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VAT Rate Increase

During the 2010 Budget the Chancellor announced an increase in the standard rate of VAT to 20% with effect from 4 January 2011. This allows adequate time for business, particularly retailers, to make any changes to pricing, point of sale and accounting systems to deal with the new rate. To combat any unreasonable attempts to reduce the burden of the increase HMRC have also announced anti forestalling legislation which will block any prepayment planning arrangement which does not meet normal commercial practices. Exempt, partly exempt and nonprofit making organisations who are unable to recover all of the VAT on their costs may still wish to review whether there are any short term commercially viable VAT savings to be made within these rules.



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ECJ rules on the rounding of VAT in Wetherspoons case

The ECJ has ruled that member states should decide on the rules and methods for rounding up amounts of VAT as long as they observe the principles underpinning the EU common system.

The decision follows a case involving HM Revenues and Customs (HMRC) and JD Wetherspoons, a UK pub chain. The company had argued that it was entitled to apply the method of rounding down when calculating VAT on sales while HMRC felt that VAT should be rounded arithmetically when the customer pays.

UK law states that a business may round down the total VAT payable on all goods and services shown on a VAT invoice to a whole penny and that fractions of a penny can be ignored.

However, as Wetherspoon only provides VAT invoices upon request, Wetherspoons argued that its method of aggregating these amounts and rounding them down the total to the nearest penny was a more efficient system.



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Electronic VAT returns from 2010

HMRC has announced that it intends to withdraw paper VAT returns with effect from 1 April 2010.


This will apply to all businesses that register for VAT from this date, and existing VAT registered businesses that have an annual turnover exceeding £100,000 (exclusive of VAT). These businesses will have to complete their VAT returns online and make payments electronically.



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Changes to the online VAT registration form

HMRC have updated the online version of the VAT 1 form (the application form for VAT registration) to match the paper version of the form. The ‘new’ paper version was put into circulation in late 2006, while HMRCs online system still used the ‘old’ format.
From 2010 all applications must be completed and submitted online. With both versions “in sync” the necessary change to online applications should be simpler



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Change to the duty limit, but NOT the VAT limit

When goods are imported into the UK from outside the EC there will be no customs duty or import VAT due if the value is £18 or less. However, from 1 December 2008 the duty threshold increased to £105.
We can confirm that the VAT limit is still £18. This means there is an additional cost (VAT) when goods up to a value of £105 are imported.
Any excise duties (if applicable) remain unchanged in line with the import VAT threshold.



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Revenue & Customs Brief 55/2009 Bingo Duty: Rank High Court Ruling on 8 June

Issuing Department
HM Revenue and Customs
Issue Date
21 August 2009

Abstract
HMRC announce following the ruling in Revenue and Customs Commissioners v The Rank Group that they maintain their view of the law on the applicability of VAT to Mechanised Cash Bingo par fees is correct and they have sought leave to appeal the High Court decision. HMRC will raise protective assessments for bingo duty due in case it is finally determined that VAT is not due on any bingo par fees.

This Revenue & Customs Brief sets out HM Revenue & Customs' (HMRC) policy on bingo duty as a result of the Rank [2009] All ER (D) 65 (Jun) ruling, and it also reminds operators of their legal obligations for accounting for bingo duty.

Background
The High Court ruled in the case of Rank that their Mechanised Cash Bingo (MCB) par fees were exempt from Value Added Tax because the way the UK had applied VAT to MCB par fees had resulted in a breach of fiscal neutrality.
HMRC has sought leave to appeal against the High Court ruling but until and if HMRC succeed in the appeal, the Rank High Court ruling has effect across all taxpayers in the same situation.
HMRC is now considering claims for VAT output tax wrongly accounted for by bingo operators on MCB participation fees. A Revenue & Customs Brief was issued, number 40/09 which explains the action HMRC is taking.

Revenue & Customs Brief 40/09
The Brief also explained that HMRC was considering the impact of the High Court Ruling on bingo duty.

Bingo duty implications
1. Bingo duty is calculated on bingo receipts (after any VAT due has been deducted) minus winnings. The High Court has ruled that MCB receipts are exempt from VAT. If VAT has been deducted from MCB receipts when calculating the amount of bingo duty due on returns already submitted then bingo duty has been underdeclared on those returns.
2. All businesses making bingo duty returns are required to include any underdeclarations of bingo duty made on previous returns (box 7 of the return, form BD510 refers). Following the High Court decision in Rank, HMRC requires businesses to make adjustments for any underdeclarations of bingo duty for returns in respect of prescribed accounting periods from September 2006 onwards if they have not already done so. If you have not already adjusted an earlier return then these adjustments should be made on your September 2009 bingo duty return.
Where HMRC has already assessed for the underdeclared duty, businesses need not make these adjustments. (Please see the explanatory notes to the return).
3. Subsequent bingo duty returns submitted will be scrutinised by HMRC for any additional duty included within box 7 of the return and returns received will be risk assessed. Returns may be selected for additional checks to be made. Some visits to businesses to check their accounting records may be made in conjunction with other work to check claims for repayments of VAT as a result of the Rank High Court Ruling.
4. If you fail to make the required adjustments and do not account for any underdeclaration, HMRC will assess for the bingo duty due. In addition, a failure to adjust your September 2009 bingo duty return may leave you liable to penalties.
5. HMRC maintains that its view of the law is correct and that MCB takings remain liable to VAT. However, both businesses and HMRC will need to protect their positions during the ongoing litigation. Businesses which make adjustments for bingo duty as required at Paragraph 2 above may wish to make claims to recover these amounts and appeal their subsequent refusal in the event that the current ruling is reversed in a higher court.
6. HMRC does not accept that the High Court ruling extends beyond MCB to encompass par fees charged on all bingo. However in order to protect our position we will raise protective assessments for bingo duty due in case it is finally determined that VAT is not due on any bingo par fees. Payment of these protective assessments will not be enforced until and unless the final legal position justifies such action.
Published Date
21/08/2009