VAT Connect – January 2016

Bad debt relief

If you have found yourself writing off debts, are you remembering to reclaim any output tax that you had declared previously to HMRC?

Bad Debt Relief allows VAT registered businesses who operate invoice accounting to recover any output tax that they have declared through VAT returns. In general terms, the debt must have remained unpaid for a period of 6 months and have been written off to a separate bad debt account in the business records, which is a silver lining for any business that has suffered a bad debt.

Further information can be found in HMRC’s public notice 700/18.

A few extra days grace by setting up a direct debit

HMRC encourage you to set up a direct debit during the online VAT process and rewards you by delaying collection of VAT by an extra 3 days.

The main benefit in signing up is that not only do you receive an additional seven days to submit your return, you also get another three days before HMRC take your money. This also gives you peace of mind that once you hit ‘submit’ on your VAT return, then the payment is HMRC’s responsibility.  More details on the various ways to pay HMRC, including direct debit, can be read here.

Could you soon be living MOSS-free life?

HMRC’s recent publication has suggested that there may be light on the horizon for some VAT MOSS registered entities.

In R&C Brief 4(2016), HMRC have announced that they believe that some of the ‘businesses’ who supply electronic services and who are trading under the UK VAT registration threshold but registered under VAT Moss are doing so as a hobby, “i.e. only on a minimal and occasional basis” and therefore not actually in business and possibly not required to be registered.  This is exactly the issue that arose when VAT MOSS was introduced, so it’s a bittersweet progression, but perhaps ‘better late than never’.

HMRC plan to contact those that they think may not be ‘in business’, but if you think that may be you, you can read about the definitions of business here.

The brief also states that businesses supplying individual customers can now base their customer location on best judgement, retaining only a single piece of evidence.

Extending the scope of VAT grouping

HMRC are to review the rules around who is eligible to join a VAT Group.

Following a few similar decisions made by the European Court of Justice last year, HMRC were criticised in restricting membership of VAT groups in the UK to corporate bodies. HMRC have now announced in R&C Brief 03/2016 that they are seeking feedback from businesses and business representatives about increasing the scope of membership to include other legal entities such as partnerships, as well as a review of the control test to reflect the company law that governs subsidiaries.  We will keep you informed on how that develops and you can feedback views direct to HMRC.

Energy saving materials: have your say

HMRC have opened a consultation regarding the proposed changes to the reduced rate of VAT for the installation of energy saving materials.

Last year the European Court forced HMRC to revise and limit the scope of the 5% VAT rate on the installation of certain ‘energy saving materials’, such as insulation and draft excluders.  In particular, the consultation asks whether the legislation will achieve its objectives, and if not, why not.

If you want to have your say, you can do so by clicking on the link above, before the consultation closes on 3 February.

HMRC have also released updated guidance, which you can read here.

If any of these articles raise further questions for you, please contact any member of our VAT team.