[VAT-adviser]

Disbursements are buying goods/services on behalf of your clients. Such payments are outside the scope of VAT and whilst VAT cannot be claimed in respect of the expense, no VAT is charged on them when you invoice the client.

Disbursements are not included in the VAT turnover calculation, BUT you must ensure they meet the conditions here:  https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers

Disbursements are costs you incur on behalf of your client and these should meet the following tests:

• it was purchased for the use of the client
• the client agreed that you would arrange and pay for it on their behalf
• You pass the whole charge to the client, without adding anything, as a separate item on the invoice
• it is the client’s responsibility to pay for the goods/services
• the client knew the provider of the service is not you and you had permission from his client to make the payment

Accounting for Disbursements: Example say you incur £300 disbursements( Dr Disbursements £300 Cr Cash/Creditors  £300); and then you pass the disbursements to the client (Dr Cash/Debtors £300  Cr Disbursements £300).

Disbursements should not be confused with recharges which are your own costs incurred when supplying goods or services to customers are not disbursements for VAT. For example, postage costs you incur when you send letters to your customers, these are normal business costs and you must add VAT if you recharge them. Recharges are part of your sales.

[VAT-adviser]

You are obviously not an eligible body for the purposes of item 1, Group 6 VAT Act 1994, and therefore exemption not in point under this heading;

However you qualify for exemption under item 2, Group 6 VAT Act 1994 – income accruing from lessons provided by yourself personally or your wife (as self employed)  is exempt and the subjects are ordinarily taught in schools and it forms part of the National Curriculum.  These subjects include maths, English and any other sporting lessons you provide that is ordinarily taught at school. Recent cases concerning belly dancing, yoga and pilates make it clear that the subject matter should be commonly taught in schools or universities;

Therefore there is no obligation to register for VAT.

However if you teach these subjects under a company then you lose the “self employed” condition above and you will be required to register for VAT. You can form a partnership or a limited partnership if these interests you and you will still have no obligation to register for VAT.

[VAT-adviser]

HMRC requires you to keep all your business records for VAT purposes for at least 6 years.

In normal cases, the HMRC tax investigation time limit is 4 years, in which they can go back to claim money from taxpayers.

The maximum period for HMRC to raise an assessment is four years from the end of the VAT return period to which the assessment relates. However this period only increases (to 20 years) in cases of fraud or dishonesty – clearly not the case here!

Applying the four year time limits to this assessment, it is clear that the period covered extends beyond the four years allowed. Therefore the assessment are out of time and are not valid.

In light of the above, you should write to HMRC challenging the assessment. This can be done as part of a reconsideration request; OR you can choose the option of appealing the assessment to the First Tier Tax Tribunal.

[VAT-adviser]

VAT registration: (i) compulsory – historic or futuristic or (ii) Voluntary – existing or intending trader.

Intending trader: HMRC to be satisfied & that a bona fide business. No date of trader value of supplies required just docs to support intention and these include: contracts, letterheads, planning permission, patents, option to tax on buildings/land etc,.[ Rompleman]

Once registered – allowed input tax recovery; more recovery through CGS, future supplies VAT on it; pre-registration and pre-incorporation recoverable ( 6m services/4 yrs goods) used for business; deminis benefits

As a repayment taxpayer, apply to move onto monthly VAT returns; once taxable supplies, move to Quarterly.

If the activity proves abortive, de-register. If intention not going ahead due outside control, should retain the VAT validly recovered; otherwise clawback of input VAT. Deemed exit sale on assets or dividend in specie. VAT waived on deemed sale if <£1,000.

Identify registration period – penalties, disclosures
Exceptions from registration eg temporary threshold excess

[VAT-adviser]

DB plan:
UK VAT system doesn’t allow exemption of DB plan as it doesn’t qualify as a SIF. To qualify as a SIF it must have features of a SIF like UCITS (Raised from public, invested collectively and investing in transferable securities). A DB Plan does not meet these.
HMRC was to/fro on this but confirmed not much change to current rules
Prior to PGG: Admin fees were fully deductible by employer (if invoiced to employer) and investment mgt were not; and for mixed employers were allowed to deduct 30%.
Following PGG case, the employer can fully deduct pension admin and investment costs provided there is direct & immediate link to its taxable services just like any other employment costs.
For deduction, a valid invoice addressed to employer is required. Due to pension regulation, invoices should generally be paid by DB plan. HMRC issued other alternatives to evidence an employer’s entitlement to deduct VAT, with options including the use of tripartite contracts and VAT grouping;

Advice- restructure the agreement to ensure Employer has valid invoices.
If employer gets invoiced and recharges (output VAT due)– fully deductible, and DB can register for VAT.
Where contributions are netted against invoices, HMRC confirms this is not a supply.

DC Plan
Following ATP case, DC now qualifies as a SIF and hence all fund management related costs (admin, invest etc) are exempt. Not legal or other external costs.
If VAT for fund management was charged, consider asking supplier to re-issue invoice

[VAT-adviser]

Capital Goods Scheme (CGS) applies where assets with long life which is partially exempt and is a :
(i) building >£250k – 10 years
(ii) £50 computer; ship etc; – 5 years

Recover % of taxable usage rate x input tax; annual adjust for prior years purchases, based on (OrigR – NewR)*input tax x n/10.
– Disposal test for CGS if asset sold below mkt value –repay input-output diff (rarely applied unless abusive]

[VAT-adviser]

The main benefits of a VAT group are that one VAT return is completed for the whole group for each period, and intra-group charges are not subject to VAT. A potential disadvantage is that all members are jointly and severally liable for the VAT debts of the group. If one company defaults and cannot pay its dues, the profitable members must jointly pick-up the debt (HMRC Notice 700/2, para 2.1).

Two or more companies or limited liability partnerships – known as ‘bodies corporate’ – can register as a single taxable person or VAT group if:
each body has its principal or registered office in the UK.
they are under common control – for example, one or more company is a subsidiary of a parent company [ 51% shareholding and if Joint venture the shareholder should have casting vote.

HMRC have the right to refuse Group registration if abusive. However, if you’re not satisfied with our decision, you can appeal to an independent VAT tribunal. If you were registered for VAT before you applied for group treatment, your previous registration will be reinstated with effect from the date on which it was cancelled.

OTHER KEY POINTS:
Registration: Apply, Body corporates, under common control and UK establishment
Lose individual identity, one representative member;51% =control [ if JV -casting vote]; single taxable person, Pure holdco on their own cant register for VAT but allowed in Group [EC raised an infringement of EU directive with CJEU. 2013, CJEU agreed with the UK treatment.
Following Larentia & Minerva case – possible to include non-corporates into the VAT group through the UKJ law is yet to confirm that. Upon condition of “close economic, financial and organisational link”

Advantages: single VAT return, individual entities lose identity hence can include exempt or pure holcos, may increase input vat; exclude interco transactions – admin, cashflows good.

Disadvantages: jointly and severally responsible- may not work with JVs After a VAT group, if you include exempt results in partial recovery, higher penalties – bigger nos, depended on other entities for timing of returns etc; if you include repayment entity lose monthly returns.

Member CGS leavers creates CGS interval and the remainder continue the CGS with 12m intervals

If Holdco is supplying staff consider other options – joint contact of employment & secondment (where subs pays direct).
Divisional registration – each division registers for VAT /separate returns but company liable

[VAT-adviser]

   Insurance Premium Tax

Insurance Premium Tax (IPT) is a government-introduced tax on insurance policies including car, home, travel and pet which every insurance provider has to charge. IPT is charged Only if there is a premium under a taxable insurance contract.

A taxable insurance contract is one with a: 1. premium 2. Insured indemnified against a loss 3. Insured has an insurable interest. [Prudential case]

The definition of Premium payment includes payment for risks, commission, admin, taxes, interest etc.

IPT may not be charged if the contract is a separate insurance contract ie separately disclosed & client has a choice etc.

Once you decide that IPT is chargeable, you need to figure out the rate: std, higher, exempt & calculate the IPT chargeable.

[VAT-adviser]

VAT is charged on monetary and non-monetary transactions. A good case to look at regarding Barter trade cases is the Naturally Yours Cosmetics case – just google it. Generally VAT is subjective on such matters but value is based on what seller would have paid if monetary. Even if no cash has been paid if there is consideration, VAT is charged and is often not possible to defer VAT if goods are supplied. The tax point is point of delivery or <14 days’ invoice.

There are however other non cash transactions which VAT is not applicable like gifts below a certain threshold – currently £50.

[VAT-adviser]

By default, supplies of goods and services (made in the UK, by a taxable person, in the furtherance of a business) are subject to the standard rate of VAT of 20% on monetary equivalent of the consideration.

[VAT-adviser]

Its useful to look at the contents of VAT invoice based on VAT legislation here:
http://www.legislation.gov.uk/uksi/1995/2518/part/III/made

however you may also argue for itemization under: Sale of Goods Act 1979

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