Are you new to VAT?

If you are new to the concept of VAT, having never dealt with it before, it can be difficult to know where to begin. The more you discover about VAT, the more likely it is you will come to realise that very little is straightforward.

The VAT People has decades of experience in providing support and advice to businesses relating to all aspects of VAT. If you require advice on how to get off the ground, we are happy to help. Contact us today by calling 0800 077 4604, or fill out an on online enquiry form and we will be in touch.

Key considerations

VAT is subject to rules relating to tax across the European Union (EU), and the law in other EU countries is largely the same as it is in the UK. The key difference is that HMRC’s guidance is reflective of the UK’s perception of the law, and therefore, other countries across the EU are not bound to the rules laid out by HMRC. In addition, EU countries are permitted to a degree of discretion when it comes to applying particular rules.

If you discover that you have a VAT liability in another EU country, it must be addressed locally. In most cases, there will be a “nil” threshold for VAT registrations of non-established businesses. For instance, if your business is established in France and makes £1 of taxable business sales in the UK, you may need to register for VAT in the UK.

This system does not account for the fact that the compliance costs involved will be considerably more than the sums of VAT that may be involved. It is not advisable to ignore a VAT liability, and in some instances, businesses are forced to take a view that the cost of compliance makes a particular transaction uneconomical.

Using the HMRC helpline

If you are unable to find an answer you require in one of HMRC’s online publications, you may wish to give them a call. If your business is already VAT-registered, you will need to provide your VAT registration number, and answer a security question to receive any guidance.

When communicating with HMRC, always make a note of the call, along with the information you provided and the answer you received. You will be given a call reference number as well, which you should note down. If you are not offered a call reference number, then always ask for one.

We have seen many instances in which businesses have been given incorrect advice, or have misunderstood advice given, which without a reference number can be particularly difficult to retrieve.

It is important to remember that the inner workings of the VAT system mean that it is the law that determines your VAT liability and not HMRC. This means it is fairly common for HMRC to provide incorrect advice. For instance, if you were told by HMRC not to charge VAT, but several years later you realise this advice was incorrect, you will still be billed for the VAT in question, unless you can prove beyond doubt that:

• You sought guidance from HMRC on the matter

• The advice you were given was clear and devoid of qualification

• The advice you were given was based on a full disclosure of all relevant details

• You explained to HMRC what that advice would be used for, and that you intended to rely solely upon it

To summarise, your only protection against incorrect HMRC guidance is establishing that you had a reasonable expectation that you could rely on the body’s advice. It is incredibly difficult to persuade HMRC to accept any liability, which could limit the options available to you if a discrepancy is discovered down the line.

Where to find guidance

HMRC offers a large amount of guidance for businesses looking to ensure they are compliant when it comes to VAT. However, it can often be difficult in knowing where to look for advice that is relevant to your business.

Notice 999, which contains a list of HMRC’s VAT publications, is a good place to start, while there is also a great deal of relevant information in Notice 700 (the VAT guide).