UK: VAT Focus - A Round-Up Of Recent VAT-Related Developments

Last Updated: 9 February 2009

Time Is Running Out To Reclaim VAT

Following the cases of Fleming and Condé Nast, businesses have the opportunity to reclaim overpaid or under-claimed VAT from the period 1973 to 1997 (previously blocked by the three-year cap). However, the 31 March 2009 deadline for making claims to HM Revenue & Customs (HMRC) is fast approaching, so this should be reviewed urgently.

There are many areas where claims can be made, including staff entertainment costs (which were not allowed prior to 1997), business gifts, staff expenses, car parking and foreign exchange trading for banks.

A lack of accurate and complete records, especially for the earlier years, was considered an obstacle to making claims. However, HMRC appears to be accepting extrapolation and sampling methods to estimate reasonable claims for earlier years where complete records are not available.

Reclaim Business Entertainment Expenses

The recent European Court of Justice (ECJ) ruling in the Danfoss and AstraZeneca case also provides an opportunity to reclaim certain VAT costs, which were previously always considered business entertainment by HMRC. The ruling confirmed that, where meals are provided to business contacts during the course of meetings, as long as such catering is strictly for the purpose of the business, these costs should not be blocked from input VAT recovery. For example, many professional firms will have client meetings, seminars and other events where catering is provided internally. Where VAT has been restricted on these costs, a claim can now be made if it was strictly for business purposes. A claim can be made for the period between 1973 and 1997 in addition to a claim for the last three years.

What Next?

If you have not already done so, you should consider whether your business has the potential to make such VAT claims. To discuss whether your business is eligible to make a claim, please speak to your usual Smith & Williamson contact.

VAT Treatment Of Debt Collection Services

The Scottish Court of Session recently ruled on a case involving services of 'debt collection'. The case considered whether the services provided by agents in obtaining payment of arrears were debt collection, or whether VAT exemption could be applied.

Debt collection services are excluded from the exemptions listed for financial services in the VAT legislation, and are subject to VAT at the standard rate. In this case, Halifax Bank of Scotland (HBOS) sought to structure its arrangements with debt collection agents, so that the services related to arrears on loans and credit cards would qualify for exemption. HBOS worded its contracts with the agents accordingly, so that its services were described as "debt negotiation" rather than collection services. The contracts noted that the agent would typically renegotiate the terms on which credit is granted to the borrower with a view to maximising recoveries.

HMRC argued that the services did not involve any intermediation and that the essential aim was to secure the collection of debt. The Court of Session agreed and upheld the decision reached by the Tribunal – that the services provided by the agent were of debt collection. It commented that if a supply consists of some negotiation, this does not exclude it from being a service of debt collection; as the agent is recovering at least some of the debt and any negotiation concerning the debt is no more than incidental to its recovery. Additionally, the agent did not act in an intermediary capacity, as it was effectively standing in for the bank as its principal when performing negotiations. Therefore, the services were of debt collection and subject to VAT at the standard rate.

What Next?

If you supply or receive the services of debt collection agents you should ensure that the correct VAT treatment is applied. For further advice, please speak to your usual Smith & Williamson contact.

[HBOS Plc [2008] CSIH 69]

An Update On Bad Debt Relief

For bad debt relief to be claimed, VAT charged on the supply, for which payment has not been received, must have been accounted for on a VAT return and paid to HMRC.

However, following a recent Tribunal decision, HMRC now accepts that it may be possible to make a claim for bad debt relief where the output VAT, subject to a bad debt relief claim, has been accounted for on a VAT return but the VAT due has not been paid to HMRC.

The Tribunal confirmed that the company, which was in administration, was entitled to offset unclaimed input tax against its output tax liability for the purposes of the VAT bad debt relief claim. This decision suggests that the UK rules on claiming bad debt relief are restrictive and contrary to European Union (EU) law.

What Next?

In light of the above, you should consider retrospective claims for repayment of VAT bad debt relief if you have been previously prevented from claiming it. The normal time limits apply, so the claim must be made on a VAT return within three years and six months of the later of when the invoice payment was due or the date of the supply.

If you require any assistance with making VAT bad debt relief claims, including any retrospective claims, please speak to your usual Smith & Williamson contact.

[VTD 20611 - Times Right Marketing Limited (in liquidation)]

Staff Hire Concession – A Reminder

The 'staff hire concession' is due to be withdrawn from 1 April 2009. This will cause VAT to be calculated on the full, rather than the net consideration charged by an employer or employment agency providing or seconding staff (i.e. consideration will have to include those wages of the employee transferred, which are currently paid directly by the client). If your business is unable to recover VAT incurred on such costs in full, this could represent a significant extra cost. These arrangements should be reviewed and be restructured to minimise any VAT costs.

What Next?

This will affect businesses which are partially or fully exempt, for example those in the financial sectors, and also businesses in the charity or voluntary sectors. If this is an area that you have not yet fully considered, you should discuss this as soon as possible in order to be prepared for the changes from 1 April 2009.

Changes To Intrastat Thresholds

Changes to UK Intrastat thresholds were introduced on 1 January 2009. The changes included an increase to the:

  • exemption threshold from £260,000 to £270,000
  • delivery terms threshold from £14.5m to £16m.

Traders with an annual intra-EU trade in goods above the specified exemption threshold are required to provide monthly statistical returns (Intrastat supplementary declarations). Those with annual intra- EU trade in goods above the delivery threshold are required to include details of delivery terms on their monthly statistical returns.

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

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

In association with
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.