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Marks & Spencer - VAT brief on European Court judgementIn last month’s tax bulletin we reported on the successful Marks & Spencer case against Customs and Excise involving a retrospective claim for tax. Customs have now released a business brief in which they request that taxpayers who may be affected by this ruling make their claims for repayment by 31 March 2003. The brief lists valid claims as: · When a prior claim has been made for a six year period but only three years’ has previously been given by Customs · When a repayment for six years was given to the taxpayer but three years’ was subsequently clawed back by Customs · When an error occurred and was discovered prior to 31 March 1997 but not actually claimed And in all cases the repayment must be for an overpayment, which relates to a period prior to 4 December 1996. If you would like any assistance on this please contact us.
VAT on buildings and constructionCustoms and Excise have published a new booklet, Notice 708, in respect of VAT on buildings and construction. This contains all the relevant updates since the previous booklet published in August 1997. The leaflet describes and consolidates many of the changes in this area of VAT, updating previous press releases from Customs and Excise including: · The meaning of non-residential dwellings to include those buildings not used for the purposes of residential dwelling for 10 years · The treatment of VAT on building materials · Non-qualifying use of a building and use for a relevant charitable purpose · New format of the certificates for zero rating of relevant residential and charitable buildings · Change of method of calculation of VAT when there is a change in use of a certified building · The tax point rule in relation to periodic payments Please contact us if you would like a copy of this leaflet.
VAT on postal charges – new rulingA recent case against a taxpayer, Plantiforr Ltd, has been found in favour of Customs and Excise. The case concerned the charging of VAT on the delivery of goods. VAT is not chargeable on charges for delivery by Post Office or Parcel force, but is chargeable on the delivery of items by other businesses. Plantiforr entered into an agreement with the Post Office to send a certain number of items at a reduced rate. As such, Plantiforr did not charge VAT on those deliveries, claiming that there was no consideration for delivery between their customers and themselves. Customs and Excise disagreed with this treatment, but the VAT tribunal upheld Plantiforr’s VAT treatment of delivery expenses. This ruling was overturned by the High Court on the grounds that Plantiforr received the payment for the postage from the customer by direct debit and then passed payment to the Post Office. The High Court held that these monies formed part of the receipts of the company of Plantiforr and were taxable. Customs and Excise have published a business brief, advising taxpayers to ensure that they make appropriate adjustments if they relied on the VAT tribunal’s earlier ruling. If you would like assistance on this please contact us.
VAT and bad debtsWe reported in our June 2002 update the new treatment introduced by the Finance Act 2002 of bad debts for VAT purposes. Customs and Excise have defined the relevant date as the date of the invoice, unless: a) The invoice is issued 13 days or more after delivery of goods or supply of services, or b) Payment is due prior to the issue of the invoice In which case the day of delivery or performance of services would be the relevant date. The new treatment of bad debts is to apply to invoices issued on or after 1 January 2003, so the first claims for bad debt relief will be possible on or after 1 July 2003, being six months after the first possible relevant invoice date.
Information for exporters and forwardersCustoms and Excise have published a new booklet describing the method of the New Export System called “New Export System – putting the ‘e’ into Exports”. The booklet serves as an introduction to the new export system and the operation of CHIEF (Customs Handling of Import and Export Freight). CHIEF is a sophisticated software tool to enable the recording of all international exports from the UK by land, sea or air, and links ports, airports and businesses throughout the UK. The booklet describes the outline of the previous “negative system” of approval for export, whereby an application was made and if within 14 days Customs and Excise did not notify the exporter regarding the application the exporter would then be free to export the goods. Under the new “positive system” an application must be made via the CHIEF system and export cannot take place until Customs and Excise approval is received. The new system was introduced at Dover on 4 March 2002. It is scheduled to be introduced to other seaports by 28 October 2002 and to UK airports between then and April 2003. If you would like a copy of this booklet please contact us.
Transfer pricing and enquiriesA recent tax bulletin issued by the Inland Revenue describes the timetable and risk assessment approach in respect of enquires regarding transfer pricing. The article suggests that the following may be reviewed in undertaking a risk assessment: · A review of any previous transfer pricing papers · A detailed examination of six years’ group accounts, and of accounts of individual UK and appropriate non-UK entities · Consideration of the group structure and identification of haven/shelter countries · A review of industry trends, details of the company’s place in its sector, and recent developments within the group (such as new acquisitions or locations) · A review of databases for multiple-year data and potential comparables · A review of company returns in other jurisdictions · Liaison with PAYE office for details of highly-paid UK staff · Possibly, liaison with Customs and Excise Depending on the results, the article goes on to suggest that if such pre-enquiry work seems excessive then this indicates that the case may not be suitable for a full enquiry. This is a complex area of tax, so please contact us for further advice.
Individual Savings Accounts (ISA) – withdrawals and transfersThe Treasury have laid amendments to the ISA regulations, which will require the terms and conditions of ISA products to contain certain conditions in relation to withdrawals from or transfers of ISAs by investors. It had previously come to the Inland Revenue’s attention that some ISA providers were not allowing investors to make withdrawals from or transfer their ISAs. The amendment is intended to stop this practice and will come into effect from 1 October 2002.
Working families tax creditThe Inland Revenue have released a new interactive website which deals exclusively with working families tax credits. The site covers eligibility, and calculates the potential amount of the tax credit due. It also allows the individual to make a claim online.
Enhanced capital allowancesFrom 5 August 2002, spending on five further energy-saving technology groups can qualify for 100% capital allowances: 1) Heat pumps 2) Radiant and warm air heaters 3) Solar heaters including thermal systems 4) Energy-efficient refrigeration equipment, including display cabinets, and compressor equipment
5)
Air compressors – specifically,
electronic drain traps and condition-monitoring control systems Capital Gains TaxThe Inland Revenue has published a new booklet entitled “Capital Gains Tax – an introduction”. It is a general guide to capital gains tax and will assist with when to report gains or losses on the disposal of assets. If you would like a copy of this booklet please contact us.
Instruments of variation for Inheritance Tax and Capital Gains TaxThe Inland Revenue have detailed the new procedure as introduced by the Finance Act 2002 for the reporting of instruments of variation in respect of a deceased person’s property. The new procedures remove the need to make an election to the Inspector of Taxes in respect of the deed of variation, provided that the deed is made within two years of death and certain other statutory requirements are met. This new procedure will come into effect on or after 1 August 2002.
General Commissioners websiteA new website has been launched by the General Commissioners to the Inland Revenue, explaining the purpose of the General Commissioners and giving general advice in relation to the bringing of cases in front of the Commissioners. |