View the related Tax Guidance about Reverse charge
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
VAT fraud ― overview
VAT fraud ― overviewThis guidance note provides an overview of the most common types of VAT fraud that can be committed and how a potential fraud will be investigated by HMRC.Common types of VAT fraudThe most common types of VAT fraud are:•businesses trading over the VAT registration threshold that deliberately fail to register•the suppression of sales and / or purchases•false invoicing•the manipulation of VAT liabilities and accounting schemes•missing trader fraud•labour provider fraud•smuggling goodsVATF10000Businesses who deliberately fail to registerA taxable person is a business who is either making or intending to make taxable supplies in the UK, distance sales in the UK, or relevant EU acquisitions of goods in Northern Ireland, and may be liable to be registered for VAT or be entitled to register for VAT. If a person is liable to be registered for VAT and deliberately fails to register, they are committing fraud.Also, if a person is not registered for VAT and is in business and they charge VAT on supplies of goods and services and this VAT is not accounted for to HMRC, the person is committing fraud.Please see the VAT registration and deregistration ― overview, VAT registration ― overseas businesses and Penalties ― VAT wrongdoing guidance notes for more information.Suppressing sales and / or purchasesThis is a simple form of VAT fraud and is commonly used in sectors that have a higher number of cash sales; but any type of business can be involved in this type of
VAT review ― registration and compliance
VAT review ― registration and complianceThis guidance note is intended to provide more detail on areas to consider during a VAT review which relate to general compliance. This document should be used in conjunction with the Checklist ― VAT review when undertaking the actual review in order to ensure that all relevant items have been covered.Whilst this guidance and associated checklist have been prepared to seek to cover the common issues and risks which might arise, care should be taken to ensure that any specific business or sector issues are considered as part of a comprehensive review.VAT returns and compliance ― return and payment deadlinesA typical starting point when undertaking a VAT review or due diligence exercise is to confirm whether all VAT returns and payments have been made on time. The VAT return and any payment due must reach HMRC by the due date stated on the return. For a normal return, this will be:•no later than one month after the end of the VAT return period, and•no later than one month after the effective date for cancellation of registration (or, in the case of a business that had failed to register, one month after the date when liability to be registered ceases)Businesses can check the payment deadline using the payment deadline calculator provided by HMRC.If during the course of a VAT review it is identified that returns or payments have been made late, the next step will be to confirm whether the
Renovations and alterations ― reduced-rating works on empty homes
Renovations and alterations ― reduced-rating works on empty homesThis guidance note explains when certain renovation works on ‘empty’ residential properties can qualify for the reduced rate of VAT.For an overview of the liability of construction services more broadly, see the Overview ― construction, conversion and renovation guidance note.In-depth commentary on legislation and case law relating to reduced-rated renovations is contained in De Voil Indirect Tax Service V4.413.When can renovation works be reduced-rated?It is possible to reduced-rate renovation services when the following conditions are satisfied:•the premises being renovated or altered are ‘qualifying residential premises’•the services are ‘qualifying services’•the premises have not been lived in for at least two years•if appropriate, a valid certificate is held•if appropriate, planning consent / building control approval has been obtainedVATA 1994, Sch 7A, Group 7; Notice 708, para 8.1.2These conditions are explored further in this guidance note.What are ‘qualifying residential premises’?Qualifying residential premises include the following:•a single household dwelling•a multiple occupancy dwelling•a building (or part of a building) that was used for a relevant residential purpose when last lived in, and will be used solely for that purpose once the work has been completed•a building (or part of a building) that was one of a number of buildings that were together used for relevant residential purposes when last lived in, and will be used solely for that purpose once the work has been completedVATA 1994, Sch 7A, Group 7, Notes 2, 4AWhat is a single household
Imports ― special rules for consignments of £135 or less
Imports ― special rules for consignments of £135 or lessThis guidance note looks at the special rules that apply to imports of consignments valued at £135 or less which are located outside the UK at the point of sale.For importing goods from outside the UK generally, see the Imports ― overview (rules from 1 January 2021) guidance note. For movements of goods and Northern Ireland, see the Northern Ireland ― overview guidance note.In-depth commentary on the legislation and case law can be found in De Voil Indirect Tax Service V3.305.Imports of goods sold directly to GB customersWhere a consignment of £135 or less is sold directly to a customer in Great Britain and the goods are located outside the UK at the point of sale the place of supply for VAT purposes is deemed to be the UK. The effect of this is that overseas seller must normally register for UK VAT and account for VAT at the point of sale. However, where the supply is business to business and the customer has a valid UK VAT registration number, then a ‘reverse charge’ applies. This means that the overseas seller is not required to account for the UK VAT and instead the customer ‘self-accounts’ for the VAT due. The customer effectively treats the goods as supplied both to and by itself. This is a very similar mechanism to the reverse charge which applies to services bought in from overseas, for which see the
Exemption ― insurance ― brokers and agents
Exemption ― insurance ― brokers and agentsVATA 1994, Sch 9, Group 2, item 4 exempts the provision by an insurance broker or insurance agent of any of the services of an insurance intermediary in a case in which those services:•are related (whether or not a contract of insurance or reinsurance is finally concluded) to an insurance transaction or a reinsurance transaction•are provided by that broker or agent whilst they are acting in an intermediary capacityVATA 1994, Sch 9, Group 2, item 4, Note 1; De Voil Indirect Tax Service V4.123; VATINS2000, VATINS5000; VAT (Input tax) (Specified Supplies) Order 1999, SI 1999/3121; HMRC Notice 701/36This guidance note provides an overview of the VAT rules relating to supplies made by insurance intermediaries and agents. This note should be read in conjunction with the Exemption ― insurance ― overview and Insurance ― specific transactions guidance notes.Who is a broker or agent?An insurance agent is not defined in either the UK legislation. HMRC gives the following definition in its guidance:“For the purposes of the VAT exemption HMRC recognise, that an insurance agent might be anyone who provides insurance related services in an intermediary capacity. An agent could be a tied agent who sells insurance as his main business or, for example, a typical high street retailer or a car dealer arranging insurance to cover the goods they sell. Whereas an insurance broker usually acts for the insured, an agent may act for the insurer, the insured or both. The definition of
Conversion ― reduced-rating conversions to different residential use
Conversion ― reduced-rating conversions to different residential useThis guidance note explains when works in converting premises to different residential use can qualify for the reduced rate of VAT.For an overview of the liability of construction services more broadly, see the Construction ― zero-rating of construction services guidance note.In-depth commentary on the legislation and case law around reduced-rated conversions is found in De Voil Indirect Tax Service V4.411.When can conversion works be reduced-rated?Conversion works will generally never qualify for the zero-rate of VAT (see the Construction ― conversion, reconstruction and alteration of existing buildings guidance note) with the exception of certain conversion works supplied to housing associations (see the Land and buildings - conversion work for housing associations guidance note).However, some conversion works can qualify for the reduced rate of VAT, provided the following conditions are met:•the conversion is a ‘qualifying conversion’•the services are ‘qualifying services’•the services are supplied ‘in the course of conversion’•if appropriate, a valid certificate is held•if appropriate, planning consent / building control approval has been obtainedVATA 1994, Sch 7A, Group 6, Item 1These conditions are explored further in this guidance note.What is a ‘qualifying conversion’?There are three different types of qualifying
Weekly case highlights ― 16 May 2022
Weekly case highlights ― 16 May 2022These are our brief notes and thoughts on cases published in the last week or so which caught our eye and are likely to be of particular interest to tax practitioners. Full case reports and commentary on most of these cases will be included within our normal reference sources in the coming weeks.Business taxCIA Insurance Services Ltd V HMRCThis is another case on broadly the same remuneration trust scheme that was litigated in the Marlborough and Strategic Branding cases. There was a difference of view between the judges in those two cases. In the first, the judge held that the amounts received were distributions and, in the second, the judge held that they were employment income. The outcome in this appeal follows the second decision, which is perhaps no surprise as the same judge was involved. Here, the taxpayer’s case was hampered in two ways. In the first, even the taxpayer’s counsel accepted that the documents were badly drafted. More importantly, in the second, the taxpayer’s witness made a very poor impression. Her explanations about the reasons for the contribution to the trust were not believed; she did not accept that the planning was a tax avoidance arrangement, even though it had been sold as such and all of the purported benefits went to the individual directors of the company in supposedly tax-free loans. The case is an object lesson of what happens when there is a complete lack of understanding by directors
Place of supply of services ― intermediaries
Place of supply of services ― intermediariesThis guidance note looks at the special place of supply rules that apply to intermediary services.For an overview of VAT and international services more broadly, see the International services ― overview guidance note. For information on agency and its VAT implications more broadly, see the Supply and consideration ― agents, agency and principals guidance note.In-depth commentary on the legislation and case law that applies to intermediaries for the purposes of the place of supply of services can be found in De Voil Indirect Tax Service V3.195. What is the place of supply of intermediary services?The place of supply of intermediary services will depend on whether the intermediary service is supplied B2B or B2C.B2B intermediary services fall under the general rule for the place of supply of services and are therefore supplied where the customer belongs. However, B2C supplies of intermediary services are covered by a special place of supply rule. These are taxed in the same place as the supply to which the intermediary service relates (ie the underlying arranged supply). For discussion of whether a supply is B2B or B2C and for the general rule, see the Place of supply of services ― the general rule, relevant business persons and belonging guidance note.What are intermediary services in this context?Intermediary services in the context of the place of supply of services rules are characterised by making arrangements for a supply by or to another person. They can also be other
Online marketplaces
Online marketplacesThis guidance note deals with the various anti-avoidance provisions that were introduced by the Government in respect of supplies made via online marketplaces. This note includes the provisions coming into effect from 1 January 2021.BackgroundHMRC has introduced a number of changes to the law since 2016 in an attempt to combat VAT avoidance by businesses located in both the UK and overseas who sell goods via online marketplaces. This guidance note provides an overview of the changes that have been introduced.What is an online marketplace?In order to work out whether a business needs to consider the implications, it is necessary to determine what an online marketplace is.The Taxation (Post-transition Period) Bill provides a legal definition of a marketplace and it states:(1) In this Act ―‘online marketplace’ means a website, or any other means by which information is made available over the internet, which facilitates the sale of goods through the website or other means by persons other than the operator (whether or not the operator also sells goods through the marketplace); ‘operator’, in relation to an online marketplace, means the person who controls access to, and the contents of, the online marketplace provided that the person is involved in ―a)determining any terms or conditions applicable to the sale of goods, b)processing, or facilitating the processing, of payment for the goods, and c)the ordering or delivery, or facilitating the ordering or delivery, of the goods.(2) For the purposes of subsection (1), an online marketplace facilitates the
Speed up all aspects of your legal work with tools that help you to work faster and smarter. Win cases, close deals and grow your business–all whilst saving time and reducing risk.