A weekly round-up of tax stories from the national press...

BUSINESS

The Conservatives have accused the prime minister of making false claims about the number of businesses given Government help with their tax bills.

Independent & Telegraph

The Conservatives have pointed out that while £5 billion in tax has been postponed, this is in respect of 160,000 businesses, many of which have been able to make multiple agreements. Gordon Brown said the number of firms was nearer 300,000, suggesting he had been looking at the number of agreements.

Alistair Darling has warned that Conservative plans to press ahead with a banking tax, to claw back some of the billions of taxpayer funds spent bailing out the financial sector, would pose 'a hell of a risk' to City jobs unless it had international support.
Guardian, Telegraph & Financial Times 22.3.10; Financial Times 24.3.10


This looks like a case of extracting the maximum amount of feathers with the minimum amount of hissing from the goose. Banks are an easy and popular target for a levy of some description. The only question is whether going alone on this, as the Conservatives suggest, would mean the goose flies south to sunnier and less heavily taxed climes. International action as proposed by Labour would presumably make alternative destinations less attractive.

The chairman of Lloyd's of London, Peter Levene, has called for lower taxes to stem the exodus of insurance companies to offshore centres.
Guardian 25.3.10

Every industry will say it is a special case for tax cuts. However, in the current economic climate, neither party has said it is prepared to reduce income tax. The general election may see the Conservatives saying they will cut corporation tax (and pay for the reduction by cutting other allowances), but Labour has made no such promises.

CORPORATION TAX
Multinationals are paying 'much more tax' to resolve cross-border disputes, according to HMRC.
Financial Times 22.3.10

HMRC’s focus on transfer pricing issues is paying off, according to the department, because it carries out stringent checks ensuring companies are dealing with transfer pricing correctly.




GENERAL
Higher-rate taxpayers and older people are being urged to claim their share of hundreds of millions of pounds of overpaid tax and missed reliefs, ahead of a shortening in the time limit for tax refunds.
Financial Times 20.3.10

Hopefully, practitioners will, as a matter of course, have ensured their clients have claimed all the reliefs and repayments to which they are entitled. This might be an opportunity to remind clients of the shortened deadlines, particularly for 2004/05 and 2005/06, just in case any reliefs have been overlooked.   

Labour is likely to backtrack on plans to implement a so-called death tax to pay for long-term care, saying the party will not introduce any definitive final reform in the next parliament.
Guardian 22.3.10

Having already been burnt on this issue, Labour would probably prefer to seek a cross-party approach to the problem of paying for long-term care. This will not happen during the run-up to the general election, when parties will seek to emphasise the differences between them.

Tax inspectors are for the first time to get wide-ranging powers to open people’s post without their permission.
Telegraph 26.3.10

This measure is aimed at smuggled goods, not taxpayers’ general mail.

INCOME TAX

Tax relief on donations to UK charities are being extended to some organisations in the European Union, Norway and Iceland.
Financial Times 25.3.10

This is to be retrospective, in that donations made after 27 January 2009 (the date of the ECJ judgment in Porsche, which is the reason for extending gift relief) may also be considered for relief. It may be worth making protective claims for clients who made relevant donations. 

Personal allowances will be frozen at their current rate despite inflation growing at 3%, in move widely criticised as a stealth tax.
Telegraph & Independent 25.3.10

Although widely reported, this story is nonsense. Personal allowances are announced in the pre-Budget report, and the baseline is uprating in line with September RPI. In September 2009, RPI was 1.4% negative, so leaving personal allowances unchanged was an increase in real terms. For 2008/09, allowances were increased by 7.3%, based on a 5% RPI figure in September 2008 and a further addition as part of the 10% tax rate abolition debacle. By the time of the Budget in 2009, RPI had turned negative, but the same politicians and newspapers did not call for the personal allowance increase to be reversed.

Ten million middle income households are worse off under the changes made to the tax system by Labour since 1997, but the incomes of the poorest have been improved.
Guardian & Telegraph 26.3.10

These are the findings of a report from the Institute for Fiscal Studies. They will not be a surprise, given Labour’s policies, which are designed to improve the lot of the lower-paid.

The Treasury faces a wave of demands from international sports stars that they be exempt from tax when they compete in the UK, to match the tax waiver announced in the Budget for foreign-based footballers playing in next year's Champions League final at Wembley.
Financial Times 26.3.10

International sportsmen and women, other than footballers, may feel discriminated against as only the latter may be exempt from income tax when they play in the UK.

INHERITANCE TAX

Thousands more Britons face paying inheritance tax after the Chancellor announced that he would not increase the level at which the levy is payable for the next four years.
Telegraph & Independent 25.3.10

A relatively small number of estates have to pay inheritance tax; while freezing the annual exemption will increase this number, it is unlikely to cause the Chancellor sleepless nights given Labour’s attitude is that the wealthiest percentage of the nation is not the party’s priority in terms of tax cuts.

INTERNATIONAL (no comment, just news)The French government will abandon its plan to introduce a carbon tax on domestic energy and road fuels unless there is agreement on a European Union-wide levy.
Financial Times, Guardian & Telegraph 24.3.10
Bulgaria plans to introduce a tax on the rich and put a limit on public salaries as it battles a deepening recession and tries to keep down its fiscal deficit.
Guardian [not online] 22.3.10

The German government is to introduce a tax on large lenders that indulge in high-risk investment behaviour, such as proprietary trading.
Times 23.3.10
Credit Suisse has severely restricted travel to Germany by private bankers working for rich German clients with accounts in Switzerland, amid fears that such employees could be detained by tax authorities across the border.
Financial Times 22.3.10
Chile's new conservative government plans to introduce 'moderate' tax rises to help rebuild the country after last month's earthquake and tsunami, according to finance minister Felipe Larraín.
Financial Times 24.3.10

INVESTMENTS
Wealthy investors seeking to beat the rise in the top rate of tax to 50% on 6 April have sparked a last-minute rush for tax-efficient venture capital trusts.
Times 21.3.10
…so the promoters of several leading VCTs say in an article appearing in a weekend money supplement, in which such companies advertise regularly. No doubt the freedom from tax on the returns has proved to be even more attractive with the prospect of a 50% tax rate, but it would be unwise to read too much into such assertions.

The Tories have backed business protests at Government plans to include complex cuts to pension tax relief for high-earners in the pre-election Finance Bill
Financial Times 22.3.10

Tax experts and pensions organisations say the proposed new rules relating to higher-rate tax relief for pension contributions are unworkable and complex. However, there has been no indication the Chancellor is prepared to give way on this because higher-rate taxpayers are not his current priority. 

NATIONAL INSURANCE
David Cameron will make a firm general election pledge to halt next year's planned rise in National Insurance contributions for workers and companies, according to senior Conservative sources.
Independent, & Times 26.3.10

The party cannot guarantee to make such move given the UK needs all the tax revenues it can get.

STAMP DUTYThe UK has missed out on £90 million in tax revenue from corporate takeovers in the past two years as an increasing number of companies have used a 'scheme of arrangement' structure to avoid paying stamp duty on their purchases.
Telegraph 22.3.10
 

Stamp duty avoidance schemes must be reported to HMRC under the disclosure of tax avoidance scheme rules. If the Revenue can close down a scheme, it will do so.


A Conservative government would not reverse the stamp duty increase or most of the other tax rises unveiled in the Budget, senior Tories have said.
Financial Times 25.3.10
Until the UK’s fiscal state improves, the Government both now and after the election will be keen to collect all the tax it can get into its coffers.

     


     
 

A weekly round-up of tax stories from the national press...

BUSINESS

Ministers should consider a carbon tax on imports to help struggling British manufacturers, according to Adair Turner, one of the Government's key advisers, despite fears such a measure could lead to a global trade war.

Guardian 2.3.10

Given the power of some of the countries likely to be targeted, it would be a brave government that would impose carbon tax on imports from non-EU countries.

The proposal for a new international tax on bank transactions has been given a boost after one of Japan's most senior government ministers, Katsuya Okada, came out in favour of the plan.

Telegraph 3.3.10

The ongoing saga of the Tobin – or Robin Hood – tax on banks is a dead horse – at least until the USA expresses any significant interest in the levy.

CORPORATION TAX

General Electric, the infrastructure, finance and media conglomerate, has criticised Tory plans for a swift, 3% cut in the headline rate of corporate rate, saying it would be a 'real own goal' for manufacturers and big inward investors.

Financial Times 5.3.10

At first sight this criticism of a corporate tax rate cut may seem strange; the proposal is that it will be funded by a reduction in capital allowances. Technological changes mean rapid depreciation of plant and machinery, and the effective cost of replacement may therefore be more expensive.

GENERAL

Tax specialists expect HMRC to step up their attempts to reduce the numbers of people claiming self-employed status after winning the latest round in a case involving 1,700 team leaders at Weight Watchers centres.

Telegraph 2.3.10

Self-employed status is frequently the subject of appeals to the tribunals. The self-employed must take care that they can show their working terms do not bear characteristics of an employer/employee relationship, to ensure they maintain their status.

The forthcoming Budget must focus on public spending cuts rather than tax increases, the British Retail Consortium (BRC) has warned.

Telegraph 1.3.10

The BRC is particularly concerned about the 1% NI increase, which will add to the cost of employing staff. It is generally accepted that cuts will be needed, but there are no indications that any of the proposed tax increases will not go ahead.

GREEN TAXES

The EU is drawing up plans for its first direct tax, with a green levy on petrol, coal and natural gas that could cost British consumers up to £3 billion.

Telegraph 5.3.10

This proposal saw light several years ago, but was shelved. The EU needs more income for institutions since the Lisbon Treaty, but a green tax is likely to hit UK energy consumers and businesses particularly hard because recent rises in fuel duties are more than double the 5.07% average for western Europe.

INCOME TAX

The forthcoming 50% tax rate for the highest earners is dissuading entrepreneurs from expanding their companies, according to Howard Hackney, an independent business adviser.

Financial Times 27.2.10

It seems a large cause of dissatisfaction with the tax system is its complexity and lack of stability. Businesses like to be able to predict their outgoings. Changing rules and rates are likely to be a disincentive to investment.

The Treasury has finally struck a deal to exclude Britain's stockbrokers from the 50% bonus tax, ending three months of uncertainty for the sector.

Telegraph 5.3.10

This concerns the operation of the bank payroll tax proposed in the 2009 pre-Budget report. The Treasury is expected to confirm shortly which organisations will be affected by the new tax.

INHERITANCE TAX

Conservative plans to slash inheritance tax would effectively abolish the tax 'for practical purposes', according to research by accountants Grant Thornton.

Independent 1.3.10

As this story points out, the take from inheritance or estate taxes is now at an all-time low, even without the Tory proposal that would mean fewer than 5,000 estates would pay the tax. If so, the cost of collecting the tax would probably not be worthwhile. Abolition would be one possibility, while another would be increasing the tax take until it returned to something like its traditional share of tax revenues.

INTERNATIONAL
Greece has announced £4.4 billion of extra tax hikes and spending cuts as the country attempts to convince EU partners it is tackling its debt crisis.

Mail 4.3.10

VAT

The Government should broaden the VAT base and scrap planned tax increases on income and employment if it is to reduce the deficit without hindering economic recovery, says thinktank Reform.

Telegraph 5.3.10

Reform suggests the full rate of VAT should be imposed on food, the construction of new homes, children's clothes, electricity and gas. The £15 billion this is predicted to raise would mean the 50% income tax rate and 1% NIC increase would not be needed, encouraging investment in the UK and job creation.

More than 57,000 small businesses have been hit with higher tax bills after the Revenue increased the amount of VAT they have to pay under a flat-rate scheme.

Telegraph 5.3.10

Just as HMRC re-evaluated the flat rate scheme percentages in December 2008 to reflect the temporary reduction in the standard rate of VAT to 15%, the department has re-calculated the rates again to reflect the increased rate of VAT to 17.5%. The Revenue says it has also taken into consideration current various business patterns – as the taxman did in 2008.

A Weekly Round Up Of Tax Stories From The Press

BUSINESS

Property companies are preparing to turn top earners into self - employed partners to minimise the impact of the government's impending higher tax regime.

Times

Anyone thinking about following this route will need to ensure the status of their employment when they change to self-employed. Getting this wrong could result in substantial PAYE arrears.

The Government has changed its rules on research and development (R&D) tax credits, allowing small businesses to claim the relief even if they do not own all the intellectual property rights arising from their work.

Financial Times

Bring it on - any possible tax saving is greatly welcomed.

A Celebrity-backed campaign for a "Robin Hood" tax on banking transactions has been condemned by the director of the Centre for Business Taxation at Oxford University, Mike Devereux, for promoting a "stealth tax" that would hit unintended targets while leaving the banks unscathed.

The "Robin Hood" tax is effectively the Tobin tax that has support among some politicians, including Gordon Brown, but none from the USA. Therefore it is unlikely to go anywhere. It is difficult to take seriously a celebrity-backed drive when it comes to taxation though!!!

Around 600 independent filling stations could be put out of business by Government tax changes, according to their trade body RMI Petrol.

This is in relation to the rules covering the rateable value of properties, which are being revised to better reflect the current rental value of petrol stations.

GENERAL

Only 4% of taxpayers are likely to be deliberate tax dodgers, according to a study commissioned by HMRC, which also shows that 26% of people fail to meet their tax liabilities because they do not understand the tax system well enough, or are genuinely unaware of their obligations.

Financial Times

This study was published last September with the aim of helping HMRC understand what problems need to be addressed to encourage compliance. Given the complexity of tax legislation and individuals' natural antipathy to dealing with the Revenue, it is no surprise that such a large percentage of individuals are non compliant because of ignorance.

INCOME TAX

Nearly one in three families will loose their tax credits under plans by the Coservative Party to save £400million from the annual credits bill.

Mirror

Under the Tories' plan, families on incomes of more than £50,000 will not receive the credits - Does this mean Jeremy Kyle will be screened in the evenings too??

INVESTIGATIONS

German tax dodgers have been rushing to declare money that they have hidden in Switzerland after the Government warned that it would buy a stolen disc containing details of secret bank accounts.

The Times

UK tax avoiders be aware. Information purchased by the Germans relating to accounts in Liechtenstein was subsequently purchased by our very own. Leading the way as ever!!!

HMRC are investigating a fund called Inside Track, which brought tax benefits to the film industry on suspicion of tax avoidance.

Mail

The rules relating to film taper tax relief have been tightened up over recent years to ensure that it is applied as intended. As this investigation is on going, it is not clear how the scrutiny works yet.

HMRC INVESTIGATIONS - What you need to know!!!

Since the introduction of self assessment in 1996, HMRC has been retraining its staff to develop investigatory skills rather than deal mainly with compliance and the preparation of assessments, as was previously the case. This new focus of the Revenue and certain developments over the last year suggest that the number of tax investigations, which may target businesses or individuals, is likely to continue rising over the coming months.

The war on tax evasion

During 2009 governments across the world were engaged in a co-ordinated campaign to limit banking secrecy, sign tax information exchange agreements with known tax havens, gain information on any potential tax dodgers and stamp out tax evasion. With tax information exchange agreements negotiated even with the jurisdictions traditionally committed to banking secrecy such as Switzerland or Liechtenstein, HMRC has access to an increasingly wide pool of information and there are few places to hide for tax evaders.

Those who may have unpaid tax liabilities but choose not to come forward voluntarily, are likely to see investigations launched into their financial affairs, as tax inspectors attempt to recover revenue for the Exchequer. Britain’s public debt stood at £15.7bn at the end of 2009, and it is clear that the government will need to raise its tax take in order to plug that hole.

The information network

Details of offshore account holders handed over by banks under new tax information exchange laws are not the only reason for the start of HMRC enquiries. The tax authorities assess a wide range of information. For example, they look at gross profits of similar businesses up and down the country and if your income is significantly different from the average, that might trigger an investigation.

A large proportion of tax enquiries, perhaps over 50%, are started by informants - former business associates, jilted lovers and others.

What to do

Tax investigations are becoming an increasingly inevitable part of the fiscal landscape but there are some simple rules which will help you limit the trouble and anxiety associated with an enquiry if not avoid it altogether.

Keep good records

Good records are essential to running a business as well as keeping an individual’s financial affairs in order. They will also be a great help during tax investigations. You need to ensure (especially if yours is a cash business) that your books are carefully maintained, with all transactions properly logged and recorded so that should you or your business ever be subject to a tax investigation, you will be able to respond to all queries and provide all information requested. By law, self-employed individuals are required to keep all records pertaining to their tax return for five years from the filing date, and those whose tax is deducted through PAYE must keep records for 12 months from filing date.

Cooperate

Under the Taxes Management Act, HMRC has the right to request information from you or a third party (e.g. your accountant), and you are obliged to cooperate. However, cooperation is not just a matter of legal necessity - it can also significantly help your case. Timely responses to HMRC enquiry letters, providing all the information requested can help resolve an enquiry early on before it turns into a full-scale investigation, saving you a great deal of trouble.

Cooperation can also be rewarding in purely monetary terms as any penalties imposed can vary significantly depending to the extent to which you demonstrated a willingness to come forward with information and cooperate with HMRC investigators.

Seek quality professional advice

Having a good professional adviser representing you will, in many cases, help you avoid becoming the target of an enquiry in the first place. If you are facing a tax investigation, the help of an experienced professional who has a good reputation with HMRC will be invaluable in dealing with any enquiries.

More Generousity From HMRC

Taxpayers are being warned they will be fined if they submit their self-assessment returns late, even though the deadline day for returns falls on a Sunday.

HMRC lodged 43% of all creditor-petitions seeking to wind up companies to recover debts in the past six months, according to accountancy firm UHY Hacker Young.

HMRC are using anti-terror laws 15 times a day to investigate suspected minor breaches of tax rules.

HOWEVER

44m  phone queries to HMRC went unanswered in 2008/09!!!

 Says it all really.

Flat Rate VAT Rates from 1 January 2010

The new rates for those on the Flat Rate VAT Scheme from 1 January 2010 are available here.

Changing back to the old rate of VAT

On 1 January 2010, the standard rate of VAT reverts to 17.5 per cent after a period of 13 months at 15 per cent.

HMRC will allow the basic tax point to apply to goods delivered or taken away before 1 January but paid for on or after that date. Consequently, the 15 per cent rate will still apply to such sales.

It will also be possible to take deposits or prepayments before the change relating to supplies, which take place after it. However, there are anti-avoidance provisions to prevent abuse.

The trade of certain types of business will span midnight on 31 December 2009 and HMRC has acknowledged it would be unfair to expect them to stop what they are doing on a busy New Year’s Eve and change their systems to cope with an extra 2.5 per cent VAT.

They will be allowed to continue applying the 15 per cent rate until their trading session ends that night, or until 6am, whichever is the earlier. The types of business affected are: pubs, clubs, restaurants and similar retail shops and telecommunications providers.

Exempt and partly exempt businesses (and those with non-business activities, notably charities) should particularly consider taking advantage of early deliveries of goods or deposits or prepayments as explained above, where supplies received will be used in full or in part other than for taxable purposes because, by so doing, they will minimise irrecoverable input tax.

Business owners should also note that where a supply of services spans the change, i.e. it starts before 1 January 2010 but does not finish until on or after that date, the supplier may choose split his invoice to show amounts due at the two rates. As that treatment is optional, recipients of such services, whose input tax is not fully recoverable, should encourage their suppliers to take up the option.

Other businesses affected by the changes include those using the cash accounting, who must clearly identify receipts before and after the change date, and those using the flat rate scheme as percentages will revert to their November 2008 levels. All should remember that the VAT fraction for determining the VAT amount from a VAT-inclusive figure reverts to 7/47, from 3/23, and apart from gross takings, this will also affect, for example, fuel scale charges.

Changes to the flat rate scheme

The scheme allows small businesses with an annual turnover up to £150,000 to pay HMRC a fixed percentage of their turnover rather than the usual payment of output tax and recovery of input tax on actual positive rated outputs and inputs. The percentages are based on the norm for particular business sectors based on statistics available to HMRC.

The percentages were revised downwards on 1 December 2008 when the standard rate was reduced to 15 per cent. However, the changes from 1 January 2010 will not only reflect the reversion to the 17.5 per cent standard rate, but also take into account business patterns across the various sectors over the last year.

Joining the scheme is optional and businesses are entitled to leave it any time. Leaving the scheme retrospectively is at HMRC's discretion. However, HMRC have stated that they will apply this sympathetically if businesses consider it is no longer helpful to them after the changes.

Since its introduction in 2002, the flat rate scheme has generally been helpful to small businesses, so the forthcoming changes afford an opportunity for all qualifying businesses to assess its relevance to them.

Changes to VAT

Background




EC legislation has provided for the filing of ESLs for a number of years in a limited number of circumstances. The domestic provisions applying in individual Member States vary slightly, but the general principle remains that for certain supplies of goods from one member state to another an ESL is required. In the United Kingdom ESLs have been required for a number of years for those businesses that are registered for VAT in the UK and making supplies in the following situations:



supplying goods to a VAT registered business in another EU country;

transferring its own goods from the UK to another EU country; or

acting as an intermediary in triangular transactions involving VAT-registered purchasers and sellers in other EC countries.

The ESLs are filed separately from VAT returns and are generally issued as a consequence of making a declaration in the VAT return that intra-EC sales of goods have been made. Generally ESLs have been required for calendar quarters, with filing being due within 42 days of the end of the period, although it has in certain circumstances been possible to file monthly or annual ESLs.



The changes – summary



The changes have been introduced in response to two key areas of concern. In part the changes were aimed at modernising and simplifying the current rules relating to cross border supplies of services and also as part of the EU Anti-Tax Fraud Strategy. The key changes that will take effect from 1 January 2010 are:



the filing frequency for ESLs for goods will change to monthly in certain cases;

ESLs will be required where services are supplied to EU VAT registered business customers who account for the VAT under the reverse charge provisions; and the filing dates for ESLs for both goods and services will be significantly shortened.

The changes – for those businesses supplying goods



The current ESL reporting period is currently, generally, calendar quarters. With effect from 1 January 2010 this will change to monthly for those businesses whose turnover of such supplies exceeds a specified threshold. The threshold for which quarterly reporting remains relevant is that the value of supplies of goods made must be less than £70,000 per quarter for the period to 31 December 2011 and then from 1 January 2012 the threshold reduces to £35,000 per quarter.



Accounting & Tax



Any business that has exceeded the £70,000 threshold in any of the four quarters in 2009 will be obliged to file monthly ESLs from 1 January 2010. Similar provisions will apply ahead of the reduction in the threshold in 2012. If the threshold is exceeded during the course of a quarter, post 1 January 2010, the option to file quarterly ESLs will cease at the end of that month, such that monthly ESLs will then be required. So, if the threshold is exceeded during February a “quarterly” ESL will be required for January and February and then a monthly ESL for March.



Businesses currently have a period of 42 days after the period end in which to submit ESLs. With effect from 1 January 2010 this period will reduce to 14 days for paper returns and 21 days for electronic submissions.



The changes – for those businesses providing services



Currently there are no provisions for the filing of ESLs for those businesses providing services to other VAT registered businesses in other EU countries. With effect from 1 January 2010 this changes and any business providing services where the customer accounts for VAT under the reverse charge will be obliged to file an ESL. In the case of the UK and Isle of Man such ESLs will be due on a calendar quarter basis with the ESL being submitted in the same time frame as for goods, ie 14 or 21 days.



Those supplies not covered by the new provisions will include:



Supplies that are exempt from VAT according to the provisions in place in the customer’s Member State;

B2B supplies where the customer is not registered for VAT; and

B2C supplies.

The same form as for goods will be used to report intra-Community supplies of services and whilst the UK and Isle of Man permit the filing of quarterly ESLs businesses have an option of filing ESLs on a monthly basis, which may be beneficial perhaps where a business files an ESL for goods.



Those businesses that supply both goods and services to EU VAT registered businesses will be able to report both on the same form, but the indicator “3” will be used to identify the supply of services. No indicator is required for the supply of goods other than where the business is involved in triangular supplies where an indicator “2” is required.



Time of supply for services



Changes have also been announced to the date on which the VAT is accounted for under the reverse charge provisions for intra-Community supplies of services. This will also impact the time on which such supplies should be included on the ESLs.



Currently VAT is generally due under the reverse charge provisions on the date on which the service is paid for, but with effect from 1 January 2010 the date will change as follows:



the time of supply of such services will be the earlier of when the service is completed or when payment is made; butfor continuous supplies of services, the time of supply will be linked to the end of each billing or payment period, but where no invoice or other accounting document is issued or payment made during the year, the time of supply will be the end of each calendar year.

Accounting for VAT by reference to the completion of the service is already accepted practice in the UK, as VAT is generally due based on the date of completion of the service. Accounting for the reverse charged VAT and including the supply in an ESL based on the date of completion of the service is bound to create some uncertainties and inconsistencies. The UK VAT authority, HMRC, have now confirmed that there is no need for the supplier to confirm with the customer the date on which the supply is considered to have been completed.



Accounting & Tax



Penalties



HMRC have indicated that they expect businesses to take reasonable and appropriate steps to ensure the completeness and accuracy of ESLs. Furthermore they have accepted that there will be operational issues to contend with in the early stages of the adoption of these new policies. As such, provided necessary care has been taken HMRC will not seek to apply penalties in the early stages of the new ESL regime.



However, once the initial period of grace is past HMRC will seek to levy penalties at a rate of £5, £10 or £15 per day for each day an ESL is late, depending on the number of times a business has been late in submitting their ESLs.



In addition, where an ESL contains a material inaccuracy a penalty of £100 will be applied. Material inaccuracies will fall into three categories:



data missing from the ESL;

lines on the ESL are factually incorrect; or

an invalid VAT number is used.

VAT numbers have a preset format according to the Member State of the supplier or customer and will contain a country code prefix.These registrations can be checked by reference to the EC website, which can be located at http://ec.europa.eu/taxation_customs/vies/vieshome.do. Penalties will not be charged where a business has reasonable excuse, but providing an invalid VAT registration number is not considered “reasonable”.



Furthermore, “reasonable excuse” does not include reliance on a third party to complete and file the ESL. As such, whilst SMP Accounting & Tax may be agent for the completion and submission of VAT returns and ESLs the business remains legally responsible for the accurate and timely completion and submission of ESLs.



Our and your responsibilities and actions



Clearly, whilst it remains the responsibility of the business to ensure the accurate and timely submission of the ESL SMP Accounting & Tax will wish to ensure the ESLs are submitted correctly and on a timely basis. In order to do so we will require the necessary information to complete the filings within 14 days of the end of the period end. Should online submissions not be possible the information will be required within 7 days of the period end. Whilst we cannot guarantee submission of the ESLs where information is provided after that date we will endeavour to file by the due date.



Where we are responsible for the filing of ESLs we will contact you at or towards the end of the period advising that an ESL is due for filing. Unless we hear from you to the contrary we will file ESLs according to the greatest time period available, ie quarterly ESLs for services and for goods, until the threshold of £70,000 or £35,000 is exceeded. We will then require confirmation that there has been no activity during the period or, alternatively, details of any relevant sales made during the period, supported where possible by relevant sales invoices. The information that should be declared on the ESL will be:



customer’s country code;

customer’s VAT registration number; and

total value of the supplies to each customer in the period expressed in £sterling.

In order to speed up the process, given the deadlines for filing it is imperative that we have email access wherever possible to you so we can contact you quickly to obtain the necessary information and to deal with any queries.



Accounting & Tax



If you have any further queries on this matter at this time, or if we can be of any further assistance, please do not hesitate to contact one of the team.