November 2021 VATwatch

Autumn Budget

There was very little in relation to VAT in last week’s budget. After a mammoth year for VAT changes with Brexit and the Domestic Reverse Charge, the lack of VAT measures came as something of a relief!

VAT rules in relation to goods leaving free zones took effect from the budget date. These are intended to stop businesses using free zones to obtain an unfair VAT advantage.

A VAT exemption for the import of dental prostheses has been backdated to 1 January 2021.

To support the second-hand motor vehicle industry in NI, the government is introducing a Second-hand Motor Vehicle Export Refund Scheme. Eligible businesses who remove used motor vehicles from GB for resale in NI or the EU may be able to claim a refund in respect of VAT. 

Export Support Services

It might be 10 months too late for a lot of businesses but a service has been set up to offer support to people wanting to export goods or services.

This is billed as a one stop shop where taxpayers can find information about taxes, paperwork, legal requirements, and the rules in specific countries.

There is a telephone service or you can use the online offering which aims to respond within 3 days.

Issues with option to tax form

The current online version of form VAT1614A, notifying HMRC of an option to tax, contains errors. 

It appears that no matter how the question about whether the business is in the UK is answered, you are presented with a box that requires the name of the Tax Representative.

As a workaround,  HMRC has said it is acceptable to put “N/A – UK Opter” for this answer. The address fields for representative also need to be completed but dummy information can be used.

Disposal of entire interest

When a property has been purchased or constructed at the zero rate of VAT, with a certificate stating that it will be used for a relevant residential or relevant charitable purpose, the property may be liable to a self-supply charge if there is a change in use or the entire interest is disposed of within a 10-year period.

The Supreme Court considered in the case of Balhousie, whether a sale and leaseback amounted to a disposal of the entire interest in a property and concluded that it did not. This is a significant change from HMRC’s view which was that the sale and the lease were two entirely separate transactions.

If any taxpayers have made a VAT adjustment in similar circumstances within the last 4 years, there may be scope to make an error correction claim and recover the VAT from HMRC.

More than one DIY Claim

Anyone familiar with DIY Housebuilder claims will know that the guidance states that only one claim can be made and there are very strict time restraints in that it can’t be made until the property is complete but must be made within 3 months of completion.

The First Tier Tribunal recently considered the case of Ellis in which housebuilders had made 2 claims, the second of which was rejected by HMRC.

Their construction had taken a number of years as they were working on it mainly at the weekends and during holidays. In 2017, the council deemed that council tax was payable and they submitted at DIY claim for the VAT, which was paid by HMRC.

In 2019, a second claim was made which was refused by HMRC.

The VAT legislation refers to “a claim”. The Interpretation Act 1978 s. 6 provides that “In any Act, unless the contrary intention appears…….. words in the singular include the plural and words in the plural include the singular”. On that basis, the legislation does not specifically mean that only one claim can be made.

HMRC are yet to comment on the case but this could be of significant benefit to those constructing their own homes and so it is hoped that HMRC will issue a statement in due course.

Thank you for taking the time to read this VATwatch round-up.