View the related Tax Guidance about Insurance premium tax
VAT review ― registration and compliance
VAT review ― registration and complianceThis guidance note is intended to provide more detail on areas to consider during a VAT review which relate to general compliance. This document should be used in conjunction with the Checklist ― VAT review when undertaking the actual review in order to ensure that all relevant items have been covered.Whilst this guidance and associated checklist have been prepared to seek to cover the common issues and risks which might arise, care should be taken to ensure that any specific business or sector issues are considered as part of a comprehensive review.VAT returns and compliance ― return and payment deadlinesA typical starting point when undertaking a VAT review or due diligence exercise is to confirm whether all VAT returns and payments have been made on time. The VAT return and any payment due must reach HMRC by the due date stated on the return. For a normal return, this will be:•no later than one month after the end of the VAT return period, and•no later than one month after the effective date for cancellation of registration (or, in the case of a business that had failed to register, one month after the date when liability to be registered ceases)Businesses can check the payment deadline using the payment deadline calculator provided by HMRC.If during the course of a VAT review it is identified that returns or payments have been made late, the next step will be to confirm whether the business has
Contractual disclosure facility (CDF)
Contractual disclosure facility (CDF)IntroductionThe vast majority of HMRC enquiries, or ‘checks’ as they are now more commonly called, are carried out by staff in the network of tax offices across the UK. A formal notice is issued and the individual, sole trader, partnership or limited company is told which tax return is to be the subject of a check. Typically, the HMRC officer requests information to conduct the check, in order to confirm the accuracy and completeness of the tax return in question.However, HMRC also has specialist teams conducting civil and criminal investigations where it suspects serious tax fraud, involving direct and / or indirect taxes, has taken place. HMRC considers a tax fraud to involve an element of deliberate behaviour where, for example, there has been a failure to declare a tax liability, a concealment or withholding of information or a misrepresentation of facts.HMRC’s regime for handling serious fraud cases is called the contractual disclosure facility (CDF). Code of Practice 9 (COP 9, also known as Code 9) governs how HMRC investigates suspected fraud and sets out the rules and conditions of the CDF policy. Under CDF, HMRC only guarantees not to prosecute where the person involved enters and fully complies with the terms on offer as part of the CDF.Under CDF, the taxpayer has the following two options:•to accept the CDF regime, ie admit to the fraud and make a full disclosure to HMRC, or•not to cooperate with HMRC, in which case they have no
Liability ― insurance ― overview
Liability ― insurance ― overviewA supply of insurance is a supply of services and is exempt from VAT. The VAT exemption for insurance also applies to the services of an insurance agent or an insurance broker acting in an intermediary capacity in relation to insurance. This guidance note provides an overview of the:•scope of the VAT exemption for insurance•entitlement of insurers, insurance agents, insurance brokers and insurance policy holders to recover VAT on costs•VAT treatment of insurance payments received by policy holdersIn-depth commentary on the insurance exemption can be found in De Voil Indirect Tax Service V4.121 to V4.124.Overview of the scope of the VAT exemption for insuranceThe VAT legislation provides for exemption to apply to:•insurance transactions and reinsurance transactions•the services of an insurance agent or an insurance broker acting in an intermediary capacity in relation to a contract of insurance or reinsurance regardless of whether the contract is concludedVATA 1994, Sch 9, Pt II, Group 2Whether the VAT exemption for insurance agents and insurance brokers applies does not depend on whether a contract for insurance is concluded. For example, if an insurance broker charges a client that is seeking insurance a fee for introducing them to an insurer, the fee is exempt from VAT regardless of whether the client decides to buy an insurance policy or not. For information about the VAT treatment of services supplied by insurance agents and insurance brokers, see the Liability ― insurance ― agents, brokers and claims handling
Operating the margin scheme
Operating the margin scheme This guidance note provides an overview of how the margin scheme operates. Note that there are special rules in places when a margin scheme is used in respect of:•second-hand vehicles ― see the Margin scheme ― second-hand motor vehicles guidance note•horses and ponies ― see the Margin scheme ― horses and ponies guidance note•houseboats and caravans ― see the Margin Scheme ― houseboats and caravans guidance note•items that have been pawned ― see the Margin scheme ― agents and pawnbrokers guidance note•high volume, low price items ― in this instance the Global Accounting Scheme may be used, which is a simplified version of the VAT margin scheme - see the Global accounting margin scheme guidance noteVATA 1994, s 50A; De Voil Indirect Tax Service V3.531, V3.535; SI 1992/3222, Article 2; SI 1995/1268, Article 12; FA 1995, s 24; VATMARG02000There are also different rules:•for auctioneers ― see the Margin scheme ― auctioneers guidance note•for agents see the Margin scheme ― agents and pawnbrokers guidance note•if a business buys and sells goods in Northern Ireland and the EU ― see the Margin Scheme ― Northern Ireland and imports and exports guidance noteWhen a business wishes to use the margin scheme for any of the above categories, the relevant guidance note should be read in conjunction with this guidance note.Margin scheme ― what are margin schemes?Margin schemes are an optional VAT accounting methods that can be adopted by relevant businesses.
DASVOIT ― the hallmarks
DASVOIT ― the hallmarksThis guidance note provides details of the hallmarks for VAT and indirect tax arrangements where it is necessary for the promoter or the user to notify HMRC under the DASVOIT regulations. This note should be read in conjunction with the Disclosure of tax avoidance schemes for VAT and other indirect taxes (DASVOIT) ― introduction, DASVOIT ― notifiable arrangements and making the notification and DASVOIT ― penalties and powers guidance notes.BackgroundThe relevant anti-avoidance legislation specifies a number of descriptions of arrangements that HMRC refers to as hallmarks. Hallmarks 1(a), 1(b), 2, 3 and 4 apply across all the indirect taxes including VAT and hallmarks 5, 6, 7 and 8 apply only to VAT.HMRC states in its guidance that the hallmarks are not mutually exclusive and that an arrangement can be hallmarked by virtue of satisfying one or more of the hallmarks outlined below. HMRC also goes on to state that the absence of a hallmark for a particular arrangement cannot be viewed as constituting practices that will be acceptable to HMRC. HMRC will obviously take steps to try and prevent any form of VAT or other indirect tax avoidance taking place.However, arrangements are only notifiable where they meet all of the conditions laid down in Finance (No 2) Act 2017, Sch 17, para 3, which are arrangements that:•fall within any description prescribed by the Treasury by regulations (hallmarks)•enable, or might be expected to enable, any person to obtain a tax advantage in relation to any
A–Z of common adjustments to trading profits
A–Z of common adjustments to trading profitsWhy are adjustments to profit important?When calculating the profits of a trade, it is necessary to consider whether the expenses posted to the income statement are deductible for tax purposes. If not, the expenses must be added back to the profit in order to calculate the income tax or corporation tax liability (as appropriate).As there are many different trades which each incur a wide variety of expenditure that may require adjustment, a huge body of case law has evolved to supplement the fundamental principles set out in statute. The relevant concepts are explained in the Adjustment of profits ― overview guidance note.The table below lists some of the more common adjustments, together with links to additional sources of information including other guidance notes, Simon’s Taxes and HMRC’s manuals. Whether costs are allowable or not in practice often depends upon the specific trade in question and the surrounding facts. The table below should be used as a guide only.Navigation tip: press ‘Ctrl + F’ to search for a particular term within the table.Item of expenditureUsual tax treatmentFurther detailsAAdvertising hoardingsMore permanent structures used for advertising treated as capital, therefore disallowableSales, advertising and marketing; Simon’s Taxes B2.462; BIM42550Archives and record of business historyUsually deductible, akin to advertisingBIM42501BBad and doubtful debtsAllowable for traders. Dealt with under the loan relationships regime for companiesSimon’s Taxes B2.410; BIM42701Bank errors ― funds lostCurrent account deposits lost through bank
Disclosure of tax avoidance schemes for VAT and other indirect taxes (DASVOIT) ― introduction
Disclosure of tax avoidance schemes for VAT and other indirect taxes (DASVOIT) ― introductionThis guidance note provides an overview of the rules that were effective from 1 January 2018 that require a person to officially disclose the use of certain VAT or other indirect tax avoidance schemes.This guidance note should be read in conjunction with the DASVOIT ― notifiable arrangements and making the notification, DASVOIT ― the hallmarks and DASVOIT ― penalties and powers guidance notes.BackgroundThe revised reporting rules affect persons who promote or use arrangements from 1 January 2018 that are intended to, or will provide, the user with a VAT or other indirect tax advantage that would not have been obtained had another course of action been taken. TerminologyTermMeaning allocated by HMRC in respect of DASVOITArrangementsIncludes any scheme, transaction or series of transactionsTax advantage for VATA person (P) obtains a tax advantage for VAT if:(a) in any prescribed accounting period, the amount by which the output tax accounted for by P exceeds the input tax deducted by P and is less than it would otherwise be(b) P obtains a VAT credit when P would otherwise not do so, or obtains a larger credit or obtains a credit earlier than would otherwise be the case(c) in a case where P recovers input tax as a recipient of a supply before the supplier accounts for the output tax, the period between the time when the input tax is recovered and the time
Other indirect taxes
Other indirect taxesThe table below refers to other indirect taxes and includes links to relevant commentary in De Voil Indirect Tax Service.Tax / dutyCommentaryCustoms dutiesDe Voil Indirect Tax Service V17.101Insurance premium taxDe Voil Indirect Tax Service V18.101Air passenger dutyDe Voil Indirect Tax Service V19.101Landfill taxDe Voil Indirect Tax Service V20.101Climate change levyDe Voil Indirect Tax Service V21.101Aggregates levyDe Voil Indirect Tax Service V22.100Soft drinks industry levyDe Voil Indirect Tax Service V23.100Plastic packaging taxDe Voil Indirect Tax Service V24.101
Introduction to SAO requirements
Introduction to SAO requirementsSAO regime ― backgroundThe senior accounting officer (SAO) regime ensures that qualifying companies have adequate tax accounting arrangements in place so that the correct tax liabilities are notified to HMRC. The SAO regime requires a qualifying company to appoint an SAO. It is the personal responsibility of the SAO, and in fact their main duty, to make sure that the company takes reasonable steps to establish, maintain and monitor the adequacy of its tax accounting arrangements, to ensure the production of accurate tax returns and provide a certificate to HMRC after the end of the financial year. The SAO must also identify any areas that do not meet the requirements and disclose these failures to HMRC as part of a certification process.The regime was brought in to reinforce the risk assessment approach that HMRC uses for large businesses. It brings personal accountability to senior finance personnel for the failures of a company to furnish timely and accurate tax returns.This guidance note covers the background to the legislation, specifically what taxes are covered by the SAO regime, who can be an SAO, how to make a notification, what constitutes a qualifying company for SAO purposes and so on. This note should be read in conjunction with the Duties of an SAO and Penalties for breaches of SAO rules guidance notes.For further information on the regime, see Simon’s Taxes D1.1326 (direct taxes) and De Voil Indirect Tax Service V5.215 (indirect taxes).Taxes covered by SAO regimeThe regime covers many
Margin scheme ― second-hand motor vehicles
Margin scheme ― second-hand motor vehiclesThis guidance note provides an overview of the margin scheme that can be used for selling second-hand motor vehicles (‘vehicles’). It should be read in conjunction with the Operating the margin scheme guidance note. If a business purchases a second-hand vehicle it may be beneficial for it to use the margin scheme for the following reasons:•there is no requirement to charge VAT on the full selling price of the vehicle as VAT is only due on the margin•if the business does not sell the vehicle at a profit no VAT will be due on the saleOnly second-hand vehicles can be sold under the margin scheme. The scheme cannot be used if VAT has been reclaimed on the purchase of the vehicle.Business are not required to use the margin scheme and the business can elect to sell the vehicle under the scheme or outside of the scheme where preferable. However, if a business makes a decision to sell the vehicle outside of the scheme, it cannot subsequently amend the sale to bring it within the scheme.Businesses using the scheme are still entitled to recover VAT incurred on general overheads etc in the normal way. These costs should not be added to the cost of the vehicle and should not be included in the margin scheme calculation.ConditionsFor a definition on what is deemed to be a ‘car’ for VAT purposes see the VAT (Cars) Order 1992, SI 1992/3122, Article 2 and VATMARG08100.Businesses wishing to
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