VAT
Transfer of going concern
If a business is transferred as a going concern, the
transaction is not regarded as a transaction within the scope of VAT provided
that certain conditions are satisfied.
VAT record keeping
requirements for businesses transferred as a going concern will be brought into
line with other tax and regulatory regimes so that the seller retains his
records, except in the few cases where because the buyer retains the seller's
VAT number it is essential for VAT compliance purposes that the records are
passed over.
Partial exemption
A business that makes both taxable and exempt supplies
(a partly exempt business) must operate a partial exemption method to calculate
how much VAT it can recover on its costs. Many large partly exempt businesses
operate a ‘tailor-made’ special method that must be approved by
HMRC before use.
Following consultation, the government intends
implementing two changes with effect from 1 April 2007:
- A business must declare ‘to the best of its
knowledge and belief’ that its proposed special method is fair and
reasonable. HMRC will have the power to set aside a method if the person
signing the declaration knew or ought reasonably to have known that it is not
fair and reasonable.
- Partly exempt businesses that make overseas
supplies will have the right to apply for a ‘combined method’ that
caters for the recovery of VAT on certain overseas supplies.
Proposed reverse charge for Missing Trader
Intra-Community (MTIC) fraud
MTIC fraud is a sophisticated and organised criminal
attack on the VAT system. The fraud arises through contrived transaction chains
involving supplies of high value goods with the tax loss occurring when the VAT
charged by the supplier is not paid to HMRC but can be reclaimed by the
recipient.
A reverse charge procedure was introduced in Finance Act
2006 whereby the VAT registered customer, rather than the seller, accounts for
and pays the VAT on the supply of certain goods of a kind used in MTIC
fraud.
The planned implementation date of the reverse charge was 1
December 2006 but has been postponed because there have been difficulties in
the negotiations with other member states on the derogation required by the UK
to introduce the charge. The government has confirmed that the discussions are
still continuing and still plans to introduce reverse charge VAT accounting for
a range of goods including mobile phones and computer chips once the derogation
has been agreed.
|
