Where VAT is overpaid, usually a claim is limited to 3 years. However, in addition to this there is currently a further reclaim opportunity for businesses that have overpaid VAT although this opportunity expires on 31st March 2009. If any business has overpaid VAT either in the last 3 years and/or in the years prior to 1st May 1997 then the chances are a claim is available. We detail below specific circumstances / trade sectors where we are aware claims are available with a brief explanation on each so please contact us for further details or on our special e-mail address: overpayments@thevatpeople.co.uk
» Hotels
Many hotels have accounted for VAT on no show fees. HMRC now accept that these fees are free from VAT, subject to certain conditions. In these circumstances VAT can be claimed back from HMRC.
» Property Developers
HMRC blocked recovery of VAT incurred on costs of landscaping the areas surrounding residential properties. This was found to be incorrect following the decision in the case of Rialto Gardens. HMRC will make repayments of these amounts.
» Membership organisations
Charities and not for profit organisations that provide magazines and newsletters as part of its members benefits are in a position to treat part of their subscription income as zero rated for VAT. Organisations that treat all of the membership subscription payments as subject to VAT stand to gain large repayments of VAT by using a concession granted by HMRC.
» Garages
Garages that undertake MOT work may under certain circumstances treat the provision of an MOT certificate as free from VAT. Any garages that provide MOT certificates should check with a VAT consultant to ensure they don’t miss out on an opportunity to make a claim.
» Bingo and amusement arcade operators
HMRC has implemented legislation that rather obscurely treats income from certain bingo games and gaming machines as being exempt from VAT, and income from other bingo and gaming machines as being standard rated for VAT. Following the ECJ decision in the case of Linneweber it has been found that member states cannot introduce legislation that is discriminatory. HMRC are fighting against this and despite losing the recent Tribunal Appeal in the case of Rank, they are refusing to remit claims and have taken the case to the Court of Appeal. Claims should be submitted as soon as possible to maximize the amount of VAT to be repaid if as is likely HMRC lose at the Court of Appeal.
» Vending Machine Operators
Many vending machine operators automatically treat all their supplies of cold food from vending machines as standard rated for VAT. However, it is possible in certain circumstances to treat a proportion of the income as zero rated for VAT. Operators who have historically treated all their income as standard rated for VAT are in the position to gain a large windfall VAT repayment.
» Riding schools, livery stables and farmers
Businesses that provide livery services for horses and ponies could easily miss out on a substantial VAT windfall. Following a Tribunal decision in 2001 it was found that income from renting stables to horse owners was exempt from VAT as a supply of land, even if an element of assistance such as morning turnout is given to the horse owner. Previously HMRC had insisted that such income was standard rated for VAT. Any livery providers that have treated their income as subject to VAT have the opportunity to recover it from HMRC.
» Animal Rescue Societies
In a recent Tribunal decision it was found that rescue societies that re-home animals to members of the public in return for a small ‘donation’ are actually making a VATable supply of goods. Due to a quirk of VAT law relating to charities this supply is zero rated for VAT creating no extra VAT due from the charity but allowing full VAT recovery on associated costs.
» Food suppliers and retailers
It is easy to assume nowadays with the heavy reliance on IT to support accounting that the VAT treatment of sales of food, sweets and confectionary will be correct when the item is sold. However, we find that it is common that some products are miscoded when they are set up on product files. This can result in substantial overpayments of VAT. If you have a historic error that you have previously corrected but assumed that the VAT was lost due to the three year cap this will be your only opportunity to claw it back.
» Car fleet operators
Substantial repayment of VAT can be claimed by car fleet operators who have chosen not to claim VAT on mileage allowances given to staff. The current rules are quite onerous as the operator has to obtain fuel receipts from the staff to support any claims. Pre 2001 however the rules were more relaxed making a back claim a realistic and cost effective prospect. Once the window for making claims for VAT not claimed up to December 1996 closes it will be lost for ever so don’t miss out on the chance to reclaim the VAT.
» Issues and Sales of Shares
HMRC have blocked VAT on costs incurred in relation to share issues and sales for many years. Following a landmark ECJ decision in the case of Kretztechnik it is possible subject to certain criteria for businesses to reclaim VAT on these costs. Any businesses and particularly those that are part of an acquisitive corporate group will invariably have incurred substantial corporate finance costs and treated the VAT on such costs as irrecoverable. It is well worth checking if VAT on costs has been incurred and making a VAT claim.
» Investment Fund Managers
It was found in the case of JPC and JP Morgan Claverhouse that accounting for VAT on investment fund manager’s income was incorrect. This means that fund managers are in a position to make substantial back claims for VAT. It may also be possible for VCT’s to benefit from this windfall by making claims to the fund manager to recover the VAT charged.
» Tour Operators
HMRC previously insisted that VAT should be accounted for on the price a tour was advertised for and not the amount paid by the customer. In many cases package holiday discounts are granted to customers by travel agents (often without the knowledge of the tour operator) leading to the tour operator receiving a far smaller amount than the advertised holiday price. HMRC have now accepted that the discounts can be deducted from the operator's turnover for VAT purposes. Operators that have calculated VAT due on the margin using the advertised holiday price can make substantial reclaims of overpaid VAT.
» Call Centre Services
HMRC has changed its policy as a result of a VAT Tribunal case and now accept that call centre services supplied to an insurance company are exempt, subject to certain conditions. HMRC are waiting for your VAT claim.
» Partnership Shares
There are now some situations in which the sale/disposal of a partnership share is not a supply for VAT purposes and therefore no VAT is due on the transaction. The correct VAT liability can only be determined by an analysis of the circumstances of the supply. Substantial revenue may be recovered in these circumstances.
» Partial Exemption
The Mayflower Theatre Trust Ltd Court of Appeal decision and the Cheshire Racing (bookmakers) means that many entities who restrict recovery of VAT because they make exempt supplies should revisit the way VAT on costs is allocated to taxable and exempt supplies. A number of substantial claims have been made by additional recovery of VAT.
» Catering
The supply of cold food for consumption off the caterers premises is zero rated. HMRC now take the view that the “premises” of a retailer are restricted to the actual retail unit rather than to a building (office block) in which the retail unit is situated. This change in the definition of premises has resulted in large repayment of VAT to food retailers situated in restricted access sites.
» Credit/Debit Card Handling Services
HMRC will accept claims for a refund of the VAT charged on these services after the Court of Appeal decided these supplies were exempt and therefore HMRC’s previous view that the supplies were taxable was incorrect.
» Supply of Condoms is Zero Rate
This applies when medicinal products are supplied to a charity for providing care or medical or surgical treatment. All charities in this position can make a claim from their supplier who in turn can obtain a refund from HMRC.
» Foreign Exchange Transactions
A Tribunal found that these transactions were not in the course of business when entered into for hedging purposes and to protect against adverse exchange rate fluctuations. If VAT has been declared on these services it maybe reclaimed from HMRC.
» Landlords inducements to tenants entering a lease
HMRC have revised their policy on these inducements and accept that they are outside the scope of VAT. Any VAT declared on these payments may be recovered from HMRC.
» Insurance Premium Tax (IPT)
Following a Tribunal decision HMRC accept that the reinsurance of surety bonds is exempt from IPT. Any IPT previously paid may be recovered from HMRC.
» Charity – fund raising & gifts
VAT incurred on fund raising activities is recoverable according to the use to which the funds are put. Therefore if the funds are used in making wholly taxable supplies the VAT on costs of fund raising are fully recoverable. If the funds are used partly in making taxable supplies a proportion of the VAT on costs of fund raising are recoverable.
A charity may also be able to increase the recovery of VAT on costs it if makes gifts (deemed supplies) of zero rate items (printed matter).
A charity may also be able to increase the recovery of VAT on costs it if makes gifts (deemed supplies) of zero rate items (printed matter).
» Cars sold by a Finance House on HP or Conditional Sale Agreements
The courts have decided that the sale of a car repossessed or voluntarily returned under the above agreement is not subject to VAT. This is an extremely complex matter but the potential for the refund of VAT are substantial. Please contact us to discuss the application of this judgment to your client.
» Cash Back Payments
A business that makes cash back payments to its customers (usually as part of a sales promotion scheme) should reduce the VAT paid to HMRC by the VAT element of the value of the cash back. HMRC will accept claims made on this basis.
» Hotels/Conference Facilities/Weddings etc.
It has now been established that when a hotel provides conference/function room hire, meals and sleeping accommodation under a 24 hr delegate rate, the room hire maybe treated as exempt. HMRC have also changed the long stay rules (over 28 days) to allow all entities (individuals, company’s, local authorities) be benefit from the exemption.
» Bingo Cash Prize from HMRC
Supplies who have accounted for VAT on game by game basis instead of a session basis maybe able to recover substantial amounts of VAT from HMRC.
» Building Plots
HMRC accept that a supply of bare land on which civil engineering works have been carried out constitutes a single exempt supply of land, previously HMRC required VAT to be paid on the civil engineering works. It may also be the case that the supply of land is zero rate (allowing full VAT recovery on costs) if the civil engineering services were received in the course of construction of dwellings, relevant residential and relevant charitable purpose.
» Travel Agents
HMRC now accept that when a sub-agent is providing intermediary services in relation to zero rate passenger transport that this intermediary service may also be zero rated.
» Routine Domestic Tasks
A VAT Tribunal ruling extended the exemption to these tasks. There are a number of complex rules but we can guide you through these. HMRC are accepting claims for the refund of VAT amounts.
» Islamic Products
HMRC will apply the VAT exemption to various finance products provided under Islamic Law. This will in certain circumstances provide for a repayment of VAT.
