VAT Connect – June 2015
It’s not easy being green
In 2012 the European Commission (EC) began infraction proceedings against the UK for allowing the supply and installation of energy saving materials in houses to be subject to the reduced VAT rate of 5%. HMRC disagreed with the Commission and sought to clarify this with the European Court of Justice (ECJ). In their recent decision, the ECJ confirmed that the UK had misinterpreted the scope of EU legislation, and that supplies should be standard rated. This has caused a backlash from landlords, builders, and energy-saving installation providers.
The current UK legislation allows for the reduced rate to be applied to the installation of energy-saving materials, and the materials themselves if provided with the installation. Energy-saving materials covers the various goods used in improving the energy efficiency of your home (such as insulation, and draught-stripping), and also the replacement or addition of energy-producing systems, such as solar panels and wind/water turbines.
It is unclear at this time how the UK Government will react to this decision, but with an increase of £150 for every £1000 spent, if you’re planning any energy-efficiency works, then it would be better to start this sooner rather than later, particularly since there is a Budget in early July. Read the EC’s decision here.
Crowdfunding & VAT
Kickstarter, Indiegogo, Seedrs, and Nesta are some of the popular platforms for businesses and individuals with business ideas and funding needs.
Whilst some projects seek what is effectively a donation, others offer something in exchange, such as free access if/when the project comes to fruition in the case of tech, or a product which the funding will allow to be manufactured and dispatched to the contributor. The latter scenario could fall within the scope of VAT as a ‘supply’.
The issue is now scheduled to be considered by the Commission and we await the results with interest, especially as this is another VAT issue triggered by the evolving world of technology.
If you are involved in crowdfunding, as an organiser, a fund-seeker or fund-provider (past or present), Henderson Loggie’s tax and corporate finance teams are happy to discuss the key issues with you.
Charity Mailing – additional VAT costs
Following their unpopular ruling last year that certain strategic or distribution services that were normally part of a zero rated supply must now be treated as standard rated, HMRC’s lack of clear guidance served only to further frustrate charities.
The change of policy, which was to apply originally from 1 April 2015, was postponed to 31 July 2015 due to mounting pressure on HMRC to publish guidance for those effected, and before any removal of the concession to allow both printers and charities to adhere to the change without falling foul of HMRC.
The guidance has now been added to Public Notices 700/24 Postage, Delivery and Direct Marketing and 701/10 Zero-rating of Books and Other Printed Matter, with added references to HMRC’s VAT Manuals as additional guidance.
The Scotland Bill
Following the General Election, a draft of an amendment to The Scotland Bill is currently under discussion in the Scottish Parliament. The Bill devolves some tax powers from Westminster to Holyrood, and allows the tweaking of some UK legislation if deemed by MSP’s to be of interest to Scotland.
Whilst there are no devolved powers for VAT in the Bill, the newly elected Conservative Government has promised that the first 10% of the standard and 2.5% of the reduced rate of VAT declared by Scottish VAT registered businesses will go into Scotland’s funds. With Scotland’s part of the pot now based on the efficiency of HMRC as it undergoes a further 14 office closures this year, and some calling for a review of HMRC and whether they are ‘fit for purpose’ going forward, the reality of funds available could be very different to the estimated revenue.
Retailers! The tourists are coming!
With the Scottish ‘summer’ fast approaching, the streets (and hilly bits) of Scotland will soon be bustling with tourists discovering our gorgeous scenery and architecture, and sampling our delicious home-grown food and drink. So if you’re a retailer that sells goods at the 20% rate of VAT, why not consider helping your Non-EU tourists save some of their hard-earned cash by operating the Retail Export Scheme? Although it’s got a few conditions, it’s relatively simple as these things go; Retailers provide a form to their customer at the point of sale (still charging the customer VAT as normal), but the tourist gets the form stamped by Customs at their last destination in the EU. The stamped form is then returned to the retailer by the non-EU customer, and with the evidence of export, can refund the VAT to the customer and adjust their VAT payable through their VAT return.
HMRC lose on compound interest case (again)
Littlewoods Retail Limited had previously (and successfully) appealed their right to compound interest in addition to the statutory simple interest that was paid on an overpayment of VAT on mail order supplies between 1973 and 2004. HMRC disagreed with the High Court’s decision and took the matter before the Court of Appeal.
The Court’s decision, published in late May, upheld the High Court’s decision and found that such interest should apply beyond the original repayment date to the time that the judgement was made. As yet no announcement has been made by HMRC addressing their intentions with other claims pending in relation to this outcome.
HMRC has since announced that it does not accept th Court’s latest decision, and will seek to prolong the issue even more through an appeal to the Supreme Court. A copy of the full decision can be found here and HMRC’s statement regarding their intention can be found here.
Road Fuel Scale Charges
HMRC have updated the Road Fuel Scale Charges from 1 May 2015. You can find out the relevant values from HMRC’s Scale Charge Toolkit here.
The Budget 2015, part II: Austerity or Bust
The Chancellor’s second round of the Budget for 2015 is scheduled for 8 July. Whatever transpires, Henderson Loggie will be watching and we’ll bring you a Budget Connect to summarise the issues that may impact you and your business.