VATark

I’ve got some good news and some bad news.

First the good news: for VAT the time in which you can make a claim for underclaimed VAT has been increasing to four years since 1 April 2009. This means that until 1 April 2010 you can put in a claim for underclaimed for periods that ended after 31 March 2006. Up to 1 April 2009 the time limit was three years.

Now the bad news: this means that errors where you’ve underpaid VAT also have a four year window within which they have to be adjusted. This means that HMRC can also assess for errors made in the four year period too!

Now the even worse news: for direct tax, e.g. income tax, the time limit for claims is reduced to four years. If you want to make a claim for tax before 1 April 2006 you need to make it before 1 April 2010. The silver lining is, of course, that HMRC won’t be able to assess for back tax if they don’t do it before 1 April 2010!

Do seek help from a professional adviser if you need to make a claim and might be affected by these changes.

1 January 2010 – increase in rate of VAT

The table below has been recalculated to show the rates at 17.5% for fuel scale charge.

Remember that you will have to apply the right rate for the period. Where your VAT period spans the change in rate you will need to apply the right rate: the 15% rate for the first part and 17.5% for the second part. There is a table on this site that sets out the same data below but calculated at 15%.

For periods starting after 30 April 2009

The fuel scale charge applies to all business cars which are used for private motoring. The following table sets out the fuel scale charges
for VAT periods commencing after 30 April 2009.

The amount listed under Scale Charge is the VAT inclusive amount. You need to subtract the VAT due to get the figure to include in Box 6 on your VAT Return.

For vehicles which do not have a CO2 emissions figure, you should identify the CO2 band based on engine size, as follows:

Whilst every effort has been made to ensure that the figures in the following tables is correct you should still check that the figures are correct.

In 2010 a new electronic VAT refund procedure will be introduced across the EU. It will replace the current paper system. Businesses established in the UK will submit their claims through the UK Government’s gateway. This should significantly simplify the procedure of claiming overseas VAT. Other measures have been taken to make it even simpler, for example, introduction of expenditure codes for the nine most commonly claimed expenses – full details are in the guidance issued by HMRC.

The VAT Notice 723A: Refunds of VAT in the European Community for EC and non-EC businesses available from the HMRC website provides further explanations and answers frequently asked questions. It also contains the draft UK secondary legislation.

UK businesses wishing to claim overseas VAT will have to register on the UK portal via the Government Gateway. The portal will be open for registration late in 2009. The basic details of VAT claims submitted through this portal will be verified by the UK, not by the Member State of Refund (MSR), so certificates of UK VAT status to support claims will no longer be necessary. The errors in claim completion will be identified and flagged, so the applicant could correct them and reduce the possibility of the claim being rejected.

Further enhancements of the claim submission system are planned for the future.

The guidance also touches the language-related issues. Luckily for the UK residents, many Member States have indicated that they are going to allow English to be used for free text fields.

The other important things to remember are as follows:

• Claims containing errors will still be forwarded to the MSR, but the MSR can decide to reject the claim.
• If a claim is refused in whole or in part, the decision by the MSR can be appealed.
• The time limit for submission has been extended from six months to nine months.
• The MSR will have four months to verify the claim, but this can be extended where they request further information from the claimant.
• There will be a maximum of five claims that can be submitted to each MSR per year.

HMRC have published guidance in VAT Notice 723A: Refunds of VAT in the European Community for EC and non-EC businesses containing details of how the new system works.

This article is the fifth in the series outlining the forthcoming changes in the VAT rules for 2010. We have covered the most important issues and welcome comments, questions and opinions on the subject. If you have anything to say on the matter, please post below.

The rule changes announced for 1 January 2010 cover not only the place of supply, but also the time of supply. It means that the time at which VAT must be accounted for under the reverse charge will change on 1 January 2010. The changes will be introduced by secondary legislation later in the year.

This is being done to “harmonise the time of supply rules for reverse charge services throughout the EU” – in other words, to make rules applied to cross-border supplies of services by different Member States more consistent.

HMRC has made the following Place of Supply/Time of Supply guidance available on its website. Part 4 of the document answers several important (and probably frequently asked) questions regarding the forthcoming time of supply rule changes.

The time of supply changes will come into effect at the same time as other VAT Package changes on 1 January 2010, though some legislation is still in draft and consultations with business groups have been taking place to minimise additional burden on businesses that the new rules may involve. It is expected that the legislation will all be in place before Parliament rises for the Christmas recess.

The guidance explains in detail how the new rules will apply to single supplies of services and continuous supplies of services and how to define tax points in both cases. For example, with a single supply the tax point will be completion of the service, and for continuous supplies there will be a tax point at the end of each billing or payment period. The difference between single and continuous supplies of services is explained in detail. Other answered questions include:

• What supplies are affected?
• Why do the new rules cover all supplies subject to the reverse charge arrangements in the UK?
• How will I treat supplies that span 1 January 2010?
• What impact will these rules have on completion of UK EC Sales Lists?

and a few more.

We will be writing more articles on these topics over the coming weeks and months. For now, we recommend that you read the guidance available from HMRC. Whatever questions may arise (you’ll see that the guidance published by HMRC is not the easiest to understand), we welcome questions asked either in the form of comments posted to this blog or using the contact form.

Our next article in this series is scheduled for December, and we will continue to discuss and explain the new VAT rules, so you can greet the New Year fully prepared!