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Our latest posts and rants

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VAT fuel scale charges

VAT fuel scale charges, for taxing private use of road fuel, are amended for periods commencing on or after 1 May 2014.

Scale charges for particular vehicles are determined by their CO2 emissions figure. Where the CO2 emissions figure of a vehicle is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge. For a bi-fuel vehicle which has two CO2 emissions figures, the lower of the two figures should be used. For cars which are too old to have a CO2 emissions figure HM Revenue & Customs (HMRC) have prescribed a level of emissions by reference to the vehicle’s engine capacity (cc).

You can find details of the changes on the HMRC website http://www.hmrc.gov.uk/vat/forms-rates/rates/rfsc-2014.pdf

The tables on the HMRC website show the VAT inclusive scale charges, VAT charges and net figures applicable in each accounting period, depending on whether it is a 12 month, three month or one month accounting period.

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How to avoid being a VAT geek when on holiday

Whilst checking our bill for dinner at our favourite restaurant in Puerto del Carmen, Lanzarote recently, my husband commented on the 7% ‘tax’ which is added to all restaurant bills there. I immediately launched into an explanation that this was IVA, the Spanish equivalent of our beloved VAT and that back in the UK we are charged the standard rate of 20% for all meals eaten in a restaurant. Fortunately, for his sanity and my continued existence, I noticed pretty quickly that his eyes had glazed over.

I was reminded of this conversation just yesterday when I read that Brussels was targeting VAT on ebooks which could cut the VAT on them. It is an anomaly that whilst printed books are VAT free, ebooks attract VAT at the full standard rate of 20%.

Why should this remind me of my Lanzarote VAT geek moment? Well as I have highlighted before, the VAT treatment of many goods and services differs wildly between EU countries and the treatment of ebooks is just another example. Other EU countries already enjoy lower rates of VAT in respect of ebooks with France taxing both printed and ebooks at 5.5%.

As the French would undoubtedly say ‘vive la difference’.

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Will your holiday cost you more in the future?

Well if the European Court of Justice (ECJ) has its way then the answer to that is yes!

In a ruling handed down by the ECJ certain VAT exemptions secured when Britain joined the EU are going to be abolished which, it has been suggested, could increase the cost of holidays by 3%.

Although the details are in short supply, in this writer’s opinion this can only mean that the cost of a package holiday will be broken down into its constituent parts with VAT being charged on those elements which attract the tax, e.g. meals on board a plane.

This looks like the thin edge of a very wide wedge and we may expect other exemptions previously granted to be removed.

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Unexpected Tax penalty

Around £250,000 families who are receiving child benefit face a penalty fine for failing to register with HM Revenue & Customs (HMRC) by 5 October. This affects parents earning more than £50,000 who received the benefit between 5 January and 6 April 2013.

It has been suggested that there are around a quarter of million families yet to register and if they miss the deadline they will potentially receive a fine equivalent to the amount of benefit they have received.

It would seem obvious that HMRC have not made this requirement known widely enough but this will be no excuse as ‘ignorance’ is not an acceptable reason in the eyes of HMRC.

Anyone who thinks they may be affected would be advised to contact a tax adviser without delay.

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House price bubble – are they missing the point?

With house prices rising in recent months due in part to the Government’s shared-equity scheme for first-time buyers and also the Bank of England’s subsidies to lenders’ borrowing,the Royal Institution of Chartered Surveyors (RICS) are calling for the Bank of England to cap annual house-price inflation in order to avoid a debt bubble. (It was news to me that the Bank’s Financial Policy Committee have a suite of regulatory powers to make mortgage lending scarcer and more expensive).

The RICS want the Bank of England to limit the amount people could borrow in relation to income and also demand larger deposits from first-time buyers.

Now it may be me but surely the Government’s incentives were intended to provide a double bonus, not only to help first-time buyers to get onto the property ladder but also to generate house building and thereby help our beleaguered construction industry, the latter surely also benefiting the very institution that is suggesting this cap.

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Crédit Lyonnais VAT case

In the Crédit Lyonnais VAT case the CJEU has found that a company which operates branches outside the Member State of its headquarters and which performs activities that give rise to a VAT deduction right and activities that do not, must not take into account the turnover of its foreign branches for the calculation of its input VAT-deduction right.

Crédit Lyonnais is a credit institution with a head office located in France and with branches both within and outside the European Union. In computing its deductible proportion of VAT for the period from 1 January 1988 to 31 December 1989, the head office of Crédit Lyonnais took into account interest arising under loans granted by it to its foreign branches. The French tax authorities challenged the calculation of the deductible proportion of VAT on the basis that transactions entered into between a head office and its foreign branches are disregarded for VAT purposes  and that the interest received was therefore improperly taken into account.

This decision once again highlights the lack of ‘harmonised’ practice in the EU with respect to the inclusion of branches’ turnover for the calculation of the head office’s deductible proportion. It also must put in doubt VAT calculations being carried out by all businesses with branches in other member states.

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National minimum wage

From next month the national minimum wage (NMW) increases to £6.31 an hour for adults and to a derisory £5.03 for those aged 18 to 21. I say derisory as these same 18 to 21 year olds are accepted as adults for everything other than the NMW.

At the same time as the NMW we have the ‘living wage’ which is paid on a purely optional basis.

Three queries then:

1. How is the living wage calculated?

2. Who calculates it?

3. If the money it is thought that a worker needs to earn to cover the basic cost of living in London is £8.55 an hour, how can the NMW of £6.31 per enough?

Those on the NMW are potentially those on benefits. At a time when the coalition is going all out to reduce the number of people receiving benefits wouldn’t it make more sense to adopt the ‘living wage’ as the NMW?

Employers may not, however, buy into this.

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SME support from British banks

Britain’s banks are insisting that they want provide SMS support (Small and Medium Enterprises) yet have been slow to make amends for the interest-rate swaps mis-selling scandal. The Financial Conduct Authority has revealed that only 10 SMEs have been compensated with some 30,000 more still awaiting resolution.

The banks should take a leaf out of the book of Prince Charles who recently said..

“It is important to recognise that SMEs form the bedrock of any sustainable economy and certainly of any local economy. This is often forgotten.”

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HMRC Partnership Consultation Document

The consultation period for submissions on HMRC Partnership Consultation Document which has the potential to affect all partnerships ends on 9th August 2013.

If the proposals are confirmed, which is likely to be either December 2013 or March 2014, then all salaried partners will be affected with additional costs born by the partnership.

Corporate partner arrangements are also under threat.

Anybody wishing to make a submission should do so through their own professional body.

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The VAT trap for DIY builders

The plans for the new home which you were going to build yourself were passed; the build went ahead with no problems, even the weather was on your side; you were  correctly charged VAT at the standard rate on the building materials which you bought from your local building merchant; you completed the forms required by HM Revenue & Customs to reclaim the VAT on your building materials and submitted them together with the other required paperwork; all that remains is for the repayment of the VAT to hit your bank account.

But what’s this? The postman has just returned to you all your paperwork, with the addition of a letter from HM Revenue & Customs advising you that you are not entitled to reclaim the VAT on your lovely new home. This a major blow to you as the funding of the project was calculated on the basis that the VAT would be repaid to you.

So what has gone wrong? The letter from HM Revenue & Customs appears to be saying that what you have built is not a dwelling house when quite clearly it is- or is it?

The definition  of a ‘dwelling house’, as qualified by the notes to Group 5 of Schedule 8, VAT Act 1994 states that ‘a building is designed as a dwelling or a number of dwellings where in relation to each dwelling the following conditions are satisfied:

  • The dwelling consists of self-contained living accommodation;
  • There is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling;
  • The separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision; and
  • Statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent.

The letter from HM Revenue & Customs refers you to your planning consent which states that your new house cannot be disposed of separately from the other pre-existing buildings on the site, the results being that your home does not meet the requirements to be considered as a dwelling and you therefore are not entitled to your VAT reclaim.

The moral of this story is ‘always check your planning conditions for any restrictions’.