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VAT Penalties Blog


Charities – Zero rate VAT on Printed Matter?

A recent case at the VAT Tribunal; Paragon Customer Communications (Paragon) may have reopened the debate about the VAT liability of Direct Mail Packs. In 2014/15, HMRC decided that the treatment of the production and delivery of Direct Mail Packs was effectively a standard rated supply of marketing services rather than a supply of delivered […]

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Good news for clubs, societies and membership organisations!

Membership Organisations often offer a package of a variety of benefits to their members in return for a subscription. These benefits can range from a glossy magazine or an emailed newsletter to significant discounts and entry into exhibitions and even a ticket to the annual Gala Ball. And many Membership Organisations apportion their subscriptions between […]

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Free events for charities

We act for a number of local (and not so local) charities and NFP organisations and provide specialist advice on accounting, governance, tax and VAT to many more. In 2018 we are going to run a number of interactive breakfast workshops to share our insights on the issues that affect this sector. The aim will […]

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Can Electronic Property Searches be treated as VAT free disbursements?

A recent case at the First Tier Tribunal will be of interest to law firms offering conveyancing services. A firm of solicitors bought on-line local authority property searches through a third party agency. The agency was not charged VAT by the local authorities concerned and they correctly passed the cost to the solicitors as a […]

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New opportunity for private schools and other educational establishments to claim back VAT !

Brockenhurst College CJEU Decision, enables educational establishments to reclaim VAT paid. A European VAT decision concerning the VAT treatment of charges made by the college for meals prepared by students as part of their catering studies and for tickets to performances put on by students could be good news for private schools. It is very […]

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How to manage VAT default surcharges

The Default Surcharge is often seen as a blunt instrument in the battle to improve taxpayer compliance. However a helpful decision on managing Default Surcharges was released earlier this month. The case was heard by the Upper Tribunal so it sets a precedent which HMRC have to follow. A Default Surcharge is the term given […]

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NEW VAT PENALTY for what you should have known!

Last autumn HMRC published a consultation document asking for views on a new penalty for participating in VAT fraud.  The Budget confirmed that the new penalty is due to come into force when the Finance Bill receives Royal Assent later this year. This is a significant development because the new penalty will apply not only […]

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Tax Penalty reduced by £158,000

In a recent tax case the First Tier Tribunal agreed with HMRC that the capital loss claim in Simon Fry’s tax return was due to his carelessness and should  be subject to a penalty, but given that the unused portion of the claimed loss would be used the tribunal agreed that the penalty should be calculated on the […]

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How will VAT change following Brexit?

  What does it mean for my business? Mrs. May said today that we cannot possibly stay in the Single Market, so what does this mean on a practical level to businesses in the UK? Although VAT is a European tax, in the short term it is very unlikely there will be any changes in […]

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Deliberate Error Penalties

Increasingly HMRC are raising penalties for what they consider to be “Deliberate” errors. Until recently deliberate error penalties were few and far between and the increase in these may be due to “tax gap” pressures, yet HMRC seem to be taking the view that if you should have known something, an error is effectively deliberate. […]

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Hot off the press: Pre-registration input tax

HMRC have backed down on their (unannounced) apparent policy change for recovering pre-registration input tax. HMRC had been issuing letters threatening assessments where assets had been on hand prior to the date of VAT registration for a reduction in the input tax to reflect that use. Indeed some assessments had been issued! There has been […]

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Charities and Not for Profits – VAT Update

Level playing field… Charities and Not for Profit businesses providing care and welfare services are increasingly being depended upon to take up the role previously held by the public sector of caring for the most vulnerable in society but it would be wrong to assume that all of these providers benefit from the same VAT […]

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European Commission publishes action plan to simplify EU VAT regime

The VAT Action Plan announced recently by the EU Commission consists of four main threads A single EU VAT system Plans for dealing with VAT fraud Intention for member states to choose their own rates Support for e-commerce and SMEs The first thing to note is that the plan is primarily a discussion document and […]

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Are VAT Inspectors a dying breed ?

During the past few weeks, a number of business have received notifications from HMRC, informing them that it would like carry out a “remote” VAT audit. This latest style of VAT audit seems to be focused on small and medium sized businesses (SME’s) which is consistent with HMRC publicly-stated initiatives to increase revenue yields from […]

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HMRC targets SME VAT underpayments

HMRC has raised £3.5bn in the last year through investigations into the under-payment of VAT by small businesses, suggesting that these businesses are coming under increasing scrutiny Increased VAT revenue accounted for almost half (45%) of the additional tax yield in 2014/15 from investigations by the local compliance teams used by HMRC to monitor small […]

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Recent Tribunal case resulted in Doctor feeling under the weather

A recent tribunal case considered a situation where the VAT registration threshold was exceeded and an application was made to HMRC for exception from registration. Mr Lane is an NHS consultant. He also makes VATable supplies of medical legal reports as an expert witness in personal injury or medical negligence claims. During 2013 his rolling […]

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VAT rules on Christmas parties and gifts.

Many businesses will have held Christmas parties and lunches for their staff and clients in the weeks leading up to Christmas. Some businesses will have given gifts. They will now want to know whether they can recover the VAT that they incurred on this expenditure.  The following information is meant to act as a guide […]

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VAT on pension scheme costs announced with 12 month extension of transitional regime

This blog is targeted at: • businesses and other taxable entities that provide pension schemes for their employees • pension fund management providers • pension scheme trustees and pension providers • tax advisers HMRC has recently provided an update in relation to VAT recovery on fund management services for defined benefit pension schemes following the […]

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Tribunal states that HMRC charged taxpayer over £900k too much, and reduces total liability to around £19k!

A recent tax tribunal case holds several lessons for taxpayers who are informed by HMRC that they have underpaid their VAT. Mr Hodges ran a scaffolding company, Aqua Scaffolding Limited “Aqua” between 2006 and 2011. One of HMRC’s offices ran a series of “street sweeps” under which a HMRC employee would travel down a residential […]

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Charities and VAT opportunities

For most not for profit entities, VAT is an added cost that needs be considered in respect of any spend plans, particularly when the spending is on a capital item.  It is therefore great news if VAT can be avoided on the purchase of either goods or services. Happily, there are a several reliefs from […]

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HMRC move the goalposts in respect of Pre VAT registration input tax recovery

Various taxpayers and accountancy firms around the country have recently become aware that HMRC has revised its interpretation of the legislation that allows the recovery of input tax incurred prior to registering for VAT. Many taxpayers who have had their pre- VAT registration input tax reviewed over the past few months have seen HMRC challenging […]

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Is VAT due on clothes given to shop workers as uniforms?

The First-tier Tax Tribunal (FTT) has decided that French Connection is liable to account for VAT on the cost of its clothes given to employees to wear whilst they are working in the shops. However VAT was not due on the charge made to employees who left within three months of the start of a […]

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HMRC showing interest in businesses that organise car boot sales, festivals, craft fairs, agricultural/flower shows, collectors fairs etc.

We understand that HMRC are taking an interest in the above with a view to establishing what VAT liability has been applied to charges for traders pitches. The reason for this focus seems to be as a result of HMRC altering its characterisation of what establishes ‘a licence to occupy land’ in its public notice […]

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UK businesses unaware of VAT obligations

A recent study has discovered that over three quarters of a million of the UK’s smallest business owners are not aware of the VAT registration threshold. This could result in small businesses unintentionally not registering for VAT at the appropriate time thereby putting themselves at risk of penalties. If a business has a VATable turnover […]

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Upper Tribunal considers whether compromise agreement precluded VAT recovery assessment

The Upper Tax Tribunal recently considered whether HMRC was entitled to issue an assessment to recover amounts of VAT paid to the taxpayer in error. The taxpayer, a supplier of dental nurses to dental practices, submitted a claim for repayment of overpaid VAT. This was on the basis that its supplies should have been treated […]

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If you make or receive prompt payment discounts, you need to read this.

HMRC has reminded us of its intention to remove one of the few gifts that it gives to taxpayers. The Taxman is not renowned for its spirit of generosity, but hitherto VAT registered businesses that provide prompt payment discounts to their customers have been allowed to treat the discounted amount as the consideration received, even […]

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“We’re not being charged a penalty so we don’t need to appeal against a surcharge notice” Is that always true?

The VAT surcharge system imposes no penalty the first time a business submits its VAT return later than it should have done.  Neither is there a penalty for the second and third defaults provided the surcharge (calculated at 2% and 5% respectively of the VAT due on the return) does not exceed £400. It’s likely […]

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Are Golf Clubs actually entitled to a VAT refund?

We have  mentioned in other blogs that HMRC might be looking to argue that if it were to repay private members’ golf clubs overpaid VAT relating to green fees it would amount to unjust enrichment. It is currently rumoured that HMRC will make the case that the repayable amounts. which are likely add up to […]

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VAT and MOSS – New EU Regulations have nothing to do with rolling stones!

In the first of two blogs on this subject, we look at what MOSS is and why it has been introduced. A subsequent blog will examine how MOSS will work and what the implications are for UK traders. There has recently been a fair amount of press coverage, some more accurate than others, regarding some […]

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Prompt payment discount “perk” to end next March

It seems to be more in the spirit of Scrooge rather than Christmas, that in this season when most of us give one another presents, HMRC has recently reminded us of its intention to remove one of the few gifts that it gives to taxpayers. The Taxman is not renowned for its spirit of generosity, […]

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VAT implications of out of court settlements

A recent case Decided by the First Tier Tax Tribunal highlighted how HMRC can sometimes misread the facts and thereby seek to apply the law inappropriately. In this instance, they sought to apply the bad debt relief legislation when there was no bad debt to apply it to! A business provided legal services to a […]

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Are supplies of education VAT exempt?

Supplies of education are always VAT exempt aren’t they? Well, no actually, as one of our clients recently discovered to their cost. Early last year, one of our accountant clients gained a piece of work preparing the accounts of a performing arts college. The college, a limited company had been in existence for a number […]

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Taxpayer 1 – 0 HMRC

 A taxpayer win in respect of the VAT consequences of an out of court settlement A recent case Decided by the First Tier Tax Tribunal highlighted how HMRC can sometimes misread the facts and thereby seek to apply the law inappropriately. In this instance, they sought to apply the bad debt relief legislation when there […]

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Golf Clubs Handicapped on VAT Repayments

And so the saga goes on! Despite the European Court having ruled back in December 2013 that VAT should not be levied on green fees charged by not for profit members’ clubs, here we are, almost 12 months later, not much further forward. The reason is that HMRC is having a serious case of the […]

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Did you know that snowballs were standard rated for VAT purposes?

Of course the snowballs in question are not the sort that are made out of snow, and if current weather predictions are correct, you will be able to throw until your arms get tired this winter. They are the items made from marshmallow, covered in chocolate and sprinkled with coconut. Given that a tax tribunal […]

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HMRC owed £15.1billion due to ineffective debt management

A vast amount of money is owed to Government, and H M Revenue & Customs (HMRC) in particular, due the lack of a strategic cross government approach to the managing of that debt and getting more money paid to the Exchequer. So say the Public Accounts Committee. HMRC was owed £15.1 billion of the £22 […]

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VAT recovery on costs of restructuring and refinancing dealt a blow by Court of Appeal

The decision of the Court of Appeal in Airtours Holidays Transport Limited (formerly MyTravel) (“Airtours”) regarding VAT recoverability on costs relating to restructuring and refinancing has just been released. This case has important implications for businesses that are currently being challenged in this area in both the corporate and private equity M&A sphere. Key points […]

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If at first you don’t succeed……….

The First-tier Tribunal (FTT) has recently rewarded a taxpayer’s persistence by allowing the company’s appeal against a default surcharge. The FTT found that the taxpayer had agreed a time to pay arrangement with HMRC and as a result had a reasonable excuse for the late payment of VAT. When Princi London Ltd made a VAT […]

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Charities lose out in healthcare VAT

Under current VAT Regulations, NHS Trusts are able to recover most of the VAT which they incur on prescribed services which they procure in the fulfilment of their statutory obligations regarding the provision of healthcare. This is because the provision of healthcare by an NHS Trust or equivalent body is largely outside the scope of […]

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HMRC Guilty of slow play regarding golf club case

Across the UK, Members Golf Clubs are still waiting for H M Revenue & Customs (“HMRC”) to make an announcement of its position regarding the decision of the Court of Justice of the European Union (“CJEU”) in the case of the Bridport & West Dorset Golf Club Limited. As you will recall, the CJEU has […]

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Half of all VAT penalties issued to businesses are successfully challenged

HMRC has revealed that half of the penalties it issues for the late submission of VAT returns are incorrect. 49% of the 17,200 automatic penalties issued by HMRC for the late filing of VAT in 2013 were overturned when challenged by the taxpayer. The system assumes that the taxpayer is in the wrong. A fine […]

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How do you feel about having to tell a client that they need to register for VAT in 27 other EU countries besides the UK?

The place of supply rules relating to where VAT is due for certain services will be changing within the European Union with effect from 1 January 2015. This change will affect businesses providing telecommunications, broadcasting or electronically supplied services to non-taxable or private customers in E.U. Member States. As far as electronic services are concerned, […]

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HMRC loses record numbers of staff!

“Tax doesn’t have to be taxing” – or so the strap line reads. Well that’s certainly not the impression given by the actions of HMRC’s employees! Staff are leaving HMRC in their highest numbers for four years, with almost 1,700 employees leaving in the last 12 months, according to recent research. A total of 1,697 […]

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VAT Boost for Member Owned Golf Clubs

Member-owned golf clubs in the UK could be in line for a considerable windfall after the European Court of Justice ruled that their visitor green fees are not liable to VAT.   Bridport and West Dorset Golf Club, brought a case some time ago against HM Revenue and Customs, arguing that, since they were not-for-profit […]

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Asset seizures by HMRC in lieu of VAT payments doubles in a year

The use by HMRC of its powers of distraint to seize the assets of businesses in order to recover VAT from businesses that have failed to meet their tax obligations grew significantly last year.   HMRC seized goods in lieu of VAT payments 4,746 times last year. This is a 98% increase on the 2,401 […]

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Retailers lose card fraud VAT ruling

In a judgement that could have an impact on most retailers, Dixons Retail plc has lost its case before the European Court of Justice. The Court has ruled that where a customer fraudulently uses a bank card to obtain goods from a retailer and the retailer receives payment of the price through the card system, […]

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VAT Tribunal pays £85,000 to racing tipster

A man who gave such successful racing tips he claims that he was barred by bookies, has won a VAT tribunal where he proved that £85,000 was receipts from winnings rather than income earned from making a supply. Jeff Laughton set up a network of around 40 people through his company who placed bets using […]

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Do your clients struggle to pay VAT ontime?

  So it seems do several other businesses if some of the recently reported Tribunals are anything to go by. No less than eight first tier tribunal reports were published on 1 November in respect of appeals against default surcharges. As these businesses found out, just failing to submit either their VAT return, VAT payment or both […]

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Compulsory online filing is Unlawful!

 Three VAT registered businesses have won their appeals against HMRC’s requirement that they file their VAT returns online. All of the appellants ran their own small businesses. Two of the appellants experienced disabilities which made it excessively difficult or impossible for them to use a computer. A third lived in a remote area of the […]

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VAT Black Hole for holding companies

What is the result if you incur costs in a stand- alone holding company or newly formed company and you cannot demonstrate an intention to make taxable supplies?In the case of BAA Plc and it’s newly formed holding company, Airport Development and Investments Limited (“ADIL”), the result was a VAT black hole of £6 million! This […]

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Series of new Task Forces announced by HMRC

An HMRC taskforce targeting tax dodgers in the road haulage industry in the Midlands has been set up this week. HMRC sets a target level of additional tax for each Task Force to recover and has said that it hopes that this one will recover £3.5 million. HMRC has collected more than £80 million as […]

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VAT changing for online traders

If you’re a business that trades online beware, the VAT man may be coming for you Comments made in a recently published report are likely to mean that businesses trading on the internet will come in for great deal more scrutiny from HMRC in the months to come. I suspect that only the most troubled […]

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VAT-Man targets local sports clubs

Gill Yates, one of our experienced VAT experts has today been interviewed by The Times newspaper regarding H M Revenue & Customs (HMRC) latest attack on village sports clubs. The full article can be found here: The Times In essence HMRC are targeting local sports clubs around the UK in many cases claiming that they […]

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£1billion VAT penalty raised!

That will be £1billion please, or will it? It’s not unusual for clients to feel that  H M Revenue & Customs’ (HMRC) demands on them are unreasonable. It is unusual however, for HMRC to get it as badly wrong as they did in a recent case. The whole affair has highlighted just how inadequately HMRC scrutinise […]

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Europe review import duty regime

Alongside weightier matter like the correct length and shape of a banana, the EC Commission have been busy agreeing the final text for the Union Customs Code (UCC) [formally the Modernisation of the Customs Code  MCC], of goods and materials, which is now scheduled to enter into force on 1 November 2013. This has been […]

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HMRC pile pressure on VAT cheats

Anyone who has deliberately not paid all of the VAT they owe during the past five years would be advised to try to enjoy themselves as much as they can, as from 1st April H M Revenue & Customs (HMRC) have implemented a policy of tightly monitoring the tax affairs of those who have chosen […]

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HMRC doubles Asset Seizures for unpaid VAT

The use by HMRC of its powers of distraint to seize the assets of businesses in order to recover VAT from businesses that have failed to meet their tax obligations grew significantly last year. HMRC seized goods in lieu of VAT payments 4,746 times last year. This is a 98% increase on the 2,401 times […]

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Celebrating 40 years of VAT

On the 1 April 1973 VAT was introduced into the United Kingdom. “VAT is a simple tax” said Anthony Barber (with his fingers crossed behind his back). I was 17. I was happy. I was naive. I put on my Careers Guidance forms that I wanted to be a vet. My handwriting was poor and […]

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Is it worth appealing VAT decisions?

HMRC’s internal review process upholds many more decisions than previously. HMRC’s internal review process is now resulting in more internal review requests going against the tax payer than succeeding. Only 48% of taxpayer’s appeals were successful last year, a big drop from the 60% that were successful in 2011. The internal review process reconsiders decisions […]

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Can HMRC’s opinions on VAT be wrong?

What price an opinion? About £80million for one taxpayer. Sportech PLC believed that HMRC’s opinion regarding the VAT liability of spot the ball competitions it ran some years ago was incorrect. In 2009, they submitted a claim to HMRC for over £40 million of VAT plus interest. HMRC’s policy for many years has been games […]

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HMRC ‘name and shame’

  In a novel move, HM Revenue and Customs have published online photographs of over 30 individuals, who were sentenced last year to a total of almost 156 years, for various offences relating to tax evasion. All but one of the 32 individuals named had evaded either VAT or excise duties rather than corporate or […]

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Tax Man to get tough with tardy payers

VAT-registered taxpayers who are behind in submitting their returns and payments are being offered a once in a lifetime opportunity to put their affairs in order. HMRC have announced that businesses will have until 28 February 2013 to submit outstanding VAT returns and pay overdue VAT. Those who do not will be targeted by HM […]

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The price of VAT frauds in UK

A recent report prepared has revealed that tax fraud makes up 44% of all the fraud reported in the UK. At £603 million, tax fraud identified in 2012 is nearly twice the level reported in 2010 (£309m). VAT fraud made up over 90% of the reported tax fraud. The research underpinning the report examined all […]

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New EU VAT invoicing rules from 1st January 2013

As of January 1st 2013, new EU wide rules came into effect with the aim of simplifying the invoicing process for business. Most importantly the legal obstacles to the use of electronic invoices will be removed from the UK VAT legislation. Electronic Invoicing  Electronic invoices have been given parity with paper invoices. Following the changes, […]

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Serving Up a VAT and Tax Investigation

Who are those shifty looking customers in your restaurant? Could they be undercover H M Revenue & Customs (HMRC) tax officials undertaking an “observation” exercise on your business? In 2011 HMRC announced 12 new task forces specifically aimed at restaurants and fast food outlets. This year, another 30 have been formed.  Their remit to generate […]

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Duty changes on import of flat panel monitors

Flat panel monitors classified within Tariff subheading 8529 59 currently attract a positive duty rate of 14%. The European Commission has recently drafted a proposal which, if adopted, will result in an autonomous duty suspension being applied to most flat panel display monitors; the proposal will create a number of new classifications for all other […]

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Avoiding Penalties the easy way

The easiest way to avoid a penalty from HMRC is by taking reasonable steps to make sure that VAT is accounted for correctly at the outset. Whenever the law changes or HMRC revises its policy, taxpayers are expected to make themselves aware of the changes and, where necessary, to change their processes and the VAT […]

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How common is “common sense”?

  The most frequent mistake that taxpayers make in respect of VAT penalties is that of believing that common sense will be used by HMRC in deciding what the level of any penalty should be. This point is well illustrated by a case that was before the First Tier Tax Tribunal earlier this year. A […]

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HMRC lose VAT-Penalty case

  A taxpayer recently won a tribunal case against a penalty issued against her by the tax authorities. HMRC initially imposed a penalty of £2,140 against her for allegedly registering for VAT later than she should have done. HMRC were unable to show that she didn’t post the necessary registration forms in time. The case […]

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Welcome to the VAT-Penalties Blog

Welcome to our Blog. On these pages we hope to update you with goings on in the World of VAT, VAT Penalties, and HMRC Penalties generally as interesting developments occur. Please feel free to comment on any Blog Posts, or contact us with suggestions for subjects that you would like covering over the coming months […]

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