“VAT is a simple tax…” so said Anthony Barber, Chancellor of the Exchequer on the introduction of VAT on April’ Fool’s Day in 1973.
40 years on and anyone who has had to decipher HMRC’s VAT rules legislation may disagree!
This year’s budget may not have yielded significant changes, aside from the usual, inflation related increases to VAT registration and de-registration thresholds, fuel scale charges etc., but there are further planned changes to the inherently complex VAT Place of Supply Rules.
In simple terms, for UK VAT to be due there has to be a taxable supply of goods or services by a taxable person in the UK, in the course or furtherance of business.
If these criteria are met the supply is within the scope of VAT. If not the supply is outside the scope of VAT.
VAT is a transaction based tax, so for each supply made the above criteria needs to be considered by all businesses whether they are Limited Companies, Sole Traders, or charities:
- Is the supply one of goods or services?
- Is the supply a taxable supply?
- Who is making the supply?
- Who is receiving the supply?
- Where is the supply deemed to be made?
HMRC’s Place of Supply of Services Public Notice warrants a 96 page document to determine the Place of Supply alone, only one of the above criteria. Place of Supply can be difficult to determine without all the facts!
From 01 January 2010 the general rule for Business to Business (B2B) supplies is that VAT is due where the customer belongs subject to exceptions for certain services (previously it was due where the supplier belonged subject to exceptions).
HMRC want the right tax at the right time. HMRC rely on businesses to be aware of the VAT rules, register for VAT when necessary and calculate the correct VAT due.
Right Tax Right Time = No Penalties Surcharges or Interest.
Mistakes can be costly!
At QAccounting, we can help our client’s comply with VAT rules and legislation, consider whether supplies are within the scope of VAT or outside the scope of VAT and answer the many questions that need answered to get it right first time. Simple. So contact us today to learn more about our accounting services and why you should choose QAccounting as your online accountant!
This weeks post was written by QAccounting VAT Manager Jennifer Martin.
More Posts
How Much Should I Pay Myself This Tax Year?
The article helps the owners and managers of limited companies to understand what salary they should pay themselves in the new 2025-2026 tax year.
How will the UK Governments Recent Changes to Employers NI Impact my Business?
The article helps self-employed sole traders, limited companies, and partnerships to understand how the UK Government’s recent changes to Employer’s National Insurance will impact their business from April 2025.
Basis Period Reform
The article helps self-employed sole traders and partnerships to understand how basis period reform will impact their business in the 2023/24 transitional tax year, and what steps need to be taken to ensure they do not lose any brought forward tax reliefs and remain compliant!