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Zero rate relief from VAT has historically been available to approved alterations to listed buildings used for residential purposes.

In March 2012, changes were introduced to restrict (and ultimately withdraw) the zero rate relief from VAT in respect of certain works to listed buildings, with effect from October 2012. In implementing these changes transitional relief applies for schemes where approval had been granted on or prior to 21 March 2012, for a period ending 30 September 2015; providing a three year period for relevant approved schemes to be completed.

The zero rate continues to apply where listed building consent was granted on or prior to 21 March 2012 – and has scope to apply for variations to that consent, as well as subsequent approvals relating to the materials used within the development. Owners of residential listed buildings and their developers should ensure that the zero rate is optimised, as VAT charged in error may be difficult to adjust and increases the overall costs of the project.

For example, an application for listed building consent submitted in December 2011 and approved in February 2012, on condition that details of materials to be used for the roof and windows are submitted for approval prior to installation. The work started in September 2012, and details of the materials duly submitted for approval in January 2013. The approval for the materials is part of the consent issued prior to 21 March 2012, and the zero rate applies as per the transitional rules.

There may also be scope to apply the zero rate where the local authority had been engaged in detailed pre-application advice prior to 21 March 2012, but where final consent was not granted until later.

To find out more on the extent of the zero rated relief for work to listed buildings, contact Karen Mulcahy at The VAT Consultancy on 01962 735350 or via e-mail at Karen.mulcahy@thevatconsultancy.com

From 1 January 2014 the following UK thresholds have changed:

1. Intrastat Arrival threshold has increased from £600k to £1.2m per year; and
2. The Delivery Terms threshold has been increased from £16m to £24m.

Those currently submitting intrastat declarations will need to look at their EU trade for the calendar year 1 January 2013 – 31 December 2013 to determine whether the new thresholds have been breached. If the value of EU trade in 2013 was less than:

£1.2m there will be no need to file Intrastat Arrival declarations from 1 January 2014; and

£24m there will be no need to include the Delivery Term on the declarations from 1 January 2014.

If you have any questions regarding the above or if you would like assistance with the completion of your intrastat declaration/s please contact Martyne Pearson on 01962 737 951 or via email at <a href=”mailto:Martyne.pearson@thevatconsultancy.com”>Martyne.pearson@thevatconsultancy.com</a>

Fraudulent credit card payments are consideration for VAT supplies – Dixons Retail ECJ VAT Decision

The European Court of Justice (CJEU) has released its decision in the case of Dixons Retail plc. (C-494/12).  The Court considered the scenario where someone purchases goods with a stolen credit card, with the fraud being discovered after the goods have been handed over.  Under current practice if someone shoplifts goods there is no supply for VAT purposes as no payment has been made.   However where payment is made, albeit with a stolen card, a supply is deemed to have been made, as a payment is received by the retailer from the credit card company in the value of the transaction in question.  Dixons questioned this – if the payment was not consideration for a supply but rather compensation of some sort, no VAT would be due.

The Court held that Dixons was making a supply of goods to the customer, regardless of whether it later transpired that the purchase was made using a fraudulent credit card.  Further, the Court held that the payment received was consideration as there was a direct link between the sale of the goods and the payment made.  It did not matter that the payment was funded by the card provider, rather than the individual who used the fraudulent card.

As there was a supply of goods for consideration the payment received by Dixons from the card provider included an element of VAT.

What now?

This means that the existing practice of accounting for VAT on the payment received from the credit card company and retained by the retailer will continue.

There still remains an opportunity for retailers to consider whether a business is making all appropriate adjustments when calculating its daily gross takings on which VAT will be accounted for.  Should you wish to discuss DGT adjustments, either under your bespoke retail scheme, or under one of the standard retail schemes, please contact Sean McGinness on 01962 735 350.

We met with the HMRC Travel Policy and Treasury team yesterday to discuss the outcome of the recent ECJ case on the Tour Operators’ Margin Scheme (TOMS). The main focus was the impact that the case has on the UK’s VAT Transport Company arrangement and the basis of the UK TOMS calculation. The following is a high level summary of the outcome:

Further to our news item “The CJEU case on the tour operators’ margin scheme” published on 14^th October 2013 we are due to meet with the HMRC Policy Team who are responsible for Travel and Tourism on the 14^th November 2013. The purpose of the meeting is to discuss the impact that the case will have on the UK travel industry with particular reference to how the inclusion of wholesalers in the Tour Operators Margin Scheme (‘TOMS’) will impact on the UK HMRC sanctioned Transport Company arrangement. We will also be raising the concerns that we have regarding the possibility of moving to a transaction by transaction calculation basis for those operating under the scheme.

We are currently collecting feedback from the industry and would welcome any comments or questions you may have so that we can feed these back to HMRC. If you would like to contribute or if you would like to discuss the impact of the case in more detail please do not hesitate to contact Martyne Pearson on 01962 737 951 or via email martyne.pearson@thevatconsultancy.com.

The decision of the CJEU in The European Commission v The Kingdom of Spain (supported by Czech Republic, French Republic, Republic of Poland, Portuguese Republic, Republic of Finland) (C-189/11) was published last month. This case concerned the varying interpretations of articles 306–310 of the VAT Directive 2006/112/EC, the special scheme for travel agents, and primarily focused on the question of whether the tour operators’ margin scheme (TOMS) should be used to tax wholesale or only retail travel transactions where the supplier is acting as principal in selling travel arrangements.

What is the case about?

There has been a difference in approach to this principle by the Member States, leading to an uneven playing field, with some, including the UK and Germany, taking the view that wholesale transactions should be taxed under the normal VAT rules, whilst others took the view that the margin scheme should be used to tax both wholesale and retail transactions.

The case also considered the following subsidiary issues:

The VAT scheme that allows listed places of worship to claim back the VAT on the cost of repair work is to be extended with effect from 1 October 2013.

Full details on how the changes will apply are not expected to be available until 1 October, but are reported to include administrative simplifications and additional eligible works to increase VAT recovery in certain areas, including works to pipe organs, turret clocks, bells and bell ropes, and most significantly, professional services directly connected with any eligible expenditure.  The inclusion of professional services is a welcome revision as VAT recovery on such costs was previously blocked as not being eligible expenditure.

As the changes take effect from 1 October 2013, it is anticipated that new eligible items will only be included where the work is undertaken on or after 1 October 2013, and we would expect detailed information to include commentary on VAT invoicing.

This is an important and welcome change for listed places of worship, and should be taken into account when considering fund-raising and grant funding applications.

Those involved with current and planned repair works are advised to review their current plans to consider the VAT impact.

For more information on how the VAT changes affect your listed place of worship contact Karen Mulcahy on 01962 735 350 or via email at Karen.mulcahy@thevatconsultancy.com

Today saw the release of a landmark European VAT case which will change the way in which travel businesses in many EU Member States account for VAT, potentially increasing the cost of travel in some cases.

The case focused on the special VAT scheme for tour operators (TOMS), questioning whether it should apply in both a retail and  a wholesale environment.  An inconsistent approach is taken by the different Member States currently.

The ECJ has confirmed that wholesale travel transactions should fall within TOMS. This will mean that EU travel wholesalers  will have to account for VAT from the profit margin on sales of EU travel in the country in which they are established.

Previously, wholesalers in EU Member States applying normal VAT rules to wholesaling were effectively able to sell the flight or passenger transport element of an EU package without VAT.  Going forward this will change, with VAT being due from the whole margin. Clearly, once the new VAT rules are rolled out,  this will have an impact on the profitability of travel supply chains, potentially impacting pricing ultimately.

The impact of the decision from a UK perspective could be considerable.  UK travel businesses who currently use the HMRC sanctioned trader to trader (wholesale) option (commonly referred to as ’The VAT Transport Company Scheme’) will no longer benefit from the passenger transport element being VAT free. This is because supplies between  Transport Company (a wholesaler) and its tour operator will now be subject to TOMS, rendering the arrangement ineffective.

For some tour operators the increased VAT cost could be enough to make the business unviable. Where this is the case tour operators will be forced to review their business to determine if they can adopt an alternative model such as relocating the business to a non-EU location (this can take on many forms to suit the commercial circumstances of the business in question, but key is real substance existing overseas). Non EU tour operators selling EU holidays are not currently required to account for any VAT on sales.  Alternatively the business may prefer to continue operating in the UK but under a disclosed agency model or potentially the alternative ‘Agency Option’ which facilitates the use of net rates.

As with all decisions there will be a lead in time for the Member States to enact the changes, and at this early stage it is unclear as to what the precise impact will be for the UK. Therefore, whilst it is business as usual for now from a VAT accounting perspective, those wanting to make a fundamental change will need to put the wheels in motion as soon as possible given the complexity associated with changes to business models.

If you want to find out more regarding the case or if you want to arrange a meeting to discuss your business model then please do not hesitate to contact Julie Park on 01962 735 350 or via email at julie.park@thevatconsultancy.com

Various language versions of the decisions were released this morning. We are working our way through these to understand the full ramifications.

Our initial review suggests that TOMS should apply to wholesale transactions. This could have serious implications for UK tour operators using the transport company arrangement.

For some tour operators the increased VAT cost could be enough to render the business unviable. Where this is the case tour operators will be forced to review their business to determine if they can adopt an alternative model such as relocating the business to a non-EU location (this can take on many forms to suit the commercial circumstances of the business in question but key is real substance existing overseas).  Non EU tour operators selling EU holidays are not currently required to account for any VAT on sales.  Alternatively the business may prefer to continue operating in the UK but under a disclosed agency model or potentially the alternative ‘Agency Option’ which facilitates the use of net rates.

We will be providing more narrative on the decisions shortly. However, if you do have any questions or would like to discuss the implications in more detail please contact Martyne Pearson on 01962 735 350 or via email at martyne.pearson@thevatconsultancy.com

On the 26^th September 2013 the ECJ will release its decision on whether the wholesale of travel arrangements should fall within the VAT Tour Operators Margin Scheme (‘TOMS’). The case has essentially come about due to the continued inconsistency of VAT treatment applied by different EU Member States to the sale of wholesale and retail travel arrangements.  UK established travel businesses currently exclude wholesale transactions from TOMS and the ‘normal’ VAT rules apply. For example, the supply of passenger transport will be subject to VAT in the country in which the transportation takes place and the supply of hotel accommodation will be subject to VAT in the country in which the hotel is located.

As a result of the inconsistencies,  non-taxation can arise where:

• the wholesaler is established in a country that excludes these sales from TOMS; and
• the travel arrangements in question take place in a country that applies TOMS.

In this example no VAT would be due in either location.

Before the summer the AG gave his opinion that retail AND wholesale travel sales fall within TOMS.

Should the ECJ decision follow the AG opinion this would mean that all Member States would be required to change their local legislation to include wholesale supplies in TOMS. As a result any VAT due will be accounted for and collected in the country in which the travel business has established his business. Therefore there should be no risk of non-taxation.

Critically for UK established travel businesses however such an outcome would significantly increase the cost of VAT to the business. This is due to the fact that most UK based travel businesses who account for UK VAT under TOMS make use of the approved HMRC Transport Company Scheme. This is a concession which allows those operating the scheme to enter into a wholesale arrangement with a group company to buy passenger transport at an inflated mark-up. This results in no UK VAT being due under TOMS in respect of the passenger transport. This arrangement is unique to the UK and is hugely beneficial to those applying it.

Should the ECJ determine that wholesale supplies fall within TOMS, the HMRC sanctioned Transport Company Scheme will no longer provide the desired VAT benefit, leaving many UK travel businesses with a significantly larger VAT bill going forward, unless use if made of alternative arrangements such as business migration outside the EU and disclosed agency models.

If you want to find out more regarding the case or if you want to arrange a meeting to discuss your business model then please do not hesitate to contact Julie Park on 01962 735 350 or via email at julie.park@thevatconsultancy.com.

First published in Travel Weekly on 24th September.

http://www.travelweekly.co.uk/Articles/2013/09/24/45376/opinion-uk-vat-travel-exemption-hangs-in-the-balance.html