UK: Weekly VAT News - Week Ended 21 October 2005

Retailers who have implemented "merchant charges" arrangements will be interested in a new EU Regulation, which may prevent the arrangements from being effective even if the Court of Appeal’s decision in Debenhams is reversed by the House of Lords. The new regulation, which will come into effect from 1 January 2006, states that where the total price charged for goods or services remains unchanged, no matter what the method of payment, then the amount on which VAT is charged is not affected (i.e. reduced) where a card handling fee is levied as part of the amount paid by the customer. Debenhams is currently waiting to see if the House of Lords will hear its appeal.

Some suppliers of distance learning may be facing higher VAT costs following the decision of the House of Lords in The College of Estate Management. The House of Lords decided that the college made a single supply of education and that there was no separate supply of the (zero-rated) materials which formed the "distance learning" packs that were sent to students.

In response to increasing consolidation in the Financial Services and Insurance sectors, Deloitte has further strengthened its Financial Services VAT team. The group brings together all of Deloitte’s London based Financial Services specialists in a single team. The new structure has also allowed Andrew Ball to devote 100% of his time to this increasingly important sector. The Deloitte Financial Services and Insurance team is now some 40 strong nationally and includes 6 Financial Services VAT Partners. Andrew Burns leads the team and specialises in insurance, Richard Gilroy specialises in banks and capital markets, Andrew Ball in stockbrokers and are all based in London. Jon Graham (Edinburgh) specialises in retail banks, Daniel Lyons (Bristol) specialises in life assurance and Mark Smith (Manchester) specialises in credit cards. The partner group is reinforced by Directors Pauline Hawkes, who concentrates on funds and Kate Hill, who specialises in leasing (both based in London and Ian Beacham (Birmingham) who specialises in building societies..

As part of a project aimed at cutting red tape, HMRC are inviting businesses to spend an hour or so telling them about the administrative cost of complying with the tax system. Some businesses and other trade groups will be specifically invited to participate by HMRC but any business that wants to give some feedback on red tape should contact HMRC.

The number of businesses registering for VAT in the UK dramatically reduced in 2004. The number of firms charging VAT rose by only 0.1, down from 4.1% in 2003, hinting at a slowdown in business start ups. In 2004 a total of 181,400 businesses registered for VAT whilst 179,400 registrations were cancelled. 

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