UK: VAT Focus - February 2012

Last Updated: 9 February 2012
Article by Smith & Williamson

Compound Interest Update

The Advocate General (AG) has recently given his opinion in the Littlewoods Retail case at the Court of Justice of the European Union (CJEU). The AG has indicated there is no basis under European law for compound interest reimbursement but did suggest that when national courts consider how their laws governing this should be interpreted, they should be no more or less favourable than in the case of refunds of other taxes (such as UK direct taxes). There may still be some scope to suggest that compound interest can apply in the UK if any other tax refunds can qualify for compound interest. Many taxpayers had argued that repayments for overpaid VAT, some of which date back to the beginning of the VAT system in 1973, should be subject to compound interest until the date of repayment by HMRC.

What next?

The AG's opinion is not always followed by the Court, and it remains to be seen whether the Court will do so in this case. If it does, this could provide a welcome relief for the Treasury, but may not be the end of the matter; with billions at stake, the appellants may be e xpected to continue their campaign until every line of argument has been exhausted.

VAT on postal charges

Many charities, not-for-profit organisations and businesses in the VAT-exempt sectors will be affected by the introduction of VAT on a number of Royal Mail parcel services from 2 April this year.

Some postal services, including stamped or franked first and second class letter post, will remain exempt from VAT as they are provided under the Royal Mail's Universal Service Obligation. Other postal services subject to regulatory price control will also remain VAT exempt.

However, VAT will be charged from 2 April 2012 on:

  • business collections
  • Special Delivery " Next Day (on account only)
  • door to door.

A full list of the postal services that will now be subject to VAT can be found on the Royal Mail website. The addition of 20% VAT on postal services will be a significant cost increase for organisations and businesses that cannot reclaim all of their VAT and an incentive to find more tax-efficient ways to communicate with their customers. For those that are partly exempt and able to reclaim a proportion of their VAT costs, it may be an opportune time to review their VAT recovery calculations to try to mitigate the irrecoverable VAT costs.

What now?

Charities and other organisations that are not VAT registered, should ensure that they are taking advantage of other measures to minimise the VAT cost of postal campaigns, such as the zero-rating of campaign packs where individual elements might otherwise attract VAT.

Even if you are normally able to reclaim your VAT costs, the changes in April might still involve a bottom-line cost for your business. If you use a franking machine, Royal Mail has said that the services on which VAT will be charged from April can only be purchased through 'smart' franking machines, which will also produce VAT invoices; the VATable services cannot be purchased through older franking machines.

HMRC compliance changes 2012

HMRC has confirmed a number of VAT compliance changes that will come into effect in 2012.

Intrastat

Businesses involved in the buying and selling of goods with other VAT registered businesses in the EU will be interested to know that current Intrastat legislation will be amended to:

  • make online filing compulsory (including the submission of amendments, corrections and additional declarations)
  • bring forward the monthly due date for submission of Intrastat declarations, from the last day to the 21st day of the month following the reference period for the declaration (e.g. declarations for the reporting period ending 31 March 2012 will be due for submission on 21 April 2012).

Both changes will take effect from 1 April 2012.

EC sales lists

Businesses selling goods to other VAT registered businesses in the EU must submit EC sales lists (ESLs).

From 1 January 2012, businesses with EU sales of goods exceeding £35,000 in the current or previous four quarters are required to submit ESLs monthly. Below this level, they may continue to submit ESLs quarterly.

Businesses that supply services subject to the reverse charge in the customer's EU member state will be unaffected by this change and may submit ESLs monthly or quarterly, regardless of sales value.

Overseas businesses trading in the UK

The VAT registration threshold will be removed for non-UK established businesses trading in the UK with effect from 1 December 2012. A non-UK established business that makes taxable supplies of goods or services in the UK will be required to register for VAT in the UK, regardless of their value.

Moving to VAT online

Online submission of VAT returns will become mandatory for all businesses, with effect from 1 April 2012.

An enhanced version of HMRC online services will be available from October 2012. In addition to VAT registration applications, the enhanced online service will also allow registrations to be cancelled.

What now?

If you are affected by any of these changes, please speak to the VAT team or your usual Smith & Williamson contact for more information.

Lebara phone cards

The AG has issued his opinion in the case of Lebara which concerned the supplies of phone cards. Lebara sold phone cards to distributors in other EU member states who sold them on to end users in the respective member states. The end users' use of phone time via the card was ultimately routed through Lebara's UK-located telephone exchange.

HMRC argued that Lebara made two supplies.The first supply was made to the distributors and the second supply was to the end users (which was taxable in the UK).As a result of recent case law, HMRC considered that it had a choice as to which supply to tax.

The AG suggested two answers, both concluding that Lebara makes a taxable supply to the distributors, meaning there would be no UK VAT due on the supplies (as HMRC had contended). The suggestions were:

  • Lebara makes a supply to the end user of the phone card via the distributor, but if the distributor acts in his own name in the onward supply of Lebara's phone services to the end user, the distributor is making the supply to the end user; or
  • Lebara makes a single supply to the distributor, and the subsequent purchase by the end user does not represent a supply by Lebara.

What now?

This could form a major issue for HMRC as, if the AG's opinion is followed, it casts doubt on the way in which the UK treats supplies of vouchers and similar supply chains. We will have to wait and see how HMRC responds once the Court has confirmed its decision, but, in the meantime if this concerns your business please get in touch with your usual Smith & Williamson contact for further information.

Transfer of a going concern and the grant of a lease

In a recent CJEU case, Ms Schriever ran a shop selling sports equipment from premises that she owned. In June 1996, she sold the stock and fittings of the business to a sports retailer. A lease was granted to the sports company for an indefinite period but this could be terminated by either party at short notice and was to take effect at the end of the following calendar quarter. VAT was not charged on the sale of the stock and fittings as Ms Schriever treated the sale as a transfer of a going concern (TOGC).

The German tax authority disagreed with this VAT treatment because the premises had not been transferred along with the stock and fittings.

The Court held that it was not necessary for the premises to be transferred with the assets as long as business premises were made available by a lease or the transferee had its own premises from where to carry on the business. The fact that the lease could be terminated at short notice did not affect the TOGC treatment.

What next?

This is an interesting development in determining what can qualify as a TOGC. However, many commentators have concluded that the creation of a new lease can constitute a TOGC in itself, in our view this is not apparent from the decision and care should be taken in any TOGC transactions. If you would like any further advice please contact your usual Smith & Williamson contact.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Smith & Williamson
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Smith & Williamson
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions