This week we bring you news about VAT reciprocity with Italy and HMRC has provided an update on specified supplies registration for VAT. HMRC has also published details of VAT services being removed later this month from its legacy Online Service for Agents and the latest Agent Update is also available.
VAT reciprocity with Italy
Following successful negotiations of a bespoke reciprocal agreement with the Italian Government, UK businesses not established in Italy will be able to claim refunds of VAT paid on goods and services in Italy relating to their business activities. UK businesses can claim these VAT refunds under the EU’s 13th Directive process. Tax representatives will not be able to make these claims.
The agreement will have retrospective effect from 1 January 2021. Claims submitted on or after this date to the Italian Revenue Agency (Agenzia delle Entrate) will be considered valid. All claims for VAT refunds must meet the eligibility criteria and application requirements set out by the Italian tax authorities to be paid. For details on how to claim a VAT refund, visit the Agenzia della Entrate website.
Update on specified supplies registration
HMRC was recently made aware of problems encountered when attempting to register for VAT due to making specified supplies.
Specified supplies are supplies of certain financial services which would usually be exempt but can be treated as taxable if certain criteria are met. This gives rise to the option of voluntarily registering for VAT to recover input tax incurred on such supplies.
Given that these supplies are part of a group that are usually exempt, the rules behind our registration service are programmed to reject applications that include a SIC code relating to these supplies.
The consequence of this is that applications are being rejected when a person applies to voluntarily register under para 10 sch1 VATA 1994 due to making specified supplies.
HMRC has listened to these concerns and, as of February 2024 updated the rules behind the VAT registration service (“VRS”) so that when a person applying under these circumstances enters the words ‘SPECIFIED SUPPLIES’ in the ‘Business Descriptions’ free text box when applying, the application will not be rejected.
Section 2.7 of VAT Notice 700/1 has also been updated to this effect and HMRC is now considering the most appropriate place to include an update in VRS itself to best support those applying.
Removal of services from HMRC’s legacy Online Service for Agents
From 16 April 2024, HMRC will remove some functionality from agents’ legacy VAT services. From that date agents will no longer be able to use the Online Service for Agents to submit a VAT return, set up or amend a direct debit or change VAT registration details on behalf of a client. This does not impact services within the Agent Services Account. From 16 May 2024 the remainder of legacy VAT services (the view account and view submitted returns functions) will also be withdrawn. More information is set out below
“Why is this happening?
We are in the process of decommissioning our outdated legacy computer system.
Our customers were moved to a new IT platform when we introduced Making Tax Digital for VAT. Agents and a small number of customers still have access to the legacy VAT services. Amendments made in the legacy system do not automatically update customer records on the new platform. This can lead to a delay in updating records.
How this affects agents
Agents must use the ASA to transact on behalf of their VAT clients and should no longer use the legacy Online Service for Agents.
You will be unable to create/amend Direct Debits on behalf of your client using the legacy Online Service for Agents. Your client will need to self-serve through their VAT Online Account, this ensures that banking regulations are adhered to. The VAT C9 form is available for use if more than one signature is required on a Direct Debit Instruction (DDI).
Please be aware that amendments you make to client details via the Online Service for Agents until closure will not be automatically reflected in your clients’ records. This includes DDI amendments, which could result in delayed payment to HMRC and prevent repayments reaching your client on time. Please refrain from using this service to advise us of any changes with immediate effect.
Use your ASA to advise HMRC of changes to your clients VAT account, view their account, view submitted returns, print a VAT certificate, cancel a VAT registration, and print VAT returns on behalf of your client.
If you are not yet authorised to represent your client via the ASA, you will need to complete a Digital handshake. For information on how to do this please visit the following link: https://www.gov.uk/guidance/how-to-use-the-digital-handshake-to-get-authorised-as-a-tax-agent.
How this affects clients
The majority of clients will be unaffected by this change, they will be automatically logged into the new IT service when they access their VAT online account via their Business Tax Account.
The small number of clients who still have access to the legacy IT service will not be able to submit a VAT return, set up or amend a direct debit or change VAT registration details. Clients affected will be directed to the new service by relevant guidance.
VAT returns should be made through MTD compatible software unless we have granted an exemption.
Clients must have a Government Gateway user ID and password to access the latest VAT online account. For assistance in gaining access Government Gateway, please follow this link: https://www.gov.uk/log-in-register-hmrc-online-services/problems-signing-in.”
Agent Update 118
Agent Update: issue 118 is available now. Get the latest guidance and information including:-
- Construction Industry Scheme (CIS) changes from 6 April 2024;
- National Insurance contributions rates changes reminder;
- The Investment Zone direct tax offer;
- The VAT margin scheme – your clients may need to act before 30 April 2024; and
- GOV.UK One Login – a new way to access HMRC’s online services for some customers.
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