View the related Tax Guidance about Domestic reverse charge
VAT review ― registration and compliance
VAT review ― registration and complianceThis guidance note is intended to provide more detail on areas to consider during a VAT review which relate to general compliance. This document should be used in conjunction with the Checklist ― VAT review when undertaking the actual review in order to ensure that all relevant items have been covered.Whilst this guidance and associated checklist have been prepared to seek to cover the common issues and risks which might arise, care should be taken to ensure that any specific business or sector issues are considered as part of a comprehensive review.VAT returns and compliance ― return and payment deadlinesA typical starting point when undertaking a VAT review or due diligence exercise is to confirm whether all VAT returns and payments have been made on time. The VAT return and any payment due must reach HMRC by the due date stated on the return. For a normal return, this will be:•no later than one month after the end of the VAT return period, and•no later than one month after the effective date for cancellation of registration (or, in the case of a business that had failed to register, one month after the date when liability to be registered ceases)Businesses can check the payment deadline using the payment deadline calculator provided by HMRC.If during the course of a VAT review it is identified that returns or payments have been made late, the next step will be to confirm whether the business has
VAT on property acquisitions
VAT on property acquisitionsThis guidance note provides an overview of the VAT implications of acquiring land and buildings located in the UK and outside the UK.Property may be acquired by:•buying it•constructing a new building•creating a building by converting an existing building•extending an existing building•renovating an existing buildingOne method of acquiring property is to buy exactly what is required. Other methods may include a combination the above. For example, a person may buy land and arrange for a new building to be constructed on it, or buy an existing non-residential building and arrange for it to be converted into a dwelling.This guidance note summarises the VAT issues on acquiring property. For a similar summary of the VAT issues on disposing of a property, see the VAT on property disposals guidance note.VAT implications of acquiring land and buildings located in the UKAs indicated above, there are various methods of acquiring land and buildings. In broad terms the methods are:•buying a property •arranging for building work to be carried out•a combination of the aboveThese methods of acquisition are discussed below.Buying a propertyThe table below provides a general overview of the VAT implications of buying property located in the UK and includes links to guidance notes which provide more information.Type of acquisitionDescriptionFurther readingBuying a dwellingA building may look like a dwelling and function as a dwelling and yet not qualify as a dwelling for VAT purposes.
Domestic reverse charge ― overview
Domestic reverse charge ― overviewThis note provides an overview of the domestic reverse charge provisions that have been introduced in order to tackle VAT avoidance in certain perceived ‘high risk’ industries in the UK.What is the domestic reverse charge?The domestic reverse charge is an anti-fraud measure that is designed to limit the opportunity for suppliers to charge VAT on supplies made and then fraudulently fail to remit this VAT to HMRC. The domestic reverse charge is only applied to specified supplies of goods and services that HMRC considers more likely to be subject to fraudulent activities. The domestic reverse charge is not the same as the cross-border reverse charge that applies to services received from overseas vendors ― see the Reverse charge ― buying in services from outside the UK guidance note for more information. Businesses that make supplies covered by the domestic reverse charge must not charge VAT on the supply made. The customer is required to self-account for any VAT due on the VAT return covering the period in which the supply was made. What are the specified goods and services covered by the domestic reverse charge?The following supplies come within the scope of the domestic reverse charge:Specified goods / servicesImplementation dateRelevant guidance noteMobile phones and computer chips1 June 2007Domestic reverse charge ― mobile phones and computer chipsCarbon emissions allowances1 November 2010Domestic reverse charge ― trading in carbon emissionsWholesale gas and electricity1 July 2014Domestic reverse charge ― wholesale
VAT registration ― voluntary
VAT registration ― voluntaryThis guidance note provides the following information regarding VAT registration on a voluntary basis:•when it is possible•reasons why it may be appropriate•practical points to considerFor in-depth commentary on the legislation and case law concerning voluntary VAT registration, please refer to De Voil Indirect Tax Service V2.144–V2.146.For guidance about the process of registering for VAT, please refer to the VAT registration procedure guidance note.The Input tax ― overview guidance note includes guidance on the rules for claiming VAT on costs incurred prior to the date of VAT registration.The Flowchart ― VAT registration ― compulsory or voluntary is intended to provide an overview of when UK VAT registration may be required on a compulsory basis or may be available on a voluntary basis. The flowchart does not, however, reflect all of the points covered in this guidance note and the VAT registration ― compulsory guidance note and it should be used in conjunction with both of these guidance notes.When can a person register for VAT voluntarily?The VAT registration ― compulsory guidance note explains when VAT registration is required on a compulsory basis. If VAT registration is not required on a compulsory basis, it is available on a voluntary basis if a person makes, or intends to may, any supplies that provide the person with an entitlement to claim VAT as input tax. For guidance on claiming VAT as input tax, please refer to the Input tax ― overview guidance note.The following categories of supplies provide
Domestic reverse charge ― wholesale trading in electricity and gas
Domestic reverse charge ― wholesale trading in electricity and gasThis guidance note provides an overview of the scope of the domestic reverse charged applied in respect of wholesale trading in electricity and gas. This note should be read in conjunction with the Domestic reverse charge ― overview and Domestic reverse charge ― accounting requirements guidance notes.BackgroundFrom 1 July 2014, the domestic reverse charge must be used in order to account for VAT due on wholesale supplies of electricity and gas within the UK in order to combat increasing fraud. Supplies includedThe domestic reverse charge applies to all wholesale supplies of gas and electricity made between two UK parties unless the supply falls into one of the exemptions outlined below. This usually means a wholesale supply between two UK parties under trading contracts such as the European Federation of Energy Traders contracts, Grid Trade Master Agreements and National Balancing Point contracts and over-the-counter or spot contracts where:•supplies of gas through a natural gas system situated within the UK or any network connected to a natural gas system in the UK•supply of electricityThe domestic reverse charge is not applicable to supplies of gas or electricity made under a supply licence or metered supplies to domestic and business premises for their own consumption. VAT registered businesses that do not resell electricity and gas will not be affected by these changes. HMRC has stated in VAT Notice 735, para 3.5.1 that the following are examples of supplies that will be affected
Credits and debits
Credits and debitsThis guidance note provides an overview of how debits and credits should be dealt with from a VAT perspective.Crediting a customerIf a supplier has agreed to issue a credit note to a customer or offers a contingent discount and the customer is able to recover all of the VAT incurred, the supplier and customer can agree to issue a credit note without VAT. If the parties do not agree that the credit note may be issued without VAT, the supplier should issue the credit note including VAT and the VAT amount should be recovered from HMRC via the suppliers' VAT return.If preferable the customer can issue the supplier with a debit note. This option is commonly used if the customer has been issuing self-billed invoices (see the Self-billing guidance note for more information). Regulations for VAT adjustments in the course of business (reg 38)The Government has introduced legislation that amends the rules on output tax adjustments for retrospective price reductions with effect from 1 September 2019. From this date, businesses can only make adjustments where they have actually given customers a refund. The regulations have been mended to reflect the following changes:•an increase in price occurs is when both the supplier and the customer agree to the change. A debit note must be issued no later than 14 days after the price increase. The supplier must account for the increase in VAT in the VAT return period covering the date the change occurs. •a decrease
Land and buildings ― building work ― invoices and authenticated receipts
Land and buildings ― building work ― invoices and authenticated receiptsThis guidance note provides information on invoices and authenticated receipts for building work.Detailed commentary on invoices and authenticated receipts is included in De Voil Indirect Tax Service V3.511 to V3.529.Summary of points to considerThe table below provides a summary of points to consider when an invoice or authenticated receipt is issued or received in relation to building work.Points to considerRelevant sections of this guidance noteWhere was the building work carried out?Place of supplyWhen was the building work carried out?Time of supplyDoes the tax point anti-avoidance rule apply?Tax point anti-avoidance ruleWhich party is responsible for accounting for any VAT due on the supply?Reverse chargeWill an invoice or an authenticated receipt be issued?Invoice or authenticated receiptWill a self-billed invoice be issued?Self-billingWhat rate of VAT should be applied?Applying the correct VAT treatmentWho carried out the building work?Self-supplyPlace of supplyBuilding work that is carried out in the UK, including on sites within the territorial sea of the UK, is within the scope of UK VAT regardless of where in the world the supplier of the construction services belongs. It may be necessary for a VAT registered recipient of a supply of construction services to apply a procedure known as the reverse charge and account for any VAT due on the supply. For more information on the reverse charge, please refer to the ‘Reverse charge’ section of this guidance note. Building work that is carried out on sites
Land and buildings ― buying and selling ― relevant residential purpose buildings
Land and buildings ― buying and selling ― relevant residential purpose buildingsThis guidance note provides information on the VAT treatment of buying and selling relevant residential purpose (RRP) buildings. Although the content of this guidance note mainly focuses on the VAT treatment of selling, most of the content is relevant to both the buyer and the seller.For guidance regarding the VAT treatment of buying and selling:•agricultural and forestry property, see the Land and buildings ― buying and selling ― agricultural and forestry property guidance note•commercial buildings and civil engineering works, see the Land and buildings ― buying and selling ― commercial buildings and civil engineering works guidance note•dwellings, see the Land and buildings ― buying and selling ― dwellings guidance note•relevant charitable purpose buildings, see the Land and buildings ― buying and selling ― relevant charitable purpose buildings guidance noteIn-depth commentary on the legislation can be found in De Voil Indirect Tax Services V4.232BB.What is a relevant residential purpose building?In the context of the sale of land and buildings, buildings used for a ‘relevant residential purpose’ (RRP) may qualify for the zero rate of VAT in certain circumstances (these circumstances are explored further below in this guidance note). A relevant residential purpose means use for any of the following purposes:•a home or other institution providing residential accommodation for children•a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past
Land and buildings ― building work ― converting buildings
Land and buildings ― building work ― converting buildingsThis guidance note provides information on the VAT treatment of converting buildings.For commentary on the statutory legislation and case law please refer to De Voil Indirect Tax Service V4.240 and V4.411.Summary of the VAT treatment of converting buildingsThe following table provides a summary of the VAT treatment of converting buildings located in the UK. The zero rate of VAT takes precedence over the reduced rate of VAT so if the work meets the conditions for zero-rating and reduced-rating, the zero rate of VAT applies.VAT treatmentOverview of works coveredFurther guidanceWork that meets the conditions for zero-rating.Qualifying services and related building materials supplied to a relevant housing association in the course of carrying out a non-residential to residential conversion.See the Property conversion work that meets the conditions for zero-rating section of this guidance note.Work that meets the conditions for reduced-rating.Qualifying services and related building materials supplied in the course of carrying out certain qualifying conversions (including changed number of dwellings conversions, house in multiple occupancy conversions and special residential conversions).See the Property conversion work that meets the conditions for reduced-rating section of this guidance note.Work that is subject to VAT at the standard rate.Other conversion works that do not qualify for either the zero or reduced rates of VAT.See the Property conversion work that is subject to VAT at the standard rate section of this guidance note.Work on buildings located outside the UK is
Guide to completing a UK VAT return
Guide to completing a UK VAT returnThis guidance note provides information on the contents of a UK VAT return. Information on completing a VAT return for businesses using the flat rate scheme is included in the Flat rate scheme (FRS) ― operating the scheme guidance note.Box 1: VAT due on sales and other outputsThis is the total amount of VAT charged on goods and services in the return period. Businesses should ensure they include VAT payable to HMRC for certain supplies which may be made outside their core business such as:•VAT due in the period on imports accounted for through postponed accounting (see the Imports ― postponed accounting for import VAT guidance note)•VAT on the fuel scale charge (see the Input tax ― Motoring expenses guidance note)•the sale of stocks and assets•VAT on goods taken out of the business for private use•VAT due under the reverse charge•supplies to staff•output VAT on gifts of goods (see the Supply and Consideration ― business gifts and samples (deemed supply) guidance note)•commission received from selling something on behalf of someone else (agent’s commission)•VAT shown on self-billed invoices issued by the customer (see the Self-billing guidance note)Notice 700/12, para 3.2Other noteworthy points when completing box 1 include:•VAT on credit notes should be deducted•VAT on the full value of part-exchange goods should be included•assessments made by HMRC should be left outNotice 700/12, para 3.2Box 2: VAT due in the period on acquisitions of
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