VAT updates: April 2022

·???????Moving personal goods from the EU

VAT and duty are payable on the importation into the UK of goods that are already owned by the importer, but there is a relief for those moving permanently to live in the UK. One of the conditions of this relief is that the goods must be imported within 12 months of the move.?Effective from the beginning of 2021, goods movements from the EU also fall under these rules, whereas, prior to this, there was free movement of goods without VAT and duty (with some exceptions).

·???????Postponed accounting for imports - flat rate scheme

R&C Brief 3(2022) gives notice of a change of HMRC policy which arises from the fact that the policy has been wrong. With effect from 1 June 2022, businesses which import goods which qualify for postponed accounting, should adopt the following policy.

The relevant output tax to be declared on the imported goods should be included in full in box 1 of the VAT return, and the same sum deducted as input tax in box 4.HMRC had previously suggested that the value of the imported goods would be included in the flat rate scheme percentage, which would give rise to output tax, but no corresponding input tax deduction. This has now been corrected, and those who have accounted for excessive VAT on the basis of the previous policy are required to submit an error correction form.

·???????VAT charged in error

R&C Brief 4(2022) advises us of HMRC’s revised policy relating to claims in extreme and unusual circumstances. As a general principle, when a supplier wrongly charges VAT, the customer can only revert to the supplier to correct position, and not to HMRC. Under EU jurisprudence, the principle applied that, where reverting to the supplier was excessively difficult, such as where the supplier had gone out of business, a direct claim could be made against the tax authority by the customer. The Brief tells us that, having left the EU VAT system, HMRC takes the view that this principle no longer applies. They imply, however, that the matter is one for legal dispute, since they invite those in that position to refer to their legal advisers on the point.

·???????Lennartz accounting VAT rate

R&C Brief 6(2022) provides a welcome relaxation in respect of the effective VAT rate applicable to payments under the ‘Lennartz’ accounting arrangement. This arrangement was closed in 2010, but allowed purchases for a mixture of taxable and non-business uses to be fully recovered, with periodic payments thereafter being made to cover the depreciation for the non-business aspect.

HMRC has noted that the input tax claimed could have preceded the introduction of the 20% standard rate, with the effect that payments based on depreciation would generate, at length, a VAT charge greater than the original claim.HMRC acknowledges that this is not how the legislation was intended to work, and the Brief tells us that HMRC will accept that, once the amounts repaid under the Lennartz accounting scheme reach the same level as the amount claimed on non-business use in the first place, no further adjustments are required.

·???????Group registration

R&C Brief 5(2022) informs of a change of HMRC policy arising from its own significant delays in processing group registration applications. Anecdotally it appears that these delays can extend to as much as nine months.HMRC has confirmed that an application that has been received by them needs to be rejected by HMRC within 90 days of receipt or, assuming the criteria for grouping are met, must be regarded as accepted by them.