View the related Tax Guidance about Option to tax
Reverse charge ― buying in services from outside the UK
Reverse charge ― buying in services from outside the UKThis guidance note covers the reverse charge that applies to services that have been bought in from outside the UK. For an overview of VAT and international services more broadly, see the International services ― overview guidance note. For in-depth commentary on the legislation and case law in relation to the reverse charge, see De Voil Indirect Tax Service V3.231.What is the reverse charge?Certain services are subject to a reverse charge when they are bought in from outside the UK. This means that instead of the supplier being required to register and account for VAT on its supply of services as normal, the obligation to account for VAT on the services is actually ‘shifted’ to the customer. The customer therefore treats the service as if it were supplied both to and by itself. In other words, the customer must ‘self-account’ for the VAT on its purchase. The customer is still able to recover the VAT that it charges to itself under the reverse charge subject to the normal VAT rules for input tax recovery. This means that if the customer is entitled to recover all of its VAT, the reverse charge ends up being a simple administrative entry on its VAT return. However, if the customer is not entitled to recover all of its VAT (for example because it is partly exempt), then the reverse charge will have the effect of increasing the amount of VAT
Option to tax ― real estate election (REE)
Option to tax ― real estate election (REE)This guidance note looks at real estate elections.For an overview of the option to tax more broadly, see the Option to tax ― overview guidance note.For in-depth commentary on the legislation around the real estate election, see De Voil Indirect Tax Service V4.115C.What is a real estate election?An REE is a formal decision made by a business that (with certain exceptions) it will be treated as having opted to tax every property in which it (or a member of its VAT group) subsequently acquires an interest. An REE differs from what is known as a ‘global option to tax’. A global option applies to a large number of properties that are not specifically identified (for example ‘all current property holdings and future acquisitions’). A global option has a significant downside being that it cannot be revoked on a property-by-property basis. This is different to an REE where individual options can be revoked, subject to meeting the normal conditions for revocation. Although some global options still exist, it is no longer possible to opt to tax all current holdings and future acquisitions in this way. Theoretically, a business could still opt to tax a large area (eg the whole of the UK) but this is unlikely to be desirable given it is considerably less flexible than an REE. If a global option is already in place, it may be possible (and desirable) to convert this into an REE. Where a business wants to
Cancelling a VAT registration number
Cancelling a VAT registration numberThis guidance note provides:•guidance regarding when a person must deregister from VAT on a compulsory basis•guidance regarding when a person can deregister from VAT on a voluntary basis•practical points to consider in relation to the cancellation of a VAT registrationFor in-depth commentary on VAT deregistration please refer to De Voil Indirect Tax Service V2.151 to V2.155.When must a person deregister from VAT on a compulsory basis?The VAT registration ― voluntary guidance note explains when a person is entitled to be registered for VAT. A person who is registered for VAT and ceases to be entitled to be registered must notify HMRC within 30 days from the date they ceased to be entitled to be registered. HMRC can cancel the registration of a person who has ceased to be entitled to be registered for VAT, even if the person has not notified HMRC. A failure to notify HMRC may result in a penalty. If the reason the person is no longer entitled to be registered is because they have transferred their business as a going concern the VAT registration number may, subject to the agreement of the person acquiring the business and HMRC, be transferred to the person acquiring the business. The request for the VAT registration number to be transferred should be submitted to HMRC using the form VAT68. In all other circumstances the VAT registration number must be cancelled, although HMRC may agree to a
Overview of VAT and property issues
Overview of VAT and property issuesThe VAT treatment of transactions relating to land and property is very complex and care needs to be taken when determining the correct VAT treatment of the transaction that will be undertaken. This guidance note is intended to provide you with a brief overview of the main points that need to be considered. This guidance note also contains links to other guidance notes that provide a more in-depth analysis of the points raised.What are land and property transactions?The following section provides a brief overview of the most common types of land and property transactions: Supplies of landFor VAT purposes, the term 'land' includes any of the following:•buildings•civil engineering works•works•walls•trees and plants•waterways, ways, watercourses and commons•any other structure or natural object in, under or over 'land' that continues to remain attached to it (ie certain fixtures and fittings)A business makes a supply of land if it grants one of the following:•a grant of a freehold or leasehold interest in the land•an assignment of a lease by an existing tenant to a new tenant•a surrender of an interest in land to the person who granted the interestAn interest in land includes a 'legal' or 'beneficial' interest in the land. A legal interest usually constitutes some formal ownership of an interest or right of land (ie a freehold or leasehold interest). A beneficial interest is the right to receive the benefit of any supplies made in the
Exemption ― supplies of goods where input tax cannot be recovered
Exemption ― supplies of goods where input tax cannot be recoveredThis guidance note provides an overview of the VAT treatment of sales of goods on whose purchase input tax was non-deductible.VAT treatmentThe supply of goods in relation to which input tax was non-deductible is exempt.This provision came into effect from 1 March 2000 as a result of an CJEU ruling in EC Commission v Italian Republic. The relevant legislation (see above link) states that a supply of goods in relation to which the following conditions are satisfied, is exempt:a)the person making the supply (‘the relevant supplier’), or any predecessor of his (ie where there has been a prior transfer of a going concern, or more than one such transfer), has incurred input tax on the goods used for the supplyb)the only such input tax is non-deductible input tax, and
Transfer of business premises
Transfer of business premisesThis guidance note summarises the factors to take into account on the transfer of business premises as part of a trade and asset sale. Please also refer to the Capital allowances ― property transactions and fixtures guidance note.Capital allowances ― fixturesBuildings usually contain fixtures, ie items which are attached or placed permanently in the building. Examples of fixtures include:•lifts and escalators•heating, lighting and electrical systems•alarm systems•sanitary appliances, and hot and cold water systems•telephone and data installationsThe availability of capital allowances on such items for the purchaser of the building will depend on whether the previous owner could have claimed capital allowances, the original cost of the fixture and what disposal value has been brought into account on a previous disposal. In most cases, the capital allowance claim will depend on the seller having pooled the fixture and a value for the fixture being fixed by means of a joint election, usually under CAA 2001, s 198 but sometimes under section 199. It is important therefore to ensure these formalities have been done and documented within the required timescales and that the purchase contract reflects the requirement for the seller to pool any fixtures within their tax computations. More details of the capital allowance rules on fixtures can be found in the Capital allowances ― property transactions and fixtures guidance note.Buildings allowancesWith effect from 29 October 2018, a type of capital allowance is available
VAT on property acquisitions
VAT on property acquisitionsThe VAT treatment and considerations in relation to a property purchase depend on the type of property and whether the vendor has elected to waive his VAT exemption or ‘opt to tax’ as it is more commonly known.This guidance note is intended to provide an overview of these considerations. A good summary can also be found in the Overview of VAT and property issues guidance note.Territorial scopeFor property situated abroad, the place of supply of the property transaction (and of any work on the property, such as conveyancing, etc) will be outside of the UK. This will therefore be outside of the scope of UK VAT, although there may of course be local VAT considerations and advice should be sought from a local VAT specialist.For property that is situated in the UK, the UK VAT position will need to be considered. This will depend primarily on the nature of the property.New build eligible propertyFor the investor purchasing a newly built eligible property, their purchase will be zero-rated for VAT purposes. This means that the developer who has sold the property will not charge any VAT on the sale, although they will be in a position to reclaim back the VAT they have incurred on their build costs (with a few specific exceptions). Note that ‘new’ in this context means the first grant of a major interest in an eligible property by the person who has constructed it.An eligible property is:•an eligible dwelling•a building that
VAT registration ― voluntary
VAT registration ― voluntaryThis guidance note provides the following information regarding VAT registration on a voluntary basis:•when it is possible•reasons why it may be appropriate•practical points to considerFor in-depth commentary on the legislation and case law concerning voluntary VAT registration, please refer to De Voil Indirect Tax Service V2.144–V2.146.For guidance about the process of registering for VAT, please refer to the VAT registration procedure guidance note.The Input tax ― overview guidance note includes guidance on the rules for claiming VAT on costs incurred prior to the date of VAT registration.The Flowchart ― VAT registration ― compulsory or voluntary is intended to provide an overview of when UK VAT registration may be required on a compulsory basis or may be available on a voluntary basis. The flowchart does not, however, reflect all of the points covered in this guidance note and the VAT registration ― compulsory guidance note and it should be used in conjunction with both of these guidance notes.When can a person register for VAT voluntarily?The VAT registration ― compulsory guidance note explains when VAT registration is required on a compulsory basis. If VAT registration is not required on a compulsory basis, it is available on a voluntary basis if a person makes, or intends to may, any supplies that provide the person with an entitlement to claim VAT as input tax. For guidance on claiming VAT as input tax, please
Exemption ― burial and cremation
Exemption ― burial and cremationThis guidance note provides an overview of the VAT treatment of services that are provided in connection with the burial or cremation of human remains.VAT treatmentThe following services are exempt from VAT:•the disposal of the remains of the dead•making arrangements connected with the disposal of the dead•services of one undertaker to another in connection with a specific funeral or cremationVATA 1994, s 31; VATA 1994, Sch 9, Group 8, items 1 and 2; VBURC1000; De Voil Indirect Tax Service V4.151; HMRC Notice 701/32The VAT exemption only applies to the disposal of human remains. Disposal includes, burial, cremation or disposal at sea. This was confirmed in the tribunal case UFD Ltd. The burial or cremation of an animal is liable to VAT at the standard rate.The exemption under VATA 1994, Sch 9, Group 1 (land) applies to the provision of grave space and the right to place an urn in a niche, etc.Funeral directors and undertakersIf the organisation provides a ‘funeral package’, the following goods / services will be exempt from VAT, providing the overall package includes disposing of the remains of the deceased person:•coffins•coffin cover / fittings•casket, scatter tube or urn•embalming•digging and grave preparation•transporting the deceased person to the burial or cremation ground•shroud / robe•using the chapel of rest•providing bearers•transportation of the mourners•tolling the bell and music at the serviceIf the organisation provides the following services, supplied in respect of a
Option to tax ― when can an option be revoked?
Option to tax ― when can an option be revoked?This guidance note looks at the circumstances under which an option to tax may be revoked.For an overview of the option to tax more broadly, see the Option to tax ― overview guidance note.In-depth commentary on the legislation concerning the revocation of the option to tax is found in De Voil Indirect Tax Service V4.115D.Introduction to the revocation of the option to taxThe option to tax is normally a long-term decision and therefore not one to be taken lightly. The advantages and disadvantages should be weighed up carefully since once the option has been taken, the circumstances in which it can be revoked are narrow. These advantages and disadvantages are explored in the Option to tax ― deciding whether to opt guidance note.Broadly, the situations in which the option to tax can be revoked can be divided into the following categories (the conditions of which are explored further in this guidance note):•revocation in a six-month cooling off period•revocation where no interest has been held in the property for six years•revocation after 20 yearsNote that as well as there being a possibility of revoking the option to tax in the circumstances above, there are also circumstances where the option to tax is not effective / is disapplied. These circumstances are covered separately in the Option to tax ― what is covered by an option? guidance note.Revoking the option to tax in a six month cooling off periodIt is
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