to secure zero-rating of goods sent from a member state to another without entering the UK. This change does not affect supplies under the triangulation mechanism.
The change follows a Court of Justice of European Union (CJEU) decision in joint cases of X (C-536/08) and Facet BV (C-539/08). Prior to this decision, the UK operated the ‘fallback’ position, explained in VAT Notice 725 paragraph 7.7:
7.7 Is acquisition tax always due where the goods are received?
The VAT on an acquisition is always due in the Member State where the goods are received. However, there is a 'fallback' provision that applies where the VAT registration number quoted to the supplier to secure zero-rating has been issued in a different Member State. In that event the acquisition tax must be accounted for in the Member State of registration, but the customer also remains liable to account for acquisition VAT in the Member State to which the goods have been sent.
The CJEU decision has provided some clarity. The liability to account for acquisition VAT where a UK VAT number is used for goods sent from a member state to another without entering the UK remains the same. What has changes, it clarifies that there is no right to recover the acquisition VAT as input tax. The only time the UK VAT be adjusted is where a business can demonstrate that the acquisition VAT has been accounted for in the member state of arrival.
For further details please view HMRC's VAT Notice 20/11.
HMRC is consulting on a new online system to tackle VAT evasion on road vehicles brought into the UK. The consultation is open until 31 August 2011 with a proposal to introduce a system by 2013.
There have been amendments to the advisory fuel rate effective 1 June 2011.
HMRC is consulting on reforming gaming tax by introducing Machine Games Duty (MGD). The proposal is to apply MGD on net takings and will replace both Amusement Machine Licence Duty (AMLD) and VAT currently charged on these machines.
Announced in the budget this year, the Low Value Consignment Relief will reduce to £15, previously £18. The change comes into effect 1 November 2011 and applies to commercial consignments of £15 or less, excluding alcohol, tobacco products, perfume or toilet waters, will be free from customs duty and import VAT.
For details please view HMRC Reference: Notice 143.
HMRC announces its latest campaign, this time targeting individuals and businesses trading above the VAT registration threshold and have not registered for VAT. This latest campaign will form the template for future campaigns. HMRC are in discussions with interested parties including the ACCA before finalising the detail of this VAT initiative.
For further details please view this news item.
HMRC is consulting on the proposal to legislate Extra Statutory Concession ESC 3.2.2. The Concession was originally brought in to counter VAT avoidance schemes that took advantage of VAT grouping. The consultation proposes to legislate the Concession and to bring it up to date as it was brought in before the changes to the place of supply rules implemented 1 January 2010.
The consultation ends on 3 August. This was also mentioned in last month’s VAT update and by HMRC in Revenue & Customs Brief 16/11.
There has been an amendment to VAT Notice 727/2 - Bespoke Retail Schemes, the key changes include:
• reflect the amended turnover limit for use of the published retail schemes
• include a suggested model framework for a bespoke retail scheme agreement
• withdraw the requirement for bespoke retail scheme agreements to include annual reviews
• introduce the option of signing up to a scheme gradually when we can't reach full agreement initially and
• explain the circumstances in which we may permit estimation of Daily Gross Takings (DGT) adjustments.
For further details please view VAT Notice 727/2.
HMRC has published comments on the draft clauses for Finance Bill 2011 concerning the splitting of supplies. The clauses have been put into place to prevent the artificial splitting of supplies in order to obtain a VAT advantage. There were a number of concerns raised which HMRC has tried to address. These clauses only apply:
• when the supply of printed matter which is ‘connected with’ a supply of services and each is provided by a different supplier
• when the supply of printed matter is connected with a supply of services (it does not relate supplies of printed matter in connection with the supply of goods)
• when the supply of printed matter and the supply of the service would fall to be treated as a single supply of services had they been made by a single supplier.
The comments go on to illustrate HMRCs understanding of the legislation with a number of examples and its basis in case law. In particular European Court of Justice (ECJ) decision in Levob case (C-41/04), quoting:
where two or more elements or acts supplied by a taxable person to a customer, being a typical consumer, are so closely linked that they form objectively, from an economic point of view, a whole transaction, which it would be artificial to split, all those elements or acts constitute a single supply for purposes of the application of VAT.
The proposal is therefore to proceed with the clauses as they are presented. As this is already a complicated area of VAT represented by a substantial number of important cases, there will probably be more guidance on this from HMRC in due course.
The comments on the draft legislation can be found under 'Related links'.