Value Added Tax 2020/21

Description

DELETE Preface Table of examples Table of statutes Table of statutory instruments and other guidance Table of cases Abbreviations and references Introduction Chapter 1 How VAT works—an outline of the system Signposts Introduction Value added tax is an indirect tax The European basis for VAT Inputs and outputs The theory of VAT It does not matter what the business sells VAT is suffered by the consumer Rates of VAT The difference between exemption and zero-rating Outside the scope of VAT Non-business VAT catches all manner of transactions What is a ‘supply’? So what is it that makes a business liable to register? Who must register? Profit is irrelevant Some input tax is not recoverable The VAT fraction Chapter 2 Where to find the law Signposts The EC VAT Directives The Value Added Tax Act 1994 Statutory Instruments How VAT law changes VAT notices published by HMRC The pitfall in out-of-date notices Some notices have the force of law Court decisions VAT Notes It is not so just because HMRC say it is! Chapter 3 When to register and deregister for VAT Signposts Who must register? The registration limit The past turnover measure Future turnover method Identifying all the taxable sales of a business Has a business got the values right? Buying an existing business Registration due to acquisitions of goods or the reverse charge Registration due to distance selling in the UK Registration due to electronic supplies via the Internet Registration of overseas businesses trading on the Internet Planning point – overseas registration Registration of trusts If in doubt, take advice When a business has to tell HMRC Date of registration Be careful with your application form Choosing the VAT registration period The right date is important Consider the sad story of Mr Bruce Registering too early is also a mistake! The penalty for late registration A business can register voluntarily VAT that can be recovered upon registration Clubs and associations—do the accounts tell the truth? The role of a professional accountant Dividing a business to escape registration Output tax may be due on assets put into a partnership A trap re partners: section 45(2) Deregistration—how to escape the system The transfer of a business as a ‘going concern’ Do not delay the application But a business can reclaim certain VAT after deregistering VAT incurred after sales cease Is a company being dissolved or struck off the register? Chapter 4 VAT groups Signposts Effect of grouping Key points Effect on input tax recovery Holding companies Entertainment Disadvantages of grouping Effects of joint and several liability for VAT group members Group payment and repayment companies separately Payments on account scheme A separate company for exports? The anti-avoidance rules Date of leaving a VAT group Property transactions EU Commission’s proposals for harmonising VAT grouping Chapter 5 The VAT return Signposts Basic accounting for VAT How often is the return due? When is the return due with HMRC? Electronic payments Electronic VAT return Evidence of electronic payment What if the return is late? What if HMRC delay a repayment? Is interest payable as well? The repayment supplement versus interest Why might a repayment be due? Submitting the VAT return Back-up schedules Spotting errors Disclosing errors of either overpaid or underpaid VAT The four-year cap What if a business discovers errors made over four years ago? Have a permanent VAT file? VAT groups The Payments on Account Scheme Chapter 6 So what must VAT be charged on? Signposts ‘Money in’ means VAT payable If in doubt, try the ‘what if?’ question Sales ledger receipts Standard rating applies if the future supply cannot be identified Income on which VAT is not due Fees received by a business for the services of a partner or owner Companies whose directors hold other directorships Part-time judicial appointments Examples of sundry income Costs recharged are standard-rated Salaries recharged are standard-rated Salaries charged by employment agencies Service charges in restaurants Disbursements Postage charged by mailing houses What if the tax invoice is in the agent’s name? Giving goods away can be a VAT cost to a business—business gift rules Don’t give it, lend it! Can a business sell it rather than give it away? Beware of ‘entirely free gifts’ A business cannot recover VAT on gifts given away by a marketing agent Free supplies of services A loan of goods is a supply of services Services bought in are taxed if put to private use Mobile telephones Gas and electricity Chapter 7 Time of supply—when VAT must be paid Signposts The key rules The issue of a tax invoice creates a tax point The supply of the goods or services creates a tax point If a business has been paid, some VAT is due The exception for continuous services A long job is not ‘continuous’ Pro forma invoices The annual tax point rule Date of the tax point Leasing of assets via a chain Watch those tax points! Hire-purchase Tax point problems for retailers Change of VAT rate Money received without the knowledge of a business Income confirmed by bank statements What if a business is asked to re-invoice someone else? Chapter 8 The value of supply rules Signposts Special offers Prompt payment discounts (Sch 6, para 4) Turnover discounts and volume rebates No VAT on free meals to staff Accommodation for staff in hotels and pubs Anti-avoidance rules to stop artificial pricing Private use of a car from a motor trader’s stock The party plan rules Barter transactions—the gross values count! ‘Consideration’ means more than just payments received How does a business value non-monetary consideration? Money-off coupons Some examples of non-monetary consideration The promotional gifts problem Awards and rewards Some more complicated points Interest-free credit Goods returned or repossessed under hire-purchase agreements Trade-in values offered by motor dealers Other trade-in situations More on discounts, rebates and commissions The time of supply of a discount Book tokens, gift vouchers and telephone cards The value of a voucher when redeemed Goods given in return for accumulated stamps or points Deductions by credit providers from payments to retailers Chapter 9 So what is reduced-rated? Signposts The contents of Schedule 7A Domestic fuel and power—Sch 7A Group 1 Installation of energy-saving materials—Sch 7A Group 2 Certain grant funded work—Sch 7A Group 3 Grant-funded installation of ‘heating systems measures’ and ‘qualifying security goods’ Women’s sanitary products—Sch 7A Group 4 Children’s car seats—Sch 7A Group 5 Residential conversions—Sch 7A Group 6 Residential renovations and alterations—Sch 7A Group 7 Contraceptive products—Sch 7A Group 8 Welfare advice or information—Sch 7A Group 9 Installation of mobility aids for the elderly—Sch 7A Group 10 Smoking cessation products—Sch 7A Group 11 Caravans—Sch 7A Group 12 Small cable-suspended transport systems—Sch 7A Group 13 Chapter 10 So what is zero-rated? Signposts The law The Terminal Markets Order The zero-rating in Sch 8 The contents of Sch 8 The following Groups are not covered in this chapter Do not ask if it is standard-rated! What about outside the scope? What supply is being made? Check what the law says Food—Sch 8 Group 1 Sewerage services and water—Sch 8 Group 2 Books—Sch 8 Group 3 Talking books for the blind and handicapped and wireless sets for the blind—Sch 8 Group 4 Transport—Sch 8 Group 8 Caravans and houseboats—Sch 8 Group 9 Gold—Sch 8 Group 10 Bank notes—Sch 8 Group 11 Drugs, medicines, aids for the handicapped etc—Sch 8 Group 12 Imports, exports etc—Sch 8 Group 13 Charities—Sch 8 Group 15 Clothing and footwear—Sch 8 Group 16 Emissions allowances—Sch 8 Group 17 Chapter 11 So what is exempt? Signposts The contents of Sch 9 Land—Sch 9 Group 1 The standard-rated exceptions Insurance—Sch 9 Group 2 Recharges under block insurance policies Product guarantees and warranties ‘Run-off’ situations Engineering insurance and inspection Postal services—Sch 9 Group 3 Betting, gaming and lotteries—Sch 9 Group 4 Finance—Sch 9 Group 5 Life assurance and investment are different to insurance Some outsourcing cases Affinity cards for charities Stock lending Share registration services Global custody and safe custody Education—Sch 9 Group 6 Health—Sch 9 Group 7 Burial and cremation—Sch 9 Group 8 Trade unions, professional and other public interest bodies Sch 9 Group 9 Sport, sports competitions and physical education—Sch 9 Group 10 Works of art etc—Sch 9 Group 11 Fund-raising events by charities and other qualifying bodies— Sch 9 Group 12 Cultural services etc—Sch 9 Group 13 Supplies of goods where input tax cannot be recovered—Sch 9 Group 14 Investment gold—Sch 9 Group 15 Cost share group exemption—Sch 9 Group 16 Chapter 12 Is there one supply or two? Signposts The problem Some possible examples The linked supplies concession Key questions Characteristics of a multiple supply Summary of the above points So why does all this matter? Subscriptions, which include a magazine Entrance fees including programmes or catalogues Computer software sold and then customised—two supplies? So does an optician make multiple supplies? Goods—one supply or two? Books and tapes or CDs sold together A single supply of zero-rated goods may be partly standard-rated! Services—one supply or two? Some more recent cases Medical care and drugs Insurance sold with a car A television subscription, which includes a magazine Negotiating extended credit and subsequent debt collection Processing insurance claims not ancillary to training A debenture, with ticket purchase rights, was a single supply Correspondence courses or distance learning Subscriptions, which include a magazine Company formation services and conference/function rooms The golf course and the greenmower The helicopter complete with pilot A book with a game A course, which includes a book Sailing down the river Is stabling for a horse separate from the care of that horse? Does mail order include delivery? So how should a business apportion the price between each supply? Chapter 13 What can a business recover input tax on? Signposts Input tax recovery is not automatic! If a business does not pay its supplier, it must repay HMRC the input tax claimed Late reclaims of input tax VAT laundering What if a bill is paid on behalf of another business? Beware of the problems caused by a change of intention Cases where recovery has been allowed without a tax invoice The expense may belong to the business, but does the input VAT? The supply must be to the business Meals for passengers on delayed flights Beware of the unregistered business such as a self-employed person A key test is intention at the time of incurring the expense Employees’ travel expenses Entertainment is a dirty word Who counts as an employee? Canteen meals and accommodation for hotel staff Entertainment must be free Motor cars Car leasing and hire charges The definition of a motor car The one-tonne payload The difference between purpose and benefit The carrying out or promotion of a business with a racehorse, power boat, yacht, etc Personal number plates Goods used partly for business Recovery where accommodation is used partly for business Input tax on clothing Legal costs VAT on insurance claims Is input tax recoverable on expenses of staff? Distinguish between a business and the ownership of it Mobile telephones Input tax recovery and fraudulent transaction chains Input tax recovery on company pension funds Input tax recovery on non-business activities Input tax by holding companies Chapter 14 What is a valid tax invoice? Signposts Does a business have to worry about its purchase invoices? Incorrect VAT shown on invoice Information required on a VAT invoice Additional invoicing requirements from 1 October 2007 Invoicing in a foreign currency Credit notes to customers in other Member States Less detailed invoices Must the tax invoice be in the business’s name? What if the business fails to get a tax invoice? Issuing tax invoices electronically Self-billing Authenticated receipts Can a business recover VAT shown on an invoice from a supplier in another EU State? Chapter 15 Credit notes Signposts What if a business is asked to cancel and reissue an invoice? If a business accepts goods back from consumers, it should be careful of its terms! VAT-only credit notes Chapter 16 Bad debt relief Signposts Time limit for the claim Writing off the bad debt Subsequent receipt of payments How to make the claim The amount of the claim The payment offset problem Repayment under a guarantee does not count The position if the business ownership has changed Departure from a VAT group Goods supplied on hire purchase or conditional sale Chapter 17 What records are required? Signposts Taking records seriously HMRC have power to demand to see records Without adequate records, a business cannot recover VAT Records must be retained for six years Is the accounting system self-checking? A business should not take its computer system for granted! How durable are the business records? Making Tax Digital (‘MTD’) The anti-carousel fraud measures Obvious suspicious circumstances Checking a VAT number Should a business tell HMRC about a possible fraud? The potential benefit of telling HMRC Reverse charge on specified goods and services Reverse charge sales lists Chapter 18 VAT housekeeping for finance directors Signposts The head of finance Staff Basic training for staff Permanent VAT file Who should review and sign the return? Who is responsible for VAT reviews? Relationships with HMRC The four-year time limit on claims for overpaid VAT The interest problem Another tale of trouble If a business wins an appeal, interest is due under section 84(8) Is the system capable of producing the right VAT figures? Talk to HMRC when designing a computer system Errors What if the correct treatment is in doubt? Does a business trade in equipment, components or telephones? Beware the slippery slope! VAT avoidance Notifying cunning plans to HMRC Some considerations to bear in mind Conclusion Chapter 19 How does a business keep up to date on changes in VAT? Signposts How changes occur Is it necessary to read every decision? How to find a Tribunal decision How a specialist can access all decisions Prompt action may be needed Has a decision been appealed? Enquiries The specialist office for charities A business should record when it gets its copy of VAT Notes How are changes of policy announced? So, how do I suggest a business stays up to date? Where to look on the HMRC website Obtaining a Public Notice How to search a notice in PDF Printing from a PDF version of a notice Chapter 20 Exports and removals of goods Signposts The difference between goods and services Place of supply of goods The place of supply of goods sold during a cruise The zero-rating of exported goods is not automatic The law Membership of the EU Exports versus removals Evidence is critical Lost, stolen or destroyed goods The National Export System Time limit for evidence Exports are checked by HMRC Removals are not subject to frontier controls The evidence required International consignment notes If goods are resold whilst being shipped, there is only one removal Are the goods delivered in the UK, but invoiced to an overseas customer? The customer’s VAT number The Intrastat jargon Transfer of own goods ‘Call-off stock’, and ‘sale or return’ or ‘consignment stock’ ‘Distance selling’ (mail order) to customers in other EU States Registration of an EU mail order business in the UK New means of transport ‘Triangulation’ Conditions for using the simplification measure How the simplification measure works Simplification for chain transactions Installed or assembled goods Chapter 21 Imports and acquisitions of goods Signposts The law Imports from outside the EU The Channel Islands and the Isle of Man Use of an import agent Import agents Goods sold into the UK using an online platform The deferment approval system Simplified Import VAT Accounting (SIVA) Acquisitions of goods from suppliers in other Member States Postponed accounting Buying natural gas or electricity via a grid from outside the UK Special reliefs for certain imports The value on which import VAT is payable 5% for works of art, antiques and collectors’ items Temporary imports and re-imports VAT-free import of goods shipped on at once to another EU State VAT can be deferred or avoided by using a customs warehousing regime Chapter 22 EC Sales Lists and Intrastat returns Signposts The EC Sales List Electronic submission for EC Sales Lists Paper submission of EC Sales Lists Small trader concessions Information required Intrastat Supplementary Statistical Declaration De minimis limit for SSD Electronic submission of the SSD Dispatches and Arrivals Due date Information required Nature of transaction code (NOTC) Commodity codes Low value transactions on the SSD The Register of Temporary Movement of Goods Information required Format of register Chapter 23 Exports and imports of services Signposts The law Membership of the EU So, can a business recover its input tax? The starting point for the place of supply Why does the place of supply matter? Transactions on the Internet Is the EU customer in business? Use of a customer’s VAT number The reverse charge (VATA 1994, section 8) The way it works Liability to register for reverse charge services The rules on belonging Services to a Jersey company owning a London flat A subsidiary can constitute a fixed establishment of its parent Defeat of a cunning plan on place of supply of gaming machines A company can belong at its registered office Usual place of residence of an individual Beware of multiple belonging Section 7A and Sch 4A Exceptions from the basic rule for business to business supplies of services Electronic supplies of services to unregistered customers in the EU The meaning of ‘use and enjoyment’ Services relating to land Transport services and services ancillary thereto Services supplied where performed The zero-ratings in Sch 8 A supply does not ‘disappear’ when billed to a head office VAT groups—anti-avoidance rule Chapter 24 Partial exemption Signposts The law on partial exemption What kinds of business are partially exempt? What is ‘exempt input tax’? The de minimis limit How the limit works The ‘longer period’ or ‘partial exemption year’ The right to recover input tax How the right to recover affects banking, finance and insurance Partial exemption methods The standard method Special methods Cost centre accounting A cost centre accounting problem The ‘outside the scope’ supply problem An example of a special method based on cost centres What does regulation 103(1) do? How does a business deal with ‘non-specified’ supplies? What if a business makes UK supplies as well as outside the scope ones? Is the above practical? The annual adjustment Rounding up Correction of errors Certain outputs must be excluded from the standard method Meaning of ‘incidental’ An outputs ratio must not include work in progress Interest charged by holding companies to subsidiaries Think carefully about the attributions Does the special method fail to cope with certain input tax? A rights issue does not create a supply Existing rules for input tax on share issues Input tax relates to the immediate output The need for a ‘direct and immediate link’ Seemingly obvious attributions can be wrong! The failure of the joint supply argument Two cases in which there was no immediate output Input tax on the transfer of a going concern The problem of costs on an abortive property project Examples of direct attribution to minor outputs Beware of management charges What happens if the use of an asset changes? The zero-rated house/exempt rent problem Importance of a proper systems file More detail on special methods A business may need a special method without realising it Agreement by HMRC in writing Beware of changes in circumstances Changing from one partial exemption method to another Authority of the Tribunals Arguments about use of special methods Correcting the application of a special method Distortion is the key word Special methods agreed by trade associations The effect of grouping on partial exemption Two planning points for partially exempt businesses Buy fixed assets in a separate company and lease them The Standard Method Override How the override works Litigation involving the Standard Method Override The Special Method Override Chapter 25 The Capital Goods Scheme Signposts Purpose of the scheme The goods affected The adjustment period The annual calculations Changes during the year A potential problem for industrial companies A potential problem re residential or charitable use When the adjustment is due Sale of a capital asset pitfall Sale of the item as part of a going concern Chapter 26 Property Signposts The law Overview of the property rules The construction and sale of zero-rated buildings Construction services Professional services Zero-rated buildings What happens when you can’t sell a dwelling and have to rent it out? Planning point What is a dwelling? What is a ‘relevant residential purpose’? Some cases on the meaning of ‘relevant residential’ Beware of the exclusions for hospitals, prisons or similar institutions What is a ‘relevant charitable purpose’? The concession for limited business use Some cases on ‘relevant charitable purposes’ Confusing cases on non-business nurseries What is an annexe? Cases on annexes for relevant charitable purposes Specific exceptions to zero-rating Problems with existing houses and granny flats Conversion work for housing associations Be careful about building contracts Be careful of variations in the contract Garages as part of zero-rated projects The problems of decorations and other last-minute choices Residential caravan parks Civil engineering work—access roads and site preparation Certificates Change of use Planning point Subcontractors Building materials included in the zero-rating Disallowance of VAT for house builders Planning points for private clients Meaning of ‘ordinarily incorporated’ building materials Bedroom cupboards Is it goods or an appliance? Carpets do not qualify for zero-rating Alterations to zero-rated listed buildings The reduced rate for certain work on property The key rules in Sch 7A, Groups 6 and 7 The complications of the term ‘non-residential’ Adding an extra dwelling Converting part of a building Existing residential accommodation Does a house converted to another use count as non-residential? Houses in multiple occupancy Conversions into relevant residential buildings Certificates of intention to use for a relevant residential purpose The renovation of empty residential buildings Planning permission Evidence of the unoccupied period Only ‘building materials’ qualify for the reduced rate Installing non-building materials Subcontractors Garages as part of a reduced rate project Limitations on the work eligible for the reduced rate Landscaping and outbuildings Domestic reverse charge on construction services DIY Builders and Converters Scheme Sales and long leases of zero-rated buildings Commonhold associations: RTE and RTM companies Meaning of ‘person constructing’ Major interests in renovated dwellings Grants of major interests in reconstructed listed buildings prior to 1 October 2012 Short leases Sales of land Granting a major interest in a building after conversion What is a non-residential building? Apportionment for mixed use buildings Sales of new commercial buildings and civil engineering works Civil engineering work The option to tax or election to waive exemption Previous exempt supplies mean permission is needed Who can opt to tax? When should one opt to tax? Certificates from purchasers which prevent the charging of VAT Planning point Be careful of opting to tax a potential dwelling ‘Relevant Intermediaries’ Check the lease Apportionment of the VAT The scope of the option What about a building standing in a large area of land? Is there a link or not? Subsequent additions to an opted site Demolishing an opted building Take care with notifications to HMRC The Option to Tax Office Notification The 20-year time limit Record the election and authorise the notification What if a business forgets to tell HMRC? Buying and selling opted tenanted property If paying VAT on an opted property, always obtain a VAT invoice Service charges and the option to tax Anti-avoidance rules Chapter 27 Recovery of foreign VAT: the 8th and 13th Directives Signposts The law VAT incurred in other EU Member States (8th Directive refunds) Bad news on travel costs Claims by overseas traders under the EC 13th Directive Beware the time limits Claims from non-EU countries Chapter 28 What is a business? Signposts International organisations Trade unions, professional and other public interest bodies Examples of activities which are partly business Special rule for free entry to museums and galleries Free entry does not necessarily mean non-business Charities To be or not to be in business The consequences of being partly in business Charities—input tax on fundraising Elaborate schemes can be difficult to manage Planning to be in business Demonstrating that there is a business Renting out an asset through an agent is not necessarily business What about VAT incurred before an organisation realised it had a business? The basis for claiming registration at the outset The National Trust—a business/non-business situation The definition of ‘business’ An organisation can be in business without making a profit Being in business does not justify recovering all input tax Asking for money does not of itself create a business To be a business, there must be some consideration Contributions towards costs may not be consideration A public funded college was not in business An activity may be a business despite much donated income Courses in religion can be a business activity Relief of distress at below cost is non-business Chapter 29 Agency is special Signposts Why agency is special Agency versus subcontractor The undisclosed agent rules for goods Why buy as agent? Planning points on agency An example of the problems of agency Does an agent collect money on behalf of the principal? Employment agencies—staff hire concession Cases involving agency Chapter 30 Joint ventures Signposts Planning points Chapter 31 The Second-hand Goods Scheme Signposts The law Key points Definition of second-hand goods, antiques etc The Second-hand Goods Scheme is optional Goods eligible for the Scheme VAT on repair and restoration costs Global Accounting The £500 limit Other goods not eligible Initial stocks when starting to use Global Accounting Records and invoices for the Second-hand Goods Scheme Purchase and sales invoices Purchase records Sales records How does a business treat part-exchange goods? Losses due to breakages, theft, etc Stock adjustment on ceasing to use Global Accounting Goods sold to foreign customers Selling to foreign customers under the normal rules Adjusting Global Accounting purchases for foreign sales Buying from another EU Member State Scheme sales to, and purchases from, other EU Member States VAT on imports from outside the EU Auctioneer’s commission on imported goods Agents who sell second-hand goods in their own name Acting for the buyer Acting for the seller Need for VAT invoices in the correct name The Auctioneers’ Scheme How the Auctioneers’ Scheme works Invoices to vendors Invoices to buyers Reference to VAT on invoices Zero-rated goods sold at auction Correct identification of goods is important Chapter 32 The Retail Schemes Signposts The law Past disasters Does the business have a mix of sales? Bespoke schemes for sales above £130m The basic schemes Comparing the Schemes Is permission needed from HMRC? Another disaster story Chapter 33 Annual Accounting Scheme Signposts The law Key points of the Scheme Chapter 34 Cash Accounting Scheme Signposts The law Advantages and disadvantages of the Scheme Key rules Leaving the Scheme Tax points under the Scheme for sales and purchases Be careful when joining the Scheme Special records required Beware of net payments What about part payments or barter transactions? The figures for the VAT return The liability of a business if it leaves the Scheme Transfers of a business or part of a business as a going concern Chapter 35 The Flat Rate Scheme for Small Businesses Signposts The law An outline of the Scheme Will I pay less VAT under the Scheme? Does the Scheme simplify VAT accounting for small businesses? The dangers of the Scheme The importance of reading Notice 733 The turnover limits The turnover for the Scheme limit The turnover to which you apply the Flat Rate Acquisitions and imports of goods Exports and imports of services Sales to or purchases from other countries Restrictions on use of the Scheme An example of how the Scheme works with VAT at 20% Another example—a business selling goods The sensitivity of the above figures Beware exempt and zero or reduced-rate turnover The income net of deductions and barter pitfalls Choosing your Flat Rate percentage Changes in the nature of the business 1% discount for newly registered businesses The ready reckoner Pitfalls for builders The pitfall in changes to the Flat Rate trade sectors Time of supply under the Flat Rate Scheme Stocks and other assets held at the date of registration The turnover limit once in the Scheme Stock adjustment on leaving the Scheme Capital assets Applications to use the Scheme Retrospective use Retrospectively leaving the Scheme Bad debt relief under the Scheme Appeals against decisions by HMRC Chapter 36 The Flat Rate Farmers’ Scheme Signposts Qualifying activities Non-qualifying activities No output tax due on deregistration The flat rate addition applies to zero-rated agricultural produce Flat rate invoices Records required Auctioning agricultural produce Sales and purchases within the EU Sales outside the EU The £3,000 limit Leaving and rejoining the Scheme voluntarily Chapter 37 The Tour Operators’ Margin Scheme Signposts The law How it works for EU holidays Holidays outside the EU The calculation is done annually, not holiday by holiday So what are the directly related costs? In-house costs Invoices to business customers Scope of the Scheme Zero-rated transport in the EU—a planning point HMRC allow Insurance and cancellation fees VAT on overheads Intermediaries acting as agent or principal Chapter 38 Buying or selling a business Signposts Is a company or its business being sold? Insolvent VAT groups—joint and several In principle, VAT is chargeable on assets sold The transfer of a business as a going concern Common pitfalls You do not need many assets for there to be a business Key criteria on whether there is a TOGC Must it be the same kind of business? Usually, a short period of closure is irrelevant More on the same kind of business Transferring a business into a VAT group Is the outsourcing of an overhead activity of a company a TOGC? Records required on transfer Pass the parcel The problem if the assets include property Transfer of a property rental business Beware if the purchaser is a nominee The purchase of a business by partially exempt VAT group The landlord and tenant are in the same VAT group Article 5(2) of the Special Provisions Order Do not take over the vendor’s VAT number Chapter 39 Assessment and VAT penalties Signposts HMRC’s power to assess Time limits and the capping provisions The cap for annual adjustments HMRC can make alternative assessments Form and notification of an assessment An assessment must be for the correct period An assessment in the absence of a return Appeals Asking for a reconsideration Alternative dispute resolution Time limit for an appeal Best judgment The cost of getting it wrong Interest is due on mistakes Penalties The new penalty system Special reductions and suspended penalties New penalty for late registration The default surcharge for late returns: section 59 (up to 31 March 2010) The default surcharge for late returns: section 59 (from 1 April 2010) What if a business disaster makes the figures late? Excuses for late payment Proportionality Mitigation When can a business voluntarily disclose? The period of grace Compensating errors Disclosing errors Possible defences Reasonable excuses for innocent mistakes Penalty for failure to register on time: section 67 Dishonesty cases Get the facts agreed Own up at once Conclusion Chapter 40 Taking an appeal to the Tribunal Signposts The Tribunals Service Human Rights Who can appeal? Basic procedure Preparation, preparation, preparation! Prepare a skeleton argument List of documents HMRC might demand to see advice received by the appellant Evidence Witness statements Agreed bundle Delay by HMRC could win the case for the appellant! Procedure at hearing Presenting the case Remain calm and courteous Costs Index