Question archive: vat

I am considering having a new canal boat built for residential use. The boat would be my primary (only) residence. Will I be able to claim back the VAT on the cost of building the new boat, as one would do for the cost of building a new house? If so, how?

A supply of a houseboat designed for use solely as a permanent place of residence and not being able to self-propel or be easily adapted for such is zero-rated.

I am in the process of purchasing a going concern, but wish to change part of the business (Gift Shop) into a Bakery Shop. Will I have to pay VAT on the business?

Assuming that you are registered for VAT from no later than when you take over the business, it is very likely that the sale and purchase will fall within the transfer of a going concern provisions - ie the vendor should not charge VAT on the sale. You might insist the vendor obtains a clearance from HM C&E if the proposal is to charge VAT.

I have a business which is VAT (TVA) registered in France and therefore if I order goods from the UK for delivery in France I can have them invoiced to me net of VAT, providing I provide the UK supplier with my French VAT (TVA) registration number and the goods are delivered to a French address. What is the situation with regard to services delivered to a French registered business? For instance an Internet advertisement or downloading software from the Internet performed by a UK based company but delivered to a French registered company?

You must account for TVA on services purchased from non French suppliers using the reverse charge procedure. For most businesses this simply means a contra accounting on the TVA return so that TVA is accounted for and claimed back at the same time. The French authorities impose penalties for failing to comply with this requirement so get some advice in France on how to do this.

I have received two bills from two different Hotels, one has charged 17.5% VAT against Non arrival charges and the other Hotel has charged zero VAT. Please can you clarify if I should claim back VAT on bill or is this an error made by the Hotel.

The effect is neutral, as you are Vat registered.

However, a "non arrival" charge seems to similar to a cancellation charge, and is outside the scope of VAT, and therefore no Vat is due.

I would like to know if it is accurate that a company selling both new and secondhand computer equipment can charge the same percentage of VAT on both types of products? Are secondhand/refurbished goods essentially being taxed twice?

Generally, VAT is chargeable at 17.5% on computer sales both new and secondhand. You can, however, opt to use the Secondhand Margin Scheme. Under this, you broadly charge VAT on the profit margin on secondhand goods. The rules are quite detailed and you should take professional advise prior to implementing it. You will also need to keep accurate records of stock purchases and sales.

I would like to know when purchasing goods and services, how do I know which have VAT added and which don't.

If VAT has been added, traders are obliged by law to show this on your receipt.

The exact method varies - if you have your car serviced, you would expect to see the amount of VAT set out separately and the rate shown. If you go to a supermarket, they may just indicate by putting a star against the VAT registered items.

A Valid VAT receipt must show the VAT registration number, which is nine digits long.

If a bank pays a consultant for services provided to the bank, and the consultant raises a VAT invoice for the bank, how does the bank treat the VAT (in terms of the balance sheet and profit and loss statement)?

Whether or not the bank can reclaim all or part of the VAT on the invoices depends upon the use to which it puts the bought in consultancy service.

If the service is used in connection with the banks VAT exempt activities it will be unable to claim some or all of the VAT - and will therefore capitalise it.

See VAT Notice 706 on the C&E website and the partial exemption part of the VAT Regulations 1995.

If a company is based in the UK and imports goods or services from another E.C country, what is the tax rate return? Should it not be zero rated?

You should account for VAT at 17.5% on goods and services imported from other EU countries. This is done via a book keeping entry and in most instances you can reclaim the VAT at the same time you account for it so the net cost is nil.

It's done this way so that should the VAT not be recoverable (eg on goods or services used for private use) you have to account for the VAT but cannot claim it back - and therefore you have not obtained an advantage by purchasing from outside of the UK.

If an organisation has trust status what do they pay in the way of VAT and other costs?

There are specific reliefs from VAT for certain types of charities, in connection with their charitable activities. Trusts have no particular status from a VAT perspective and must pay VAT in the same way as any other organisation. Whether or not a trust can reclaim VAT depends upon the trust's activities, and on being registered for VAT.

If I am setting up a new business - how do I register for VAT?

The VAT registration section of the HM Customs & Excise site has the relevant form and helpsheets.

See http://www.hmce.gov.uk/business/vat/vatregist.htm

Is there VAT on fruit and veg?

They're zero rated/exempt if in a raw state. if processed they're vatable.

Is VAT payable on educational material?

It depends upon what is meant by 'educational material'. Printed books are zero rated, whereas writing paper, pads etc are subject to VAT. Educational Courses provided by state and (most) private schools, colleges and universities, as well as private tuition by a teacher of a subject ordinarily taught in a school or university, are all exempt from VAT. Eductional courses provided by commercial organisations (ie organisations that are not a registered charity or state body) are likely to be subject to VAT.

Where a property is opted for VAT and part of the land area is sold off for a different use, are there circumstances where VAT will not be chargeable on the sale?

Yes some sales of part of an opted property may not be chargeable with VAT.

They may be VAT exempt, outside the scope of VAT (as a TOGC) or zero rated. See VAT notices 741 (Construction) or 741 (Land & Property) available from the Customs & Excise web site.

This page was last reviewed on 07 April 2005.
The information may not reflect changes in legislation made after this date.

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