Our newsletter this month contains the following articles: clarification of unjust enrichment, change in VAT status of salary sacrifice schemes, stamp duty changes for multiple purchases and notification of new HMRC crack-downs.
What is unjust enrichment?
If you charge a customer VAT and subsequently discover that the supply of goods or services was exempt, zero rated or outside the scope of VAT you can make a claim to HMRC to refund the VAT overcharged.
The phrase “unjust enrichment” means that you are required by HMRC to refund any VAT repaid to you in this way to your customers, you cannot keep the refund for yourself!
HMRC have a special reimbursement scheme that deals with claims for repayment. When making a claim you will have to agree to:
Additionally you will have to keep the following records:
HMRC will also seek to reduce refunds due if the supply resulted in a claim for associated VAT input tax. For example if you supplied services at standard rate and there were associated costs where you recovered input tax, and then you discovered that the supply should have been an exempt supply, then HMRC would reduce the refund of over-declared output tax by the over-claimed, associated, input tax.
HMRC to charge VAT on salary sacrifice schemes
Due to a recent European Court of Justice ruling, HMRC now consider that the provision of a benefit via salary sacrifice to employees constitutes a supply of services for consideration and is therefore subject to VAT.
Benefits that will be affected include:
Stamp duty reduction for multiple purchases
A new relief is available from 19 July 2011 that will reduce stamp duty payable if you are purchasing more than one residential property in a single transaction.
Instead of paying SDLT based on the full value of properties added together, the aggregate value, you can claim to pay SDLT based on the full value on the properties divided by the number of properties purchased, the average value.
Where your claim is accepted this could result in a considerable saving.
Claims cannot reduce the overall SDLT charge below 1%.
Transactions covered by the relief are either of the following. Apologies for the complex phrasing, the definitions are copied from HMRC notes:
HMRC extend its tax avoidance crack down
HMRC are of the opinion that there are a number of businesses that should be registered for VAT, and so far, they have not registered. They are in the process of sending out 40,000 letters to traders who they believe may be in this category.
HMRC are offering businesses that “come clean” and notify HMRC of an intention to register before the end of September 2011, reduced or nil penalties. Subsequently formal applications have to be submitted on VAT form 1 before 31 December 2011.
The current VAT registration threshold is £73,000. If you have already passed this annual limit in the last twelve months, are about to, or expect to in the next 30 days, you might like to respond to this offer.
Penalties for late registration can be up to 100% of additional VAT due.
Fast Food Outlets
HMRC believes that there are a number of fast food outlets that are deliberately falsifying their records and miss-declaring their true sales levels in order to avoid paying their correct taxes.
They have set up yet another specialist task force to tackle this avoidance.
Penalties will be levied in addition to recovery of unpaid taxes. Those businesses discovered may also face criminal prosecution.
Tax Diary June/July 2011