Did you know a VAT registration requirement isn’t only triggered by sales but can in fact be triggered exclusively on purchases?

It’s not uncommon for entities making only exempt supplies, such as financial or charitable organisations, to assume they have no requirement to register for VAT. After all, if they’re not making taxable supplies, VAT registration wouldn’t normally arise. However, where such entities receive certain services from suppliers based overseas, a VAT registration requirement can be triggered.

As the year draws to a close, we’d like to wish you an enjoyable festive season. It’s also a great time to look back at some key VAT topics we’ve covered this year. A reminder of the practical updates, common pitfalls, and planning tips to ensure you are proactive in keeping your clients' business VAT-fit.

One of our key pieces of advice to the accountancy firms we work with, is to encourage their clients to seek VAT advice as early as possible. This is crucial for development projects, buying or selling land and here’s why...

After years of minor adjustments and a largely hands-off approach, HMRC appears to be shifting gears with two significant VAT developments so far this year. These moves suggest a more assertive stance and may mark the beginning of broader reform.

Over the last few months we have seen an increase in queries from online retailers selling goods into the EU and whether there is a simple solution, given we are now over three years into the post Brexit trade arrangements.  

The answer is of course, nothing is ever really simple, especially where VAT is concerned, but there are a range of options available to your clients.  Whilst we would always recommend seeking further advice, we highlight some of the solutions we discuss with clients here.

Questions have cropped up recently in relation to whether supplies are of staff or services and, where there are supplies of staff, whether it is just the profit margin which is subject to VAT.

This is an area which has been heavily litigated by HMRC over the last 10 years, but is still causing clients issues as their competitors look to obtain an advantage in a tough market by not charging VAT.

Over the last few months we’ve reviewed many a charity funding agreement to confirm whether the income is a grant (and outside the scope of VAT) or consideration for a supply (and potentially subject to VAT). This is often referred by the audit RI before they sign off the audit.

There is no one defining factor as to whether the funding is a grant or not and multiple factors as well as the substance and form need to be taken into account when reviewing the agreement. How the funding was obtained (applied for or put out to tender), the wording in the agreement (funding or contract for services) and clawback provisions are all important.

In the past month, as the legislation has come into being a few things have arisen. A mixture of light relief in the form of VAT recovery, but also confusion over "closely related services”. Read on as we explain both.

Accountants and advisors to Listed Places of Worship should be aware that following an announcement this morning, the Listed Place of Worship grant scheme will be renewed for a further 12 months to 31 March 2026.

We didn’t really expect to see wholesale changes to VAT in the budget, and it is perhaps welcome that we were very well informed of the Private School changes that were announced. Nonetheless, we’ll take the opportunity to once again re-iterate that tinkering around the edges when working with legislation from the last century really isn’t working anymore. However, at present it was no surprise that Private Schools and their VAT status (albeit expected) was the headline. With so much media coverage, with catchy headline being higher priority than technical explanation, we’ve put together the list to help you navigate the new (still draft) legislation.

Having just come out of the busy summer holiday season, we can’t help think about the Tour Operators’ Margin Scheme (we are VAT advisors after all). Given the more recent court cases highlighting ambiguities in its application, a casual observer might be surprised that TOMS is decades old. However, those on the inside will be aware that this is one of the least understood and loved areas of VAT...although that may change if the ultimate decisions in these cases open the scope for significant VAT savings...as indeed they might.

We all know that with everything, there are always horror stories of when things went terribly wrong. How can you help your clients avoid becoming the centre of a cautionary tale? Read some that we’ve come across to help you flag potential issues with your current clients, to avoid them becoming the horror story.

During the time of year when many businesses are preparing their partial exemption and business/non business calculations, as a default position, HMRC expects businesses to use their income to calculate the amount of VAT incurred on overhead costs which is recoverable.

Whilst using income is a 'one size fits all' approach that works for the average business, it may also be that one size doesn’t really fit very many at all, because very few clients are actually 'average'.

An interesting question we had recently through one of our client helpdesks perfectly illustrates the complexities of VAT and property and the Capital Good Schemes (CGS);

The Capital Goods Scheme is the mechanism by which “capital items” falling within the scheme are subject to 9 adjustments of the initial VAT recovery with reference to changes in their taxable use. It only applies to investment buildings as buildings for sale will be “stock” rather than “capital”.

Other countries do VAT differently –Those that have introduced VAT (or GST) in the more recent past, Australia for example, have arguably made it more fit for today’s world. Our VAT system is well rooted in history (some of it coming from the old purchase tax which predates the introduction of VAT in 1973). After another quiet Budget from a VAT perspective got us thinking about what we would really like to see to move VAT forward.

VAT is a transaction tax and each transaction has a VAT consequence. If VAT is overlooked it is difficult to mitigate the VAT fallout after the transaction has happened. We are sure that those taking the time to read this article expend huge efforts in providing the best service to their clients, but might there be an element to your service that is missing because you don’t know what questions to ask them to anticipate any VAT challenges?

Senior VAT staff are under immense pressure to build a sustainable and growing pipeline. Unlike almost all other accountancy departments, specialist VAT advice does not usually have a regular, repeating revenue stream. This means that senior members of the VAT department must be constantly working on business development. Either nurturing existing relationships, educating, persuading and closing new clients, or trawling through audits looking for opportunities that may or may not be present. This is incredibly labour intensive, especially as the nature of VAT means that clients are often unaware of the VAT implications and need to be educated before they can even make a buying decision. Typically, when accountancy firms approach The VAT Team, their senior staff are approaching 80% billable and the organisation is starting to suffer.

This year’s Autumn statement was by no means groundbreaking for VAT, so this year our commentary is around the extension of reliefs and specifically what it means for goods and services to be zero rated. We will cover the benefits and potential drawbacks of extending zero rating and explore whether further extensions in the post Brexit era, where the UK has autonomy over such reliefs within the VAT system, are worthy of consideration.

Many accountancy firms struggle with the idea of outsourcing potentially billable work. We hear the initial objections of ”it costs more than doing it inhouse” or “it's opening up further risk” often. Work is often outsourced at times of crisis and desperate need to cover recruitment or skills gap, or to assist with an urgent project. However, when the true cost of internal VAT provision is factored, it suddenly becomes an attractive prospect for Firm’s looking to build a VAT provision.

We’ve taken a look at typical sized mid-tier firm and what costs they would incur with recruitment of, and maintaining, an internal VAT consultant versus outsourcing and it makes for interesting reading.

It’s nearly time for the Christmas party season, and if you have a room or venue that you hire out, ordinarily this room hire is exempt from VAT. The reason - because it is a supply of land and there is an exemption for the supply of land in the legislation.

But what would a VAT exemption be without exceptions.

Whilst a lot of our clients are accountancy firms with no in house VAT expertise or team, an increasing number are those which do have in house resource but face time and costly challenges.

Anticipating, scheduling, and satisfying demand profitably is the cornerstone of any business success. Accountancy firms typically have predictable annual demand for the bulk of their services, albeit with surge periods. Audit clients can be reliably scheduled for annual work. The hours and expertise required are relatively easy to predict based on size and previous experience. By looking at the client base in aggregate, auxiliary services can also be estimated and planned for with reasonable accuracy. The exception to this rule is VAT advisory work. The transaction-based nature, and increasingly frequent changes resulting from case law and policy updates, mean that attempting provide VAT services using 100% in-house resources is putting many firms’ profitability and/or reputation at risk.

The blank canvass that Brexit granted for VAT law remained untouched, without so much as a tentative brush stroke, in the Budget a few weeks ago. With the budget announcements being well covered on social media and the press, our Managing Director, Rebecca Porter, considers the impact of VAT registration threshold freeze to smaller businesses in real terms.

Solving VAT problems for clients can be a little like playing chess. Failure to move the pieces in the right order can cost you the win in chess, and failure to execute VAT solutions in the right way can cost an organisation more than doing nothing.

There are times in a game of chess where sacrificing a star piece is worth the strategic advantage gained. The same can be true of VAT, and in this case, I’m thinking about VAT exemption.

In theory VAT exemption is valuable in that it removes VAT from the onward supply. Therefore, when the sale value and VAT lost thereon exceeds the costs of making the sale and the VAT incurred, the seller retains more profit. This is because more of the sales value is retained in the supplying organisation and, where this is the case, calling the VAT exemption a relief appears to fit.

Wouldn’t it be helpful if translation websites had a “VAT” option in the language to translate?

Ever had a lengthy email from a VAT consultant that feels a bit longwinded? I bet you have, but maybe we can help you see why.

Part of the problem with VAT is many of the terms used in the VAT legislation and developed from guidance and case law include ordinary words and phrases which are then specifically defined for VAT. These include “dwellings”, “domestic use”, “charitable use”, de-minimis", “capital items” “electronically supplied” and “cake”! Add to those the words and phrases that don’t me anything unless we explain what they refer to such as “reverse charge”, “golden brick”, “PVD”, “self-supply charge”, “PVA”(Postponed VAT Accounting - Not glue!) and “MOSS” you can see why de-coding this is vital to being able to properly advise clients.

A recent insight article published by the ICAEW raises the possibility of de-risking new hires in the accountancy market by implementing football style contracts. The proposed contracts would lock new hires into the firm for a defined period, or provide compensation in the form of a pseudo transfer fee, payable by the candidate’s future employer, or even the candidate themselves. The suggestion in the article is that more of a two way street between employer and employee, using signing on fees with agreed progression structures may combine to be “the answer to hanging onto your best people against a backdrop of huge attrition”.

At The VAT Team we are all for innovative ways to deal with staffing woes in the accountancy professions, and since the article is aimed at the sector as a whole, we decided to unpack the analysis from a VAT perspective, with the help of Guy Barrand, Director at BLT and leading recruitment consultant in the indirect tax market.

80% of MPs disagree with the government policy on electric vehicle charging¹ - but it turns out, unless there’s some very atypical driving patterns that we are unaware of, so does the law.

Many within the EV sector have voiced annoyance in the media at the standard rate of VAT being applied to electricity purchased to recharge electric vehicles at public charging stations. The VAT Team think this is at odds with the law and that taxpayers with public charge stations may have claims for four years of overpaid tax. In fact, the only EV owners that should be liable to pay the 20% VAT would be those travelling nearly 2,900 miles, every month, solely using public charging points that are all owned by the same supplier. How many people fit that description? Certainly not enough to base an entire policy around.

We are all familiar with the saying a little knowledge can be a dangerous thing. When clients get their little bit of VAT knowledge from the media or articles purporting to be technical guides it’s easy to realise why we come across so many wild interpretations of the VAT rules. Unfortunately, the noble aim of “keeping it simple”, especially for VAT, leads to the problem of inaccuracy and whilst it may make the subject easier to understand, it also means that taxpayers and non-specialists will be inclined to believe that it is more straight forward than it is for certain scenarios. One thing, however, is certain - unpicking the errors when a too simplistic version of VAT rules has been applied is almost always more costly and damaging than having worked through the complications in the beginning.

Despite Brexit providing the chancellor with free reign in terms of implementing new VAT rates and reliefs, the absence of VAT measures that could have really made a difference was notable in last week’s Spring Statement.

The absence of any extension of the temporary reduced rate in the hospitality and tourism sectors is a real blow for many businesses in these industries.