VAT & listed buildings – possibly some good news!
For once, good news emanating from HMRC, who have just re-written their internal guidance on the topic of construction - their reference V1-8A. Within it, they state that double glazing and secondary glazing can, potentially, be zero rated as alterations. This is wonderful news as they have hitherto refused to accept zero rating, except in very limited circumstances.
To recap - the work would have to be carried out on a listed qualifying building, be subject to Listed Building Consent and be an "alteration". Dictionary definition - "make something different, change". Their narrow view, thus far, is that it simply isn't an alteration. In fact, in a recent case that, as far as I know, is still heading for the First Tier Tax Tribunal they maintain that it is "repair and maintenance of the building as a whole". I've found a dictionary definition of "repair" and find "...restore to good condition after damage or wear.." I think not.
It's difficult for me to lose my natural cynicism, and as a result I have emailed HMRC to ask them if they really mean it.
Watch this space.
Update 9 November2011: HMRC didn't cover themselves in glory, with their response.
I asked "Does it mean what I think it says?"
They replied:
“Thank you for your enquiry dated 20 October 2011. I understand that your query relates to work to a listed building.
HM Revenue and Customs will only provide a ruling (Clearance) if after consulting the relevant guidance there is demonstrable uncertainty about how a transaction should be treated. Guidance on how to apply for a Clearance is available via the HMRC website www.hmrc.gov.uk, at the following address: http://www.hmrc.gov.uk/cap/links-dec07.htm”
Not immensely helpful, but I persevered and received something that would pass, in a dim light, as a reasonable answer:
“I can confirm that HMRC policy has not changed, each case is considered individually and as long as all the conditions have been met in relation to altering the fabric of a listed building zero rating can be applied.”
I have a couple of letters on file from HMRC, last year, in which they state that double glazing and secondary glazing are NOT regarded as alterations so I'll leave you to decide whether anyone is being economical with the truth.
Budget 2011
As ever, the world of VAT toodles along, with few highlights, so it is difficult to get excited about the things that are changing. But let's not start on a negative - here's a few goodies for you:
VAT registration limit (previously £70k) going up to £73k. [They call it "revalorisation" of the threshold - what is that all about?] This will apply from 1 April 2011.
De-registration limit going up to £71k, from £68k, again effective on 1 April.
There is one interesting change though - the "low value consignment relief" being reduced from £18 to £15. For those who don't know what this is, it is the value of individual deliveries coming into the UK that slip past HM Customs intact, with no duty or VAT being charged. This is what allows you to get cheap CDs, flowers, vitamins etc. from the Channel Islands - as it would have cost more to collect the taxes than HMRC would gain from collecting them. I don't know that this will stop the trade, but there you go.
Fuel scale charges will rise as they usually do - from
VAT periods commencing after 1 May 2011.
I would have to express surprise at mention of the wacky "Online Registration Wizard", which I believe is a posh way of saying that if you register for VAT, you must do it online. Why do they think it is better to dress it up in this way?
And I've just noticed a really cheesy mention of a plan which will "....accelerate the move of customers to access services through efficient online channels." Of course it will, especially if you make it sound as if it is of benefit to the 'customer'.
Furthermore, they are planning for everyone to do online VAT returns as well - those who have escaped thus far will be forced into it from 1 April 2012.
And finally, further down the page, there is a bit of slush about how HMRC are improving things, in which they mention "operational grit". That's what is called an error, in the real world..
VAT rate change
The world is awash with advice and assistance as regards how to avoid the increase - up to 20% on 4/1/11, if you didn't already know. In that light, I will add a shortened version on how to avoid it:
Goods
Buy it before 4/1/11 - VAT remains at 17.5%.
Services
Have the service, whatever it might be, performed before 4/1/11. VAT remains at 17.5%.
So far so good, but it's not rocket science is it?
OK, so the obvious trick is to get something being provided after 4/1 to be subject to 17.5% VAT. How is that done?
Plan A - pay for something in advance, be it goods or services. As long as they have the money in the bank before 4/1/11, it will be chargeable at 17.5%. Obviously this isn't terribly good advice, if there is the faintest possibility that the supplier will run off with your money, so please take care before doing that!
Plan B - Have the supplier invoice the goods or services prior to 4/1/11.
Both Plan A and Plan B are slightly offensive to H M Revenue & Customs, and as a result they have said that they won't work if any of the following apply:
a) Supplier and customer are "connected" - husband/wife/associated companies etc.; or
b) The value is greater than £100k exc VAT; or
c) The invoice doesn't have to be paid in full within 6 months; or
d) If any prepayment is funded by the supplier.
Clearly there could be other implications especially if services overlap the date of the increase. Please let me know if you require any further information.
DIY Housebuilder’s Scheme and holiday homes
As you are doubtless aware, HMRC don't normally appear generous with their approach to taxpayers, and although what follows appears to be in the realms of generosity, it did not arise as a result of an unexpected burst of largesse on their part.
For many years there has been a “DIY Housebuilders Scheme” in existence, within the VAT system, which was originally put in place so that DIY Housebuilders were not put at a disadvantage against individuals who had a new house built by a developer. In short, an individual would simply retain all the invoices for building materials, bundle them up and send them with a claim for the VAT incurred. HMRC would then repay that VAT subject, of course, to making reasonable checks on the legitimacy of the documents received.
If, however, an individual decided to build himself a new house which had an occupancy restriction on it – such that it would only be used for holiday purposes, HMRC would not entertain a claim, on the basis that if a developer sold such a property to an individual, it would be liable to VAT.
HMRC have now been forced to admit that this policy was incorrect, by virtue of a case that has recently been decided at what used to be called the VAT Tribunal [now, the First Tier Tribunal].
They now accept that holiday homes qualify, as long as the property is to be used by the claimant, and not let out. They have also accepted that this will also apply to situations where a non-residential building is converted into the holiday home.
And finally, HMRC are also inviting anyone who has been in the position of having a claim refused, to submit one now. This will apply retrospectively as well, to anyone who has completed such a property within the past four years and three months.
VAT number
When a business registers for VAT, the identifying feature of the registration is the VAT registration number, also referred to as the VAT number. This is an 8-digit number, the last two of which are ‘check digits’. This enables one to check the arithmetical validity of any UK VAT number, Please ask if you require the magic formula to enable you to check a VAT number.
VAT (Value Added Tax)
VAT (Value Added Tax): one of the major indirect taxes imposed by the UK Treasury upon supplies of most goods and services.
New Year 2009/10 – VAT rate change
As you may be aware, the VAT rate is going back up, from 15% to 17.5% with effect from 1 January 2010 - that is, from 00.01 on New Year's morning. So do pubs and clubs and hotels have to 'cash up' when they hear the bells? Should they take a "Z" reading in the midst of Auld Land Syne?
Thankfully not.
The Financial Secretary to the Treasury stated that HMRC will allow "a few hours grace" to businesses such as pubs and clubs, to allow them to charge 15% "for a session that goes beyond midnight into the early hours of 1 January."
Needless to say, I was unable to find anything about this on HMRC website, nor was I inclined to phone the National VAT Advice Helpline for confirmation. I'll settle for the wording within Hansard instead.
National Home Improvement Show – Earls Court
I have been asked to participate in the National Home Improvement Show at Earls Court in London, which takes place between the 2nd and 4th of October 2009. I will be part of the Listed Property Owners Club stand, in the Period Living Pavilion, and also presenting a short talk about VAT relief for heritage properties on the 2nd.
I will also be available to answer technical questions for part of the Friday and Saturday and look forward to seeing you there.
Budget 2009
Ah, yes, the Budget. I was in the Highlands of Scotland on Budget Day, and was fortunate to be able to find Internet access in a pub, an hour or two after the Chancellor sat down. The fact that it's taken me several weeks to comment on it might give you a clue as to how exciting I found it.
Even now it's difficult to get eloquent about the VAT registration limit going up (to £68k) or a change in the fuel scale charge. For the record, though, here's the merest flavour of the other changes:
Option to tax – a new "Automatic Permission Condition" being brought in. This will allow many more businesses to "opt to tax", without having to seek permission first.
5% rate for children’s safety seats extended to include bases from 1 July 2009
There was an announcement about a few changes to happen in 2010, including minor changes to the "Place of supply" rules and the intra-EU VAT refund system. The latter change should make it easier for UK businesses to achieve refunds of VAT incurred in other Member States.
VAT – partial exemption changes
HMRC have announced changes to the basic partial exemption rules, most of which will have a beneficial effect on businesses afflicted by this concept. Affected businesses are those that have exempt income as well as taxable income, and who are obliged to disallow a certain amount of VAT on expenditure. In simple terms, those changes are:
• Instead of doing a quarterly calculation, based on that quarter’s figures, the business can utilise the previous year’s annual average and apply it to this year’s figures. An annual adjustment is then carried out at the year end, and that percentage is used for the next 12 months.
• Presently, when the obligatory annual adjustment is carried out, the resulting VAT adjustment has to be made on the next VAT return of the new year. HMRC are now proposing that the business can make the adjustment in the last VAT return of the previous year instead.
• A potential ‘use – based’ method can be utilised for new businesses, where the normal trading pattern has not yet established itself. Thus the first year, with heavy expenditure, might otherwise fall to have a very low VAT recovery rate.
The above three measures are voluntary and the decision whether or not to adopt them will very much depend on individual circumstances.
The fourth change is compulsory, but as it is specific to the following types of supplies I will not bore everyone else with the detail:
• supplies of services to customers outside the UK
• certain financial supplies such as shares and bonds
• supplies made from establishments located outside the UK
If you consider that you may be affected by any of the above, please ask for further details.
NB: although the changes are effective from 1/4/09, the fine print points out that this means VAT returns commencing on or after 1 April 2009.
www.davebrownvat.co.uk