My client is VAT registered as he provides consultancy to UK businesses. A French business customer has now approached him for his consultancy services. Does my client need to charge UK VAT to this French customer?
In order to answer the question we would need to know what type of consultancy the client is providing, as the deemed place of supply, and consequently the VAT treatment, are determined by the nature of the supply.
To give an example, if the client provides IT consultancy this falls within the general rule for business to business (‘’B2B’’) supplies meaning that the place of supply is treated as being where the customer belongs and so the supply would be outside the scope of UK VAT.
On the other hand, land related services fall within one of the exceptions to the general rule, so if the client is providing consultancy services in relation to a particular site or the design of a building in the UK the place of supply would be the UK where the land is located, and UK VAT would be charged.
Other types of consultancy could potentially fall either under the general B2B rule for services or the exception for services related to land.
Detailed information can be found in VAT Notice 741A, sections 6-11 but it is important first to understand exactly the nature of your client’s consultancy as the description “consultancy services” is too broad to be able to reach a conclusion.
A sole trader plumber and would like to attend a refresher course to reinforce the skills he already has. He is also thinking about attending a course to train as an electrician so that he may expand his trade. Would the costs of these courses be allowable for tax purposes and reduce his profits subject to income tax?
For training costs to be allowable, they must be incurred wholly and exclusively for the purposes of the trade. The course undertaken to refresh his skills in plumbing would be allowable as it is up-dating the skills of the individual for the trade that they are currently undertaking. This cost would then be deducted from the profits of the business.
The training costs for the electrician’s course however would not be allowable. The benefits obtained from this course give him a new skill and as such a new specialisation within his trade. It is therefore not incurred wholly and exclusively for the purposes of the trade.
A designer who is not VAT registered and they have been asked by a customer to do some design work on their property. The value of the work is expected to be about £70,000. Another customer has also been in contact with them requesting design work on their property for which they will charge about £20,000. The designer will be doing this work over a number of months and will be paid in monthly instalments of no more than £30,000 at a time. As my client knows in advance that they will receive £90,000 which is above the £83,000 VAT threshold, do they need to be VAT registered from today?
When looking at registration there are two tests. The forward look requires that if you have reasonable grounds to believe that in the next 30 days alone your turnover will exceed £83,000 you are liable to be VAT registered from the date on which you had that expectation and must notify HMRC within 30 days. For example, if you know on 5th October 2016 that you will generate more than £83,000 in the next 30 days then you will be VAT registered from 5th October 2016 and have until 4th November 2016 to notify HMRC.
The backward look states that if at the end of any month your turnover for the past 12 months or less exceeds £83,000 then you have 30 days from the end of that month to notify HMRC and then you are liable to be registered from the 1st day of the second month following the month in which you exceed the threshold. For example, if your turnover exceeds £83,000 on 5th October 2016 then you have until 30 November 2016 to notify HMRC of your registration but you do not need to start accounting for VAT until 1st December 2016.
In this situation there is no 30 day period during which they will receive more than £83,000, so your client will not need to register from today. They can wait until they exceed the £83,000 threshold by using the backward look.
A parent wants to put some of their substantial savings into the names of their children. The children are all under the age of 18. Will the children be taxed on the interest that is earned from those savings?
Children’s income is theirs in their own right, no matter how young they are. They are also entitled to the full personal allowance. However for a child under the age of 18 and unmarried, this does not apply to income that comes directly or indirectly from a parent. Where it has come from the parent it is treated as the parent’s own income with the following exceptions:
- Each parent can give each child sums of money from the total of which the child receives no more than £100 gross income per annum eg interest on bank or building society deposits. If the income exceeds the limit, the whole amount and not just the excess over £100 will be taxed on the parent.
- The National Savings ‘children’s bonds’ for under 16 year olds can be given in addition because the return on such bonds is tax exempt.
- A parent may pay personal pension contributions of up to £3,600 a year on behalf of a child under the age of 18.
- Parents may contribute towards a Child Trust Fund Account for their children.
A child includes a stepchild, an illegitimate child and an adopted child.
For tax purposes income that arises to the child that has come from the parent is treated as a settlement and is taxable on the parent under ITTOIA 2005 s629.
A garage is VAT registered and a customer has asked them to fit some new tyres and alloy wheels to their vehicle. The customer is disabled and has provided them with an exemption certificate stating that they should not charge VAT to them. The garage is confident that VAT at the standard rate of 20% should be charged but the customer is adamant that this is not the case and it should be exempt. Who is correct?
A disabled person can get VAT relief on certain supplies to them but the scope of the relief is narrowly drawn. VATA 1994, Schedule 8, Group 12 sets out the goods and services that can be zero rated
Specifically, item 2(f) states that the supply to a handicapped person for domestic or personal use of motor vehicles designed or substantially and permanently adapted for the carriage of a person in a wheelchair or on a stretcher and of no more than 11 other persons is zero rated.
In addition, item 2(h) states that parts and accessories designed solely for use in or with goods described in paragraph (a) to (g) are also zero rated.
Therefore, if the customer is simply upgrading the wheels and tyres for cosmetic reasons, then as the new tyres and alloys that the customer has asked to be fitted are not designed solely for use in an adapted vehicle your client is correct to charge VAT at the standard rate.
However, if the tyres and alloys are being supplied and fitted as part of a repair, for example following an accident, or routine maintenance, then provided your client holds an eligibility declaration from the customer and is satisfied that the vehicle was zero rated to the customer when it was initially supplied, then the repair or maintenance including the parts will be zero rated under item 5.
HMRC published Helpsheet VAT1616 in 2012 to help businesses and customers to interpret the rules on adapted vehicles. To view the helpsheet, click here.
This requirement for deposit-takers e.g. banks and building societies to deduct sums representing income tax from the interest or other returns they pay on certain savings, investments and alternative finance arrangements are removed in relation to interest paid or credited on and after 6th April 2016.
In other words, you’ll receive the interest on your bank and building society interest gross!
However if your company pays you interest, on say a directors loan account that is in credit, they still need to deduct tax from the payment, pay it over to HMRC and complete the necessary CT61 form – having ensured you have all the company paperwork up to date including minutes etc.
Give the office a call 01280 875250 if you need help