Forum Replies Created
-
Posts
-
Hi – there’s two aspects to your question! I’ve included a number of links below – the majority are to HMRC internal guidance. This is written primarily for HMRC staff, so where the text says “you”, it actually means “them”! But it shows the processes and considerations which they should be following.
TOGC – I’m assuming that all of the conditions for the transaction to be treated as a TOGC were met, and so no VAT was declared on the income that you received.
Under VAT law, a TOGC is deemed to be neither a supply of goods not services (see https://www.gov.uk/hmrc-internal-manuals/vat-transfer-of-a-going-concern/vtogc1100). This means that the VAT incurred in connection with the transfer is not attributable to the transfer, but is instead regarded as a general business expense (see https://www.gov.uk/hmrc-internal-manuals/vat-transfer-of-a-going-concern/vtogc4200). Therefore if your business was entitled to recover VAT in full on it’s normal business expenses, it will be entitled to reclaim the VAT on costs relating to the TOGC.
Deregistration – Does your business make any other taxable supplies?
If not, then you must notify HMRC that taxable activity has ceased (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg03000). There is a time limit of 30 days from the date at which you ceased to be eligible for registration (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg06000), and you could be liable to a penalty if this isn’t met. Arguably your taxable activity would have ceased at the point of the TOGC. However HMRC can then defer deregistration for up to 6 months where there are assets to be sold or costs that have yet to be billed (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg13000) – this should allow most remaining VAT declarations to be made on the normal returns, rather than via a VAT427.
If you have now missed that deadline, you should notify HMRC straight away, and explain that you have been trying unsuccessfully to contact them for clarification. Any penalty for late notification would be issued under section 69 of the VAT Act 1994 (see https://www.legislation.gov.uk/ukpga/1994/23/section/69), subsection 8 of which allows for the penalty to be waived if HMRC are satisfied that there is a “reasonable excuse” for the late notification.
If your business does still make other taxable supplies (this might include the sale of goods if your business had any assets that were not transferred as part of the TOGC and will now be sold separately), but you know that the value of those supplies will fall below the VAT deregistration threshold, you can voluntarily deregister (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg02050). As this is done by choice, there is in practice no time limit. But you must continue to charge VAT on any taxable supplies that you make prior to the effective date of your deregistration.
It may depend on the value of the items you’re selling, where they are at the time of sale, and whether your customers are businesses or consumers. I would suggest reading this HMRC guidance: https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces
It appears that you’re named as the importer. Therefore when the goods arrived in the UK, you would have been liable to pay HMRC import VAT and duties. To prevent goods being held up in Customs, UPS have paid HMRC on your behalf, and are now recovering that cost from you.
In which case, the VAT and duty amounts will be the exact amounts paid to HMRC. The duty will be a cost to you, I would suggest treating this as outside the scope of VAT. The VAT should be recoverable via your VAT return, in the same way that it would have been had you bought the goods in the UK.
The disbursement fee is a charge by UPS for making the payments to HMRC on your behalf. It is a service being supplied by them to you, but would probably fall under the finance exemption. So I would treat that element as exempt.
From your description, the only income appears to be the sale of advertising. Provided that this doesn’t exceed the VAT registration threshold (currently £85k), you won’t have to register for VAT.
However, it may be beneficial for you to register voluntarily. If your customers are VAT registered businesses that are entitled to reclaim the VAT on their expenditure, you could add VAT to your charges, at no cost to you or your customers. Being registered for VAT would then allow you to reclaim the VAT you incur on related purchases.
As you haven’t started yet, I’d suggest that it would be worth discussing your plans with an accountant.
The fact that the goods are being processed abroad appears to prevent the normal temporary exports arrangements from applying.
In Poland, the goods are being imported for “inward processing”. The treatment for Polish VAT/duties will be in accordance with Polish law. I don’t have any knowledge of the Polish arrangements, but here is HMRC’s guidance that would apply were the transaction the other way round (i.e. Polish goods processed in the UK, then returned):
https://www.gov.uk/guidance/apply-to-delay-or-pay-less-duty-on-goods-you-import-to-process-or-repair
You’ll need to establish what the Polish equivalent of this is.On return to the UK, I believe that you would be liable to import VAT/duty, due to the rules on Returned Goods Relief specifically requiring the goods to be reimported in an unaltered state – see https://www.gov.uk/guidance/pay-less-import-duty-and-vat-when-re-importing-goods-to-the-uk-and-eu
However, the UK import VAT should be recoverable by you as an input to your onward taxable sale of the processed goods .
Unfortunately I don’t know anything about inheritance laws, i.e. whether the property is at some point owned by you personally, as opposed to in your capacity as executor / administrator of the estate.
From a VAT perspective, an option to tax applies to all supplies by the person who made it – and that extends to an executor / administrator after that person’s death, because you’re effectively seen to be running their “business”. However, if the property is now owned by you personally, you will not be affected by any option to tax which may have been made by your father.
The original supplier must charge UK VAT, as they aren’t exporting the goods. The Czech company is also making a taxable supply of goods in the UK, for the same reasons.
If the Czech company is not already registered for VAT in the UK, they may need to be. If they are a “Non-Established Taxable Person” (as defined in section 9 of HMRC Notice 700/1: https://www.gov.uk/government/publications/vat-notice-7001-should-i-be-registered-for-vat/vat-notice-7001-should-i-be-registered-for-vat#non-established-taxable-persons-netps-basic-information), they will be required to register for VAT because of this transaction alone – otherwise the normal VAT registration threshold applies.
If a service is paid for (or a VAT invoice is raised) in advance, the “tax point” (the important date for calculating VAT) is the earlier of the payment or invoice dates.
I’m assuming though that this is a “stand alone” supply of catering being provided at a wedding organised by someone else, rather than being part of a wedding package. Some years ago, the courts decided that a wedding package was a single service being supplied, rather than separate supplies of the various elements included within the package. This stopped venues treating part of their packages as a VAT exempt “room hire”. So for the same reason, I suspect that venues wouldn’t be able to treat part of a package as a supply of reduced rate catering. I can’t see any specific mention of wedding packages in the legislation for the temporary reduced rate, so I’m assuming that 20% VAT still applies to them.
Services supplied the to Republic of Ireland / Romania
You need to determine the “place of supply” of the services. If the machines are a “fixture of the property that cannot be easily dismantled or moved”, the place of supply is where they are located (see section 7.4 of HMRC’s notice 749A). If the machines don’t meet this criteria, the general place of supply rules apply – which for B2B transactions are where the customer is located. So (assuming that your customers are all businesses) either way the services will be provided outside of the UK. They won’t be subject to UK VAT, and your customer will need to apply the reverse charge.
Selling goods to those countries
If you’re only considering the parts that you use in the process of installing / servicing the machines, they count as part of your supply of services rather than separate supplies of goods and are treated as above.
However if these goods are separate to the installation / servicing, you need to consider where they are at the time of sale. If they’re in the UK, you are making an export – you won’t charge UK VAT and import VAT will be due when the goods arrive in the foreign country. But if the goods are already abroad at the time of sale, you are making a supply of goods in that country and would need to register for VAT there.
Goods from Germany
The following HMRC guidance applies: https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk
For consignments under £135, assuming that the goods were outside the UK at the point of sale and you have provided the supplier with your VAT registration number, you can account for UK VAT using the reverse charge.
VAT is a tax charged on the supply of goods and services. Any supply made falls into one of three categories:
- “non-business” – outside the scope of VAT,
- “exempt business” – exempt from VAT, or
- “taxable business” – subject to VAT, either at standard rate (20%), reduced rate (5%) or zero rate (0%)
The types of supplies covered by each of these (apart from standard rate) are defined by schedules 7A to 9 of the Value Added Tax Act 1994. So standard rate is the “default” if your supply doesn’t meet the criteria for any of the other categories/rates.
You are responsible for determining which category the supplies you make fall under, and charging your customers any VAT at the appropriate rate.
If you are making “taxable business” supplies (third category above), you are entitled to reclaim any VAT that you are charged on related purchases. But you can’t reclaim VAT that you haven’t been charged.
So in your magazine example, your sale of the magazine is zero rated, so you don’t declare VAT on your £30 income. Your magazine supplier won’t have charged you any VAT either, so you haven’t got any VAT to claim on your £20 purchase. You have “added value”, in that it was worth £20 when you bought it, and £30 when you sold it. In reality the £10 difference isn’t all profit. Your business is likely to have incurred some other costs/overheads – and if you’ve been charged VAT on those, you can reclaim it.
Same principle applies to shops. They’ll need to determine the correct VAT rate for each item they sell. Provided that they all fall within the taxable business category, they can reclaim all of the VAT that they’ve been charged by their supplies – on the items being sold and any other running costs of the shop.
I’ve noticed your post from last year: https://www.vatforum.co.uk/post/charging-vat-to-eu-company-11110923?pid=1319542850
But that was prior to the end of the Brexit transition period, so it’s worth checking for changes.If your customers are all businesses, there are no changes to the rules in VAT-advisers response to your previous post. There’s also no change in rules for supplies to individuals if they’re based either in the UK (GB or NI) or outside the EU.
For supplies to individuals based in the EU, you must declare VAT in the EU. You have two options:
- Register for a “non-union MOSS” scheme in a single EU member state; or
- Register for VAT in every member state where you have customers who are individuals.
Effectively the first of these options is broadly similar to the old rules – it’s just that when we were part of the EU, the UK could operate a MOSS, whereas now you need to join someone else’s.
The following HMRC guidance may be useful: https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers#vat-accounting-options-for-uk-businesses-supplying-digital-services-to-consumers-in-the-eu
If the businesses were truly independently owned and operated, it would be allowable. The fact that the arrangement doesn’t avoid any VAT means that HMRC probably aren’t likely to be too worried either. They’re more looking for cases where someone whose business is likely to exceed the £85k registration threshold splits it into two smaller businesses.
But … are you sure this is the best option? There will be costs to operating the extra business, meaning that the VAT registered business will need to charge you more than they are paying for the goods just in order to break even. There ought to be proper contracts set up between the businesses. And the VAT registered business will be required to comply with Making Tax Digital record keeping and return submission requirements from April 2022. Also the fact that the VAT registered business is likely to be filing zero value returns (due to the VAT on income and expenditure being identical) may well prompt an HMRC check, even if they’re then happy with what they find.
You’ve named the company – it wasn’t one that I’d heard of, so I did a Google search to see if others had reported similar issues and found solutions. I’m sure you’ve done your own research, but if not you may want to look at independent review sites…
This would work. From your perspective – the place of supply of your services is regarded as France, so your charge falls outside the scope of UK VAT. The French company would have to account for VAT using the reverse charge. They would calculate French VAT on your invoices based on their VAT rate, and pay it over to their tax authorities. But (on the same French VAT return) they could also reclaim that VAT as an input to their business activities – so no overall VAT cost to them.
It’s broadly similar to what you would have done pre-Brexit when they sold goods to you. They wouldn’t have charged you French VAT and you would have calculated UK VAT, paying it to and reclaiming it from HMRC on the same UK VAT return.
HMRC have a national Options to Tax unit – their email address is [email protected] . If you explain the situation and quote his former VAT registration number, they’ll be able to check whether he ever notified them of an option to tax.
I still think it’s unlikely, given that he was charged VAT on the purchase and (unless he let any areas of the pub out to anyone else) I can’t think of any reason to opt later. But always worth checking…
No, I don’t think that you could do this with you as sole trader for both businesses. HMRC would likely regard it as a single business in reality. Also if a business is registered for VAT, it must charge VAT on its sales – this can’t be waived by it failing to reclaim VAT on its costs.
You could VAT register voluntarily (you don’t have to wait until your turnover reaches the £85k) – but the cost of charging VAT on your sales would outweigh the benefit of reclaiming it on your costs.
Do you know why the auction site are insisting on this? Is it just a way to ensure that they are dealing with businesses – if so is there any other proof that they would accept? There’s bound to be others in the same position as you, and I can’t think why they would want to restrict their potential customer base in this way.
Someone else with a VAT registered business could always buy from the site and sell to you “at cost”. That business would reclaim VAT on the purchase and declare VAT on the sale to you – so no overall impact on them.
