VAT metamorphosis: a horror story

Article Abstract:

Careful value added tax (VAT) planning can saving British businesses a significant amount of money, but traders and their advisers are often ignorant of changes made by the Customs and Excise department. Customs has been given wide discretionary powers based on secondary legislation modifying the Value Added Tax Act 1983. Businesses whose turnover is less than 250,000 pounds annually should pay close attention to proposals on cash and annual accounting. Great care should also be taken in choosing a retail scheme, since use of an inappropriate one can prove to be expensive in taxes paid unnecessarily to Customs. Expensive trader errors can result from failure to consider that VAT is charged on a supply provided by a registered person rather than on per-transaction profit generated. The need to register for VAT should be considered at the beginning of any business venture.

Sales tax

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Customs repayments--down to a fine art?

Article Abstract:

Companies that collect and consequently pay value-added tax (VAT) to the UK's Customs and Excise should ensure that they are not paying to much VAT, as Customs and Excise is unlikely to return the overpayment. This was shown by a recent UK Court of Appeal case. Greeting card manufacturer Fine Art Developments had to pay VAT based on the full retail price of the cards sold, but a European Court ruling in another case overturned this requirement. Fine Art sought a return of the excess VAT it had paid, but Customs and Excise would only return that part subsequent to the date of the ruling. Fine Art deducted the balance overpaid from its current VAT payment, and Customs sued. The UK Court supported Customs' legal right but stated that a legal mechanism should exist for return of all of the excess VAT paid.

Finance, taxation, & monetary policy

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VAT partial exemption

Article Abstract:

Great Britain has made changes in its value-added tax (VAT) laws which will affect the recovery of taxes. Partial exemption rules have been amended to prevent VAT avoidance by large firms, and to eliminate partial exemptions claimed by small businesses. The principle of the new law is that businesses that make both taxable and exempt supplies should only be able to recover taxes paid on the taxable supplies. Provisions defining taxable and exempt supplies, 'de minimis' rules, and tax simplification rules are described.

Tax accounting

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