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VAT rebate opportunities for qualifying businesses

By RJP LLP on 21 May, 2012

There have been some new developments to VAT regulations in the last few weeks that are important to be aware of. In some cases these represent potential opportunities to claim a VAT rebate. Our resident VAT compliance expert explains in full.....

VAT paid on fuel – Road Fuel Scale Charges (RFSCS)

If you reimburse the cost of car road fuel to your employees which is then used for private and business use, one way to deal with the VAT charged on the fuel is to reclaim all of the VAT but pay over an official fuel scale charge (RFSC) to take account of any private use of the fuel. This is a much simpler method than having to rely on your employees to retain detailed mileage records to prove the split between business and private use.

However, if you charge your employee for the private use of the fuel, perhaps by making a deduction from their pay packet for example, then you may have overpaid VAT if you have also been accounting for RFSC.

HMRC have acknowledged this may be an issue for some companies and are inviting claims covering the past 4 years. Depending on the circumstances, they may consider further historical repayments.

This situation has arisen because of a flaw in the legislation surrounding VAT on RFSCs. Now, following this acknowledgement by HMRC, businesses that have made a charge for private use of fuel will be allowed to account for VAT on the basis of the amount charged to the employee rather than the RFSCS.

If you think your business may have overpaid VAT as a result of this HMRC error it is possible to submit a claim for repayment of the difference between the amount already accounted for and the amount due on the basis of the charge to the employee. It is a complex area to negotiate and we are offering clients support in this area with RJP’s VAT expert.

What else is new in the VAT world? A change in treatment for face value vouchers

You have probably all heard of Lebara, the telecoms company specialising in low cost overseas mobile phone cards.  Lebara recently won a case against HMRC for the VAT paid on its phone cards and is entitled to a rebate. On the face of it this seems very specific to the phone card industry, but it could have far-reaching consequences for any businesses that uses single value face value vouchers.

In the case of Lebara, they sold telephone cards to distributors across the EU countries. These distributors then sold the cards either directly to customers or onto retailers. End consumers would buy the cards and make cheap international calls by ringing the number printed on the card and entering a pin number.

In HMRC’s view, Lebara should have paid VAT twice – once when the cards were sold, (although this may have been nil if the sale was to another EU country) and again when the cards were finally sold to the end user.

The court case examined the chain of supplies made and it was found that although there was a supply of services from Lebara to the distributors, there was no supply by Lebara on redemption to the end customer. The claim was eventually ruled in Lebara’s favour.

This is a complex case and even we admit the full details would be pretty boring for Livewire readers!

The main impact is that all single purpose face value vouchers will now be subject to VAT when issued. A single purpose face value voucher is one that can be redeemed against goods or services which carry the same VAT rate.

If you sell single purpose face value vouchers then you may need to examine distribution structures and agreements and you may be able to reclaim any VAT paid out in respect of past supplies, depending on your circumstances.

For expert VAT advice, guidance and general small business advice, contact Simon Paterson by emailing sp@rjp.co.uk.

www.rjp.co.uk

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