VAT Focus - A Round-Up Of Recent VAT-Related Developments

Time Is Running Out To Reclaim VAT

Following the cases of Fleming and Condé

Nast, businesses have the opportunity to reclaim overpaid or

under-claimed VAT from the period 1973 to 1997 (previously blocked

by the three-year cap). However, the 31 March 2009 deadline for

making claims to HM Revenue & Customs (HMRC) is fast

approaching, so this should be reviewed urgently.

There are many areas where claims can be made, including staff

entertainment costs (which were not allowed prior to 1997),

business gifts, staff expenses, car parking and foreign exchange

trading for banks.

A lack of accurate and complete records, especially for the

earlier years, was considered an obstacle to making claims.

However, HMRC appears to be accepting extrapolation and sampling

methods to estimate reasonable claims for earlier years where

complete records are not available.

Reclaim Business Entertainment Expenses

The recent European Court of Justice (ECJ) ruling in the

Danfoss and AstraZeneca case also provides an opportunity

to reclaim certain VAT costs, which were previously always

considered business entertainment by HMRC. The ruling confirmed

that, where meals are provided to business contacts during the

course of meetings, as long as such catering is strictly for the

purpose of the business, these costs should not be blocked from

input VAT recovery. For example, many professional firms will have

client meetings, seminars and other events where catering is

provided internally. Where VAT has been restricted on these costs,

a claim can now be made if it was strictly for business purposes. A

claim can be made for the period between 1973 and 1997 in addition

to a claim for the last three years.

What Next?

If you have not already done so, you should consider whether

your business has the potential to make such VAT claims. To discuss

whether your business is eligible to make a claim, please speak to

your usual Smith & Williamson contact.

VAT Treatment Of Debt Collection Services

The Scottish Court of Session recently ruled on a case involving

services of 'debt collection'. The case considered whether

the services provided by agents in obtaining payment of arrears

were debt collection, or whether VAT exemption could be

applied.

Debt collection services are excluded from the exemptions listed

for financial services in the VAT legislation, and are subject to

VAT at the standard rate. In this case, Halifax Bank of Scotland

(HBOS) sought to structure its arrangements with...