We have compiled the latest updates to various HMRC VAT publications, briefs and guidance. Readers should note that there are also numerous updates to VAT guidance and rules due to the UK’s departure from the EU. Who should register for VAT (VAT Notice 700/1); How VAT affects charities (VAT Notice 701/1); Change your VAT registration details; Buildings and construction (VAT Notice 708); Insolvency (VAT Notice 700/56); Group and divisional registration (VAT Notice 700/2); Claim a VAT refund for a new home or charity building if you're a DIY housebuilder; Claim a VAT refund for a conversion if you're a DIY housebuilder; Local authorities and similar bodies (VAT Notice 749); Claim a VAT refund as an organisation not registered for VAT; Insolvency (VAT Notice 700/56); Who should register for VAT (VAT Notice 700/1); Health professionals and pharmaceutical products (VAT Notice 701/57); Registering groups, divisions and joint ventures for VAT; How to fill in and submit your VAT Return (VAT Notice 700/12); Send details to support your VAT repayment claim; Check if you can register for the VAT Import One Stop Shop Scheme; Submit your Import One Stop Shop VAT Return; Register for the VAT Import One Stop Shop Scheme; Insolvency (VAT Notice 700/56); Refunds of UK VAT for non-UK businesses (VAT Notice 723A); Pay the VAT due on your One Stop Shop VAT Return; Burial, cremation and commemoration of the dead (VAT Notice 701/32); Revenue and Customs Brief 1 (2024): Live web streaming of funeral services; and Women's sanitary products (VAT Notice 701/18).  

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. The most recent Trader Support Service and Cabinet Officer Borders bulletins are also available. Miscellaneous updated guidance etc. Recently updated guidance, and publications relevant to EU exit are set out below:- Data Element 2/3: Documents and Other Reference Codes (Union) of the Customs Declaration Service; Data Element 2/3 Documents and Other Reference Codes (National) of the Customs Declaration Service (CDS); Data Element 2/3: Document and Other Reference Codes: Licence Types — Imports and Exports of the Customs Declaration Service (CDS); Moving parcels from Great Britain to Northern Ireland under the Windsor Framework from 30 September 2024; Check last dates for deferment period adjustments in the Customs Declaration Service; and Simplified Customs Declaration Process: notification of non monetary amendment.

Revenue has updated the Tax and Duty Manual regarding the payment and receipt of interest and royalties without deduction of income tax. The updated manual reflects the introduction of the outbound payments defensive measures and provides additional guidance.  The updates are as follows:  in respect of the application of interest withholding tax to interest paid to Irish partnerships and foreign tax transparent entities (section 5.3), and  on payments of interest to tax transparent entities where members of those entities may avail of the rate of withholding tax provided for under the terms of a double taxation agreement (section 9.1.1). 

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.

The new tax year 2024/25 begins later this week on 6 April 2024 after the new financial year 2024 commenced yesterday on 1 April 2024. 5 April 2024 is also the deadline to claim certain allowances and reliefs from the previous four tax years including claims for the marriage allowance which are still in time for the tax year 2019/20. Let’s take a look at some of the key tax changes which take effect. R&D tax relief Last month, Finance Act 2024, Schedule 1 (Research and Development) (Appointed Day) Regulations 2024 was published and appointed 1 April 2024 as the day when Schedule 1 of Finance Act 2024 will come into force (i.e. applying to accounting periods beginning on or after 1 April 2024). This schedule introduces the merged R&D tax relief scheme in addition to the additional relief available for loss-making R&D-intensive SMEs via a higher rate of payable tax credit. National Insurance Contributions (“NICs”) As announced in the recent Spring Budget, from 6 April 2024, the following changes to the rates of NICs will take effect:- The main rate of Class 1 employee NICs will reduce from 10 percent to 8 percent; and NICs rates for the self-employed across the UK will reduce to 6 percent from 9 percent as a result of a combination of the 2 percent cut announced in the Spring Budget 2024 and the 1 percent cut announced at Autumn Statement 2023. From 6 April 2024, self-employed individuals with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits including the State Pension. Anyone with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently, and those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so. HMRC would like to remind agents/taxpayers that taxpayers who are in self-assessment for reasons such as receipt of rental income or they are subject to the High Income Child Benefit Charge, and who, at a later date, become self-employed or become a partner in a partnership are still required to register with HMRC for Class 2 NICs. This will ensure that from 6 April 24, if you meet the above profit thresholds, Class 2 contributions will be treated as having been paid to protect your National Insurance record. Alternatively, if profits are under £6725 you will have the opportunity to voluntarily pay Class 2 contributions to avoid gaps in your National Insurance record. An article on this features in the most recent Agent Update. Miscellaneous The highlights from a range of other changes are set out below:- The dividend allowance will reduce to £500 from £1,000 from 5 April 2024; From the same date, the capital gains tax annual exemption will reduce from £6,000 to £3,000; From 1 April 2024, the rate of Plastic Packaging Tax increased in line with the Consumer Price Index; From 1 April 2024, both the national living and minimum wages were increased; The cash basis becomes compulsory for all unincorporated businesses from 6 April 2024; and From 2024/25, the tax year basis becomes the basis of assessment for all unincorporated businesses.

Revenue has updated the Tax and Duty Manual regarding Controlled Foreign Company (CFC) Rules. The manual has been updated to reflect the Finance (No.2) Act 2023 amendment to section 835YA TCA 1997 concerning Irish defensive measures in respect of the CFC rules. Revenue has advised that this manual will be further updated to reflect Pillar Two related consequential amendments made to the CFC rules in Finance (No. 2) Act 2023. 

Revenue has updated the Tax and Duty Manual regarding the recovery of VAT on motor vehicles. The manual has been updated to provide further information on vehicle conversions. 

Last week we examined option one in HMRC’s long planned consultation on “Raising standards in the tax advice market” which proposes mandatory membership of a recognised professional body and is clearly HMRC’s preferred option. This week we are seeking your feedback on option two, a hybrid regulatory model in of joint HMRC and industry enforcement and encourage you to share your views with us by Tuesday 7 May 2024. Next week’s edition of Chartered Accountants Tax News will set out more information on the final option, regulation by a separate statutory government body in addition to approaches to strengthen the controls on access to HMRC’s services for tax practitioners. Joint HMRC and industry enforcement Under this option, HMRC and industry would monitor and raise standards of the market. Unaffiliated tax practitioners would have to be supervised by HMRC and professional body members would be subject to the supervisory requirements of their professional body. Note that this option is unlikely to beHMRC’s preferred option. More information on this option is set out in Chapter 6. Tax practitioners in scope of the regulatory framework would be required to become and remain a member of a recognised professional body or be supervised by HMRC to provide tax advice and tax services. According to the consultation document, this would provide greater market flexibility as tax practitioners would have a choice of either becoming a member of a professional body or being unaffiliated with any professional body and instead being supervised by HMRC as a tax practitioner. Professional bodies’ responsibilities would remain the same, which includes maintaining oversight and supervision for their members and ensuring they meet the appropriate standards. They would also remain responsible for acting where members are found to be in breach of the standards required of them. This would build on the supervisory role professional bodies currently undertake to maintain professional standards amongst tax practitioners. They would not be expected to oversee the unaffiliated market. HMRC believes that as for option one, this would have minimal impact on current professional body members who meet expected standards. Under this approach HMRC would take a greater role in maintaining and raising standards of those tax practitioners who are unaffiliated with a recognised professional body. HMRC would undertake checks of those being supervised, beyond those being proposed under mandatory registration (see Chapter 5). Checks could include adherence to the ‘Standard for Agents’ and/or complete and certify that they have met appropriate continuing professional development requirements. The practitioner would be expected to declare annually that they continued to meet requirements. Additionally, HMRC would carry out ongoing risk-based checks to ensure tax practitioners continued to meet requirements and would be responsible for enforcement when tax practitioners do not comply with standards. This approach would therefore require investment to expand HMRC’s role beyond its current role of administering the tax system and supervising some tax practitioners for AML. The ability of this approach to raise standards in the market will be dependent on the supervisory role undertaken by HMRC. However, HMRC taking on a strong supervisory role of tax practitioner professional standards whilst administering the tax system could create a conflict of interest. This is because HMRC could be perceived as acting as both judge and jury, as the department would be responsible for checking both tax compliance and setting and enforcing standards of tax practitioners, for example, where there is a difference in interpretation of the law, or where the tax practitioner considers they are acting in the best interest of the client even though HMRC disagrees with the outcome. Other risks include the added complexity in the market for example, the potential for there to be different requirements and levels of oversight and enforcement for HMRC-supervised tax practitioners compared to professional body-supervised tax practitioners. This could cause confusion and complexity for clients and start a race to the bottom if HMRC and professional bodies had differing requirements. The government would be cautious about creating a dual system of regulation that could undermine the objective of supporting consistent standards and enforcement in the pursuit of creating a level playing field.

Revenue has published a new Tax and Duty Manual to provide guidance on the VAT treatment appropriate to Deposit Return Scheme (DRS) refunds. The DRS came into operation on 1 February 2024 and provides for a small refundable deposit on drink products supplied in plastic bottles and aluminium or steel cans. The deposit is refunded to a person who returns an empty container to the DRS for recycling or reuse.  Section 92A VATCA 2010 legislates for the VAT treatment of the DRS. Because it is not possible for businesses in the supply chain (e.g. manufacturers, importers, wholesalers, retailers) to know at the time they make their supplies whether or not containers will eventually be returned when they are empty, no VAT arises on supplies of drink products in the supply chain. VAT on the deposit only arises where the container is not returned under the DRS, in which case it is the Scheme Operator, Re-turn, who is liable to account for and pay the tax. Re-turn was appointed by the Minister for the Environment, Climate and Communications to operate the DRS.  

Revenue has updated the Tax and Duty Manual which provides guidance on EU Cross-Border Payments (CESOP) registration and filing. The updated manual contains detailed guidance on the process for filing CESOP reports using Revenue Online Services (ROS). The filing facility for CESOP in ROS opened on 1 April 2024.  With a view to assisting Payment Service Providers (PSPs), or their designated filing intermediaries, with a CESOP reporting obligation in Ireland, the manual provides:  Detailed guidance on the process for registration as a resident or non-resident PSP for the purpose of CESOP reporting in Ireland;  Detailed guidance of the process for filing CESOP reports in Ireland;  Details of the technical specifications required for filing CESOP reports in Ireland.  The registration facility for CESOP filers opened in Ireland on 1 February 2024.  

The Department of Justice has published guidelines for designated persons supervised by the Anti-Money Laundering Compliance Unit. The guidelines provide assistance to those persons in understanding and meeting their obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended.   The Department of Justice welcomes comments on the guidelines and will consider feedback received prior to 30 June 2024 as part of its first review process. Further information is available on gov.ie. 

Revenue has published a new Tax and Duty Manual to provide guidance on outbound payments defensive measures contained in Chapter 5 Part 33 TCA 1997, as introduced in Finance (No.2) Act 2023. The aim of these defensive measures is to prevent double non-taxation.  Chapter 5 Part 33 TCA 1997 provides for the implementation of defensive measures, by way of withholding taxes, on outbound payments of interest and royalties, and on the making of distributions, in certain circumstances. The measures apply to payments or distributions by Irish resident companies, or payments by Irish branches of non-resident companies, to associated entities who are resident, or situated, in specified territories.