Correct VAT for Gas Oil Charges 

In recent months, a few members have been visited by HMRC Inspectors regarding the member’s charging method for VAT after an item of plant has been off-hired and returned to the depot. The VAT issue centres on those occasions when the plant’s fuel tank needs refilling. Those members who have been visited by HMRC have been informed that by refilling the plant’s fuel tank on behalf of the customer, should treat this as a surcharge, and the customer should be charged at 20% VAT, and not 5%.

The Inspector’s viewpoint is that this refilling constitutes a separate supply to the hire of the plant, as the hire has ended with the plant back at the owner’s depot.

Some members have suggested to the Inspector who visited them that this is a single supply, i.e., that it still relates to the hire as the plant had a full fuel tank when hired out, and this ‘fill-up’, is putting the status of the plant to the position it was in when it went out. Other have raised a separate point in that the quantity of fuel used to ‘fill-up’ the tank is below the de-minimis level (2,300 litres), and therefore 5% VAT applies.

The Inspectors are not accepting either point and are maintaining their position - as per the Value Added Tax Act 1994 -, that members should charge 20% VAT.

The CPA has taken legal advice by contacting a tax specialist at CPA’s solicitor’s Gateley Legal. The tax specialist has confirmed that the Inspector’s interpretation is correct.

Members are advised to review their current accounting practice when charging their customers for refuelling the plant’s tank after the hire has ended. It is recommended that, if necessary, they obtain independent financial/legal advice, if they are uncertain on how best to proceed.

Reverse VAT Information

The Government has announced that the implementation date for Reverse VAT has been delayed until 1st March 2021. Build UK has compiled a powerpoint and a Practical Guide on Reverse VAT.

The Practical Guide can be viewed at https://builduk.org/wp-content/uploads/2019/07/Reverse-VAT-A-Practical-Guide.pdf  

Construction Industry Reverse Charge by Barne Roffe, the CPA's Accountants

A new VAT reverse charge, designed to combat ‘missing trader’ fraud in the building and construction sectors, will come into effect from the 1st March 2021. This means that the onus for accounting for VAT will now be on the customer rather than the supplier, where the customer is VAT registered.

Under the new rules, a VAT-registered business supplying “specified services” to another VAT-registered business for onward sale will need to issue an invoice stating that the supply is subject to the reverse charge. The recipient will then account for VAT on its VAT return instead of paying it direct to the supplier. The recipient will also be eligible to claim this amount as input VAT. This would generally be a tax neutral transaction.

HM Revenue and Customs (HMRC) state that the new reverse charge will not apply to all in the construction sector, only to those providing “specified services”. However, the definition of “specified services” are as defined in the Construction Act 1996, so it is likely that all those operating in this sector will need to be conscious of the new rules. If a supply contains a mix of both specified and unspecified services, it will be classed as a single supply of “specified services” and the reverse charge will apply.

Completion of the VAT Return

Suppliers must not enter in box 1 any output tax on sales to which the reverse charge applies. The value of any such sales must be entered in box 6.

Customers must enter in box 1 the output tax on purchases to which the reverse charge applies. The value of any such purchases must not be entered in box 6. The input tax on the reverse charge may be reclaimed in box 4.

Invoicing

The supplier’s invoice should show all the same information that is normally shown on a VAT invoice. However, it should be made clear that the domestic reverse charge applies, and that the customer is required to account for VAT. The amount of VAT due under the reverse charge should not be included as part of the total VAT charged.

The reverse charge won’t apply in certain circumstances, for instance:

  • If the supplies are zero-rated, including the construction of housing.
  • The customer is an “end user”, for instance the property owner.
  • Where businesses supply certain services to connected parties within a corporate group structure.
  • Where the supplier and recipient are landlord and tenant, or vice versa.

Instead, the normal VAT accounting rules will apply. HMRC appreciate that there may be issues whilst the new rules are introduced. As such, they will be applying a “light touch” to small errors that may arise.

Actions to take:

  • With the introduction of Making Tax Digital (MTD) and the arrival of the reverse charge, it is imperative to ensure that the software your business uses can cope with both.
  • Familiarise yourself with the new rules and ensure you can comply.
  • Review your cash flow projections to ensure that your business can cope with the cash flow implications of not receiving VAT from customers.

Please contact Barnes Roffe’s Tax Department on 01322 275335 if you have any questions.

Modern Slavery

Below are links regarding modern slavery from the Gangmaster and Labour Abuse Authority (GLAA). 

http://www.gla.gov.uk/i-am-a/i-use-workers/construction-protocol/  

and here is the link to the actual protocol:

http://www.gla.gov.uk/media/3297/construction-protocol-v05.pdf  

Below is a one page abridged version:

http://www.gla.gov.uk/media/4020/the-construction-protocol.pdf  

Other information which can be downloaded:

Human Trafficking Reference Guide

Modern Slavery Factsheet

GLAA Spot the Signs

General Data Protection Regulations (GDPR) 2018

On 25th May 2018, the General Data Protection Regulations (GDPR) came into effect to update and strengthen data protection law.

Individuals now have more control over their data by having the 'right to be forgotten' and ask for their 'personal data to be erased'.

Businesses will be supported to ensure they are able to manage and secure data properly. The data protection regulator, the Information Commissioner's Office (ICO), has been given more power to defend consumer interests and issue higher fines, of up to £17m or 4% of global turnover, whichever is the greater, in cases of the most serious data breaches.

The legislation has:

  • made it simpler to withdraw consent for the use of personal data
  • allowed people to ask for their personal data held by companies to be erased
  • enabled parents and guardians to give consent for their child's data to be used
  • ensured 'explicit' consent to be necessary for processing sensitive personal data
  • expanded the definition of 'personal data' to include IP addresses, internet cookies and even DNA
  • updated and strengthened data protection law to reflect the changing nature and scope of the digital economy
  • made it easier and free for individuals to require an organisation to disclose the personal data it holds on them; and
  • made it easier for customers to move data between service providers.

New criminal offences will be created to deter organisations from either intentionally or recklessly creating situations where someone could be identified from anonymised data.

Data protection rules have been made clearer for those who handle data, but they will be made more accountable for the data they process, with the priority on personal privacy rights. Those organisations carrying out high-risk data processing will be obliged to carry out impact assessments to understand the risks involved.

For further information on this subject, please go to the Information Commissioner's Office website at www.ico.org.uk  

Document Retention

With ever increasing demands placed on companies to ensure that they are complying with legislation. Paperwork is becoming a bureaucratic necessity. Paperwork relating to employees: their health and welfare, disciplinary and grievance issues, technical and training matters.

Other areas of note include: Health and safety polices, insurances, annual account audits and all matters associated with Her Majesty’s Revenue and Customs (HMRC).

However, under this myriad of legislation and statutes, what some companies may be remiss at understanding is the length of time these documents must be retained by the company. To use the simple example under the Limitations Act 1980, a contract for instance has a ‘shelf-life’ of 6 years. This means that one party to the contract has up to 6 years to bring a claim against another, and so the documentation regarding that particular contract would ideally need to be kept for that length of time. Yet under this Act, different documents may be required to be kept for different periods. Below is a table which outlines some examples regarding employment records.

Type of Employment Record Retention Period or Recommendation
Job applications and interview records of unsuccessful candidates 6 months of notifying unsuccessful candidates
Personnel and training records Up to 6 years after employment ceases
Contracts of employment and amendments Up to 6 years after employment ceases
Annual leave records 6 years or possibly longer if leave can be carried over from year to year
Immigration checks 2 years after the termination of employment

What becomes clear is two things: that whatever system a company adopts to contain all these records, the system must be easily manageable and accessible; and second, a company must comply with the Data Protection Act 1998 and the General Data Protection Regulations 2018, particular on information pertaining to current and former employees.

It is advisable to periodically review internal systems which the company has adopted: to ensure that records are secure, out-of-date records are correctly disposed of, and employees are updated of any changes made to the length documents are retained.