Purchase of own shares, Union Customs Code, Overseas VAT claims

One of our objectives in publishing these practical and commercial weekly tax tips is that you hear about aspects of the UK tax system you weren’t aware of, or had forgotten. This week we report a challenge by HMRC to the CGT treatment when a company purchases its own shares, and a new EU customs code. We also have a reminder of the deadline for reclaiming VAT incurred in other EU countries.

This is an
extract from our topical tax tips newsletter dated 22 September
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Overseas VAT claims
When a VAT registered business sends its employees or directors on business trips to other EU countries, those individuals will incur expenses such as: hotel accommodation, restaurant meals and car hire. The VAT element of those expenses can’t be reclaimed on the business’s UK VAT return, because the VAT incurred is overseas VAT not UK VAT.

The UK business can only claim a refund of the overseas VAT by way of an online claim made through the HMRC VAT online service. You can do this on behalf of your client.

The refund claims can be made for periods of not less than three months, in which case the minimum claim is €400 or equivalent in local currency. Where one claim is submitted for the calendar year the minimum permitted claim is €50, or equivalent in local currency. Claims for the calendar year to 31 December 2015 must be submitted by 30 September 2016, late claims are not permitted.

Don’t assume that every EU country has the same rules about non-refundable VAT as the UK. For example, in the UK VAT on business entertaining expenses can’t be reclaimed; in other countries a block on reclaiming road fuel or hotel accommodation may apply. You may need to research the VAT rules for each country for which you submit a claim, but the instructions with the online claim will help with this.

Generally, you won’t be required to submit invoices for the expenses with the refund claim, but those invoices must be retained. Some member states will request a scan of invoices with values of €1000 or more, or more than €250 for fuel.

 It takes up to four months for the refund claim to be processed, but if a query is raised the processing can take up to another four months. If the claim is paid more than 10 days following the end of the processing period, interest must be paid by the refunding state. Once again we have VAT experts in the Network who could help here.

This is an
extract from our topical tax tips newsletter dated 22 September
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 
 
The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Class 1A NIC reports, CIS gross payment status, When can VAT be reclaimed?

Much of tax compliance is about detail – sending the correct information to HMRC at the right time in the specified form. Last week we had some tips on how to comply with the requirements for class 1A NIC, and the new compliance test for CIS gross payment status. We also reported a VAT case which may have wider implications for businesses which are trying to raise funding from a variety of sources. 

This is an
extract from our topical tax tips newsletter dated 21 April
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 

When can VAT be reclaimed? 
A VAT registered trader can reclaim VAT he incurs on goods and services to be used for the purpose of making taxable business supplies. Goods or services which are used for non-business activities, or for generating VAT-exempt sales, can’t be included in a VAT claim, unless the partial exemption rules apply. 
  
This is the foundation of the VAT system, and clients need to be reminded of this occasionally. HMRC are increasing questioning whether costly purchases are used for a purpose that generates VATable sales, and thus whether the VAT can be reclaimed. In a recent case HMRC attempted to block the repayment of VAT paid on the purchase on single farm payment entitlements (SFPE). 
  
SFPE units gave the farmer entitlement to receive certain EU farming support payments. The SFPE units could be traded, and gains made on their sale qualified for business asset roll-over relief for CGT. The SFPE scheme was replaced by the Basic Payment scheme which came into effect from December 2013, but the principles are the same. 
  
Frank Smart & Sons Ltd was building up its beef cattle farming business. The company acquired 34,777 units of SFPE and paid VAT on that purchase of £1.054m. Those units generated between £1.7m to £2.4m per year of single farm payments for the farm, which used that money to pay down its overdraft, build additional farm buildings and acquire surrounding farm land. 
  
HMRC argued that the SFPE units were acquired for the purpose of generating income which was a non-economic activity outside the scope of VAT, so the VAT paid on the purchase of the units could not be reclaimed. HMRC chose to ignore the fact that the single farm payments were used to build assets for the business. The First-tier and the Upper-tier Tribunals both agreed that the purchase of the SFPE were an integrated feature of the farming enterprise. Also the costs of acquiring the SFPE units were part of the business overheads, which formed a component of the price of the farm’s products – in this case beef cattle. 
  
This case could have wider implications for businesses who incur costs to generate sources of finance such as grants or crowd funding. Our VAT experts can advise on any unusual VAT-reclaim situations which your clients may experience.

This is an
extract from our topical tax tips newsletter dated 21 April
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 
The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>