HM Revenue and Customs (HMRC) has released VAT Notice 20/11 on changes to the Intra-EU supplies. The change follows a Court of Justice of European Union (CJEU) decision in joint cases of X (C-536/08) and HMRC. VAT Notice 725 paragraph 7.7.explains the position and states '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 changed is that, 'it clarifies that there is no right to recover the acquisition VAT as input tax'. The only time UK VAT will be adjusted is where a business can demonstrate that the acquisition VAT has been accounted for in the member state of arrival.
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 changed is that 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, see 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 2011, the low value consignment relief will reduce to £15, previously £18. The change comes into effect on 1 November 2011 and applies to commercial consignments of £15 or less, excluding alcohol, tobacco products, perfume or toilet waters, which will be free from customs duty and import VAT. See HMRC Reference: Notice 143.
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 3 August and can be found here.
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
• 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 HMRC's 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 here.