Welcome. VAT news from the Isle of Man I hope you enjoy our newsletter.

Transcription

1 Trusted to deliver... Welcome I am delighted to introduce myself as the new Head of VAT Services. VAT is a constantly changing tax and this has been particularly noticeable latterly where changes have been announced that will have a marked impact on the way businesses deal with VAT and on the way in which transactions are dealt with. In this issue... UK Budget Other UK news I am confident that the level of experience I will bring to the team will significantly strengthen the VAT offering SMP Accounting & Tax Limited is able to bring to the market place. I would like to take this opportunity to welcome you to this inaugural issue of what we hope will be a bi-monthly update of key VAT issues as they may affect your business, or that of your clients, with a particular emphasis on issues relevant to international businesses. If you wish to contact any member of the VAT team, details are provided at the end of the newsletter. VAT news from the Isle of Man I hope you enjoy our newsletter. Customs matters News from the EU Peter Duchars Head of VAT Services 1

2 UK Budget The UK Budget actually changed very little as far as VAT is concerned, with the key changes being: an increase in the VAT registration threshold to 68,000 (from 67,000), with effect from 1 May 2009; an increase in the de-registration threshold to 66,000 (from 65,000) with effect from the same date; it was confirmed that the standard rate of VAT will revert to 17.5% with effect from 1 January 2010, but also forestalling legislation is to be introduced to prevent businesses, in certain circumstances, making arrangements to take advantage of the lower rate when in reality the new rate should be applied; further details on the EU s so called VAT package were announced (see below for further detail); and the procedures for opting to tax land & buildings in certain cases have been simplified. These changes will have limited application and centre on businesses that have previously made exempt supplies in the building or land. Other UK news Dealing with tax agents A period of consultation has recently been announced by HMRC that will apply to all taxes, not just VAT, in the UK. The consultation relates to the relationship between HMRC and agents and the interaction between the two to ensure returns etc are correct when submitted. The consultation document considers the possibility of a registration scheme for agents and sanctions where agents submit client returns that are incorrect, where reasonable care hasn t been taken or, in extreme cases, where the agent is deliberately non-compliant. It is not clear yet whether the Isle of Man Treasury will seek to adopt similar provisions in the Isle of Man. Submission of VAT returns by electronic means HMRC have recently announced changes to the filing of VAT returns. With effect from 1 April 2010 all VAT returns for businesses registered for VAT after that date, and for all businesses with a taxable turnover of more than 100,000 must be filed electronically. Payment should also be made electronically. Failure to switch to electronic returns will render the business liable to a financial penalty. It is likely that the concession under which those businesses with a turnover of less than 100,000 can continue to file paper returns will be removed by April As part of this process we will seek to start the introduction of electronic submission of VAT returns ahead of the implementation date. VAT news from the Isle of Man Issue of VAT paid certificates for yachts The Isle of Man Customs & Excise has recently announced that they have now ceased the practice of issuing VAT certificates to yacht owning companies, which have previously been used to evidence the payment of VAT. These certificates have no basis in law and in their place other commercial evidence of the payment of VAT should be retained. Reduced rate of VAT on property repairs etc The Isle of Man currently has in place a concession that provides for a lower rate (5%) of VAT to be applied to certain services, specifically to domestic property repairs and extensions. The current concession is due to expire at the end of 2010, but recent developments in the EU indicate that the changes could be introduced into primary legislation. 2

3 Changes to the time limits for adjustments The time limit for making adjustments to previously submitted VAT returns has now changed from three to four years. This will apply to both under and overpayments of VAT and there are transitional provisions for the first 12 months of the revised provisions. Customs matters Changes to the reporting of goods moving within the EU With effect from 1 July 2009 the TURN (Trader s Unique Reference Number) system has been replaced with a new system, the Economic Operator Registration & Identification ( EORI ) system, We have produced a detailed VAT bulletin on this subject which can be accessed here EORI. In brief though, an EORI number is required for those businesses involved in the movement of goods, particularly to and from the EU and where contact with Revenue authorities is required. A legal person will have only one EORI number, which should be valid throughout the EU. As such, it will not be possible for a business to have different numbers for branches or divisions whether located in the same or different EU countries. Those businesses that are involved in the importation of goods into the EU would previously have had TURNs. These have now automatically been replaced with EORI numbers. However, there are circumstances where a business did not have a TURN, but now requires an EORI number. We are able to obtain these numbers, which should be applied for prior to the movement of any goods. News from the EU Changes to the place of supply The most significant changes to VAT have come about as a result of proposals announced by the EU. These changes will take effect over a five year period, with the first changes due to take effect from 1 January There are four main elements of the VAT Package : the place of supply will change for certain supplies of services, meaning VAT will be accounted for by the customer in certain circumstances and in other cases the supply will be liable to VAT where the service is actually used. This could mean suppliers having to register in other countries to charge VAT in those countries; the requirement to file EC Sales Lists will be extended from merely goods to include the need to report the provision of services to VAT registered businesses; the current process for the recovery of foreign VAT incurred under the 8th Directive reclaim process will be revised and will be made electronically, which should speed up the process. The claims will in future be made to the home authority rather than to the country where the VAT has been incurred; the place of supply for many electronic services will be changed from 1 January 2015 such that VAT will be due where the customer is located rather than where the supplier is based. To facilitate this, a single point of registration will be permitted, usually where the supplier is based. This will have a pricing impact on such businesses, particularly those based in a low VAT jurisdiction. 3

4 Checking of EU VAT numbers The European Commission has recently launched an updated system to check the validity of VAT numbers provided by customers and suppliers located in other member states. Furthermore it is possible now to obtain a certificate to evidence that a check on the validity of the number has been made, which may be of use in circumstances where a business is unwittingly involved in a fraud. The relevant website is Changes to the VAT liability of qualifying aircraft The European Commission has now formally requested the UK amend its legislation relating to the zero rating applying to certain types of aircraft. The EC Directive on VAT contains exemptions applying to aircraft where they are used by an airline operating for reward chiefly on international routes. Following an ECJ case the exemptions afforded by the above provisions can be extended to aircraft operating on domestic routes, as long as it is used by an airline that flies chiefly international routes. The UK applies the zero rating according to maximum take off weight, with no reference to the airline or the routes being flown. As such, currently, most aircraft with a take off weight in excess of 8,000kgs are zero rated. These provisions in turn apply to the provision of parts and spares for such aircraft together with leasing, maintenance and handling services. At this stage it is not clear whether the UK will make the necessary changes to the legislation, but failure to do so may result in infraction proceedings being taken by the EC, which could force the UK to make the necessary changes. For many airline businesses these changes will have little impact, other than cash flow. The most significant impact, however, will be felt by those people who acquire such aircraft for non-business purposes, as the cost of purchase and operation of the aircraft will increase by the level of irrecoverable VAT. Review of the conditions applying to VAT groups The European Commission has also issued a Communication relating to the composition of VAT groups. The use of groups varies throughout the EU, and traditionally the EC has permitted groups, with the application and eligibility being determined by the individual member states. Perhaps the key proposal within the Communication is that VAT groups should only comprise taxable persons. As such it would appear that any exempt, or partially exempt companies, any dormant companies or those not in business would not be eligible for inclusion in the group. Whilst the UK and Isle of Man grouping legislation contains significant anti-avoidance legislation such companies are currently eligible for inclusion in groups. This has the effect of enabling certain VAT mitigating structures to be introduced. A number of years ago a similar proposal from UK Customs & Excise, as they were, was rejected by businesses, but this latest initiative may well result in the changes being introduced. The cost to those businesses involved in finance and insurance or with holding companies within the VAT group is anticipated to be significant. 4

5 Contacts SMP Accounting & Tax now have a dedicated team of four staff working full time on VAT. The VAT team are able to provide VAT compliance services for businesses based in the Isle of Man, UK and Ireland. In addition, VAT consultancy can be provided in respect of any situation from structuring a business, to advice on particular transactions or dealing with the relevant Revenue authorities. For further detail on any VAT related matter please contact: Peter Duchars Head of VAT Services Tel: +44 (0) peter.duchars@smppartners.com Steve Glynn VAT Manager Tel: +44 (0) steve.glynn@smppartners.com David Booker VAT Manager Tel: +44 (0) david.booker@smppartners.com For further information on SMP Accounting & Tax please contact: SMP Accounting & Tax Limited P.O. Box 227 Clinch s House Lord Street Douglas Isle of Man IM99 1RZ Tel: + 44 (0) Fax: + 44 (0) info@smpaccountingandtax.com The SMP Partners Group of Companies are: SMP Partners Limited and SMP Trustees Limited are licensed by the Isle of Man Financial Supervision Commission to provide corporate, and corporate and trust services, respectively. SMP Fund Services Limited is licensed to provide collective investment scheme and corporate services. SMP Accounting & Tax Limited is a member of the ICAEW Practice Assurance Scheme. SMP Capital Markets Limited. SMP Yacht and Aircraft Limited. The information in this newsletter is intended for general guidance only and should not be applied to individual circumstances without professional advice. No liability or responsibility for loss to any person acting, or refraining from action, on the basis of any material in this publication can be accepted by any member of the SMP Partners Group of Companies. 3