Submitting a written enquiry to HMRC can be a trial...

Our recent experience in trying to make a written submission via e mail to the Written Enquiry Team at Southend demonstrates how difficult it can be sometimes to get your message through.

Firstly, we discovered that the advertised e mail address, enquiries.estn@hmrc.gsi.gov.uk is no longer a recognised address.

Searching for the new system, we discovered it’s now online at the HMRC website (as below) and you need to submit an online form with your enquiry.  It’s definitely HMRC’s preferred route as it says below.  That’s okay, but your submission has to be less than 2,000 characters and you can’t send an attachment.  Not very useful when you are submitting something like a request for a Partial Exemption Special Method, which requires a number of specific paragraphs which HMRC stipulate.  

So be aware, you need to be brief these days, or resort to posting your request. 

For general VAT enquiries

Where possible HMRC strongly recommends that you submit your questions about VAT by secure email using one of the links below rather than by post. HMRC can reply to your enquiry more quickly this way. Only particularly long questions or those with attachments should be sent by post.

Email HMRC for your Effective Date of Registration (EDR)

UK VAT-registered business – email a VAT question

Business not registered for VAT in the UK – email a VAT question

Members of the public – email a VAT question

Agent with a UK VAT-registered client – email a question

Agent with a client who is not registered for VAT in the UK – email a question

If you need to write to HMRC by post, please use the following address:

HM Revenue & Customs
VAT Written Enquiries Team
Alexander House
Victoria Avenue
Southend
Essex
SS99 1BD

For further information please contact our Corporate Tax Director, Sarah Brock: sarah.brock@wardwilliams.co.uk

Land and property VAT – VAT recovery on conversion of pubs to houses?

In the current economic climate, there are an increasing number of pubs being converted to residential accommodation.  If carefully managed, conversion works can qualify for the reduced rate of VAT of 5%.  However, if the developer then goes on to sell the dwelling(s) and part of that space was previously used for residential purposes e.g. as staff living accommodation, input VAT recovery is usually blocked. Whilst the input VAT can be minimised to 5%, this still creates a VAT cost.

HMRC’s position was challenged in the recent case of Alexandra Countryside Investments Limited. The appellant converted a pub into two semi-detached houses. The company claimed input tax in relation to the conversion, on the grounds that the sale of the houses would be zero-rated. HMRC denied the input tax arguing that the sale of the houses would instead be exempt as before conversion the pub included a manager’s flat (parts of which were incorporated into both the semi-detached houses). In HMRC’s view, this prevented the sale of the houses from being zero-rated and meant the related VAT was irrecoverable.

However, the Tribunal found in favour of the taxpayer, concluding that previously residential elements could be used in the conversion where additional dwellings are created. This meant that contrary to HMRC’s guidance, the sale could be zero-rated and the related input VAT recoverable. Whilst a Tribunal does not set a legal precedent and HMRC could still appeal the decision, if you are carrying out similar conversions, you may wish to consider putting in a protective claim for input VAT recovery.  Please let us know if you would like to discuss this possibility.

Another interesting point brought out by the Alexandra case highlighted HMRC’s formal review of the matter which was prepared by an HMRC Higher Officer. Apart from the preamble and the standard onward appeal rights, the letter consisted of just two sentences. The Tribunal commented that “…this review in effect says nothing other than “we are right and you are wrong”. We feel that taxpayer confidence in the statutory system of HMRC internal reviews – most of which, in our experience, are conscientiously and carefully drafted – requires better performance than in the current case…”

For further information please contact Ward Williams’ Corporate Tax Director - Sarah Brock:  sarah.brock@wardwilliams.co.uk

Selling in a global marketplace - VAT pitfalls for e-tailers

A number of the major established e-tailers now offer SMEs easy access to the global marketplace via their websites, which is great news for these smaller businesses, but it brings with it a great deal of complexity and overseas VAT obligations. 

We have seen a significant increase in overseas tax authorities pursuing UK SMEs for local VAT on the basis they have been making B2C sales into their country in excess of the VAT distance selling threshold (Euros 100k or 35k per annum depending on the country). 

Under the distance selling rules, B2C sales of goods from the UK to EU private individuals are taxed at the 

UK VAT rate until the threshold overseas is breached, at which point overseas VAT is due on the sales instead of UK VAT.  We are seeing a sharp increase in the number of cases where the SME has been contacted by an overseas tax authority seeking VAT on revenues and imposing significant penalties for non-compliance.  The tax authorities review websites regularly to identify overseas vendors. 

Historically an overseas tax authority would struggle to force a non-resident business to comply with its local rules.  However in the past year we have seen wide use being made of the EU’s ‘mutual assistance’ provisions, which allow overseas tax authorities to seek the assistance of e.g. HMRC to collect VAT due on their behalf.   The business faces the prospect of owing additional VAT overseas – this can have an adverse impact on profits if the overseas rate is higher than the UK rate. 

If you would like to better understand your VAT registration obligations overseas under the distance selling rules give us a call.  We also offer a low cost VAT registration and VAT return completion service and can advise on areas such as pricing strategy to take account of varying VAT rates, website terms and conditions, and what your website needs to be able to do to recognise the customers’ location.

For further information please contact Ward Williams’ Corporate Tax Adviser -  Sarah Brock at sarah.brock@wardwilliams.co.uk

Child Benefit Tax Charge – Do you need to complete a tax return?

HMRC is to start a campaign in order to raise awareness of the ‘High Income Child Benefit Charge (HICBC)’.  It is estimated that around 500,000 taxpayers may need to complete a self assessment (SA) tax return for the first time in order to declare that they have a HICBC.

Whether you are in agreement or not, HMRC has been asked to administer the collection of the HICBC and in doing so, has put thousands more people into SA.  What is all the fuss about?  Parents on higher incomes who have continued to receive child benefit after 7 January 2013 will need to ensure that they register for SA by no later than 5 October 2013 to avoid any penalties for ‘failure to notify chargeability to tax’.  Therein lies the problem – have people been adequately informed of their responsibilities to approach HMRC and register for SA?  Will penalties be imposed on those individuals with no interest in the tax system or will people just ‘get away with it’?  More interestingly, are HMRC easily able to identify them?  The latest campaign to raise awareness suggests not.

Another fundamental issue which has caused debate is HMRC’s approach to prompt individuals with “income over £50,000” to register for SA, yet it is an individual’s “adjusted net income” which is taken into account when determining whether the HICBC applies.  It is not clear whether an individual with income in excess of £50,000 before adjustments has an obligation to contact HMRC, even if no HICBC charge will apply (for example, where personal pension contributions reduce adjusted net income below the £50,000 income threshold).  This needs clarification from HMRC.

In summary, the HICBC applies to child benefit payments received from 7 January 2013.  Those who have applied to stop receiving child benefit before 7 January 2013 are not required to take any action.  As per HMRC guidance, a person is liable to pay the child benefit tax charge if all of the following conditions apply:

·         their income is over £50,000 a year, and

·         either they or their partner received child benefit payments after 7 January 2013, and

·         their income for the tax year is higher than their partners.  The partner with the higher income is liable to pay the charge if both partners have income over £50,000

If you wish to discuss the issues raised in this article, please feel free to contact Simon at simon.boxall@wardwilliams.co.uk

Patent Box and R&D headlines

The Patent Box scheme came into effect on 1 April 2013. Companies who elect into the regime will benefit from a reduced rate of corporation tax on profits generated from qualifying patents.  The effective rate of tax for the first year (for large companies) will be 15.2%, falling gradually to 10% by 1 April 2017.

Although it will take some time before uptake of the scheme is known with certainty, initial responses from the business community have been generally positive with the number of overseas companies filing patents in the UK increasing.

Concerns have been voiced by the German finance minister that the UK Patent Box regime (along with similar schemes in other European countries) result in unfair competition for foreign investment.  The UK Government is yet to comment.

Patent Box – some common issues

Whilst the Patent Box regime offers some attractive tax savings to companies electing into the regime, there are a number of conditions to be met and some complex calculations which will need to be carried out in order to claim the relief.  Common problems faced by companies looking to take advantage of the regime include:

A patent registered in the name of an individual owner of the company.  Even if this is the only company exploiting the patent, if there is no license Patent Box relief will not be available.  In order to qualify the company would need to hold an exclusive license to use the patent.

The accounting system and records may not be capable of identifying relevant income and costs relating to patents.  Accounting systems may need to be adapted to help maximise the amount of profit benefiting from the preferential Patent Box tax rate.

Group licenses not meeting the definition of an exclusive license for the Patent Box regime.  In this case licenses should be reviewed and amended if necessary.

Research & Development

Tax relief for qualifying R&D expenditure by small and medium sized enterprises is currently available at a rate of 225%.  This effectively gives a tax deduction of £2.25 for every £1.00 spent on qualifying R&D activities.

Loss making companies can choose to claim relief by way of R&D tax credits which results in a cash sum paid to the company by HMRC, currently at a rate of 11% of the loss surrendered.

Large companies are able to claim tax relief of 130% of qualifying expenditure.  As an alternative a more generous Above The Line (ATL) R&D credit was introduced from 1 April 2013.  Previously expected to be at a rate of 9.1%, George Osborne announced in the 2013 Budget that the ATL rate will instead now be 10%.  Companies can choose to continue claiming R&D relief under the current large company scheme, but the ATL credit will become mandatory on 1 April 2016.

Don’t miss out!

The government continues to promote R&D tax reliefs and the new Patent Box regime.  The tax reliefs are generous and present many companies with the opportunity to significantly reduce their UK corporation tax bill.  Don’t assume that these reliefs won’t apply to you, R&D tax credits can be successfully claimed by companies in many different industries not just the traditional laboratory based companies.  Many companies are now considering patent registrations just to benefit from the Patent Box regime.  Even though the scheme is underway it is not too late to benefit.  If you’re doing something innovative, developing new products or services, improving existing products or procedures or carrying out a project which seeks to achieve an advance in science or technology, then you may be able to benefit from R&D tax reliefs or Patent Box.

For further information please contact Sarah Brock on 01932 830664 or email sarah.brock@wardwilliams.co.uk

Weybridge Cricket Club 3 year sponsorship

We have been established in Weybridge for over 20 years and have always supported and been active in the local community. The sponsorship of Weybridge Cricket Club seemed like the perfect opportunity to maintain this involvement. The funding provided will help to promote cricket within the local community.