The VAT Practice,
The White House, Cloncorban, Rossmore, Clonakilty,
Co. Cork
Principal: Nicholas Ryan
Tel: +353 (0)23 8838181
Mob: +353 (0)83 3340324
Fax: +353 (0)23 8838181
Email : info@thevatpractice.ie
Welcome to the VAT Practice blog. Our aim is for our blog to provide you with access to: Hot topics – which features regularly updated information, ideas and comment from The VAT Practice on Irish and international VAT issues. Talk to us – businesses can provide comment on our articles in Hot Topics and enter […]
Following a number of calls by businesses experiencing difficulties in seeking a VAT refund for the UK VAT accounted for on the purchase of a vehicle from a UK dealer we felt it would be useful to provide this overview and health warning to businesses considering taking advantage of the beneficial exchange rate to purchase a high spec vehicle in the UK.
Unfortunately, although VAT is governed by EU legislation each member state is allowed its own idiosyncracies and differences, VAT on motor vehicles being one that has provided for serious consequences for a number of Irish motor dealers and businesses when purchasing vehicles in the UK. The UK rules for motor vehicles differ to those applied in Ireland, the major difference being the determination on the right to deduct VAT on the purchase of a vehicle and, following this, the VAT treatment of any onward sale.
Within the EU businesses generate €550 billion a year in sales on a business to business and business to consumer basis of this some €96 billion involve sales to customers located in other EU Member States. The current estimate by the European Commission is that poor compliance in this sector is costing the tax authorities some €5 billion in lost VAT and it is estimated that this will increase to €7 billion by 2020.
Given this significant cost to the tax yield, it is no surprise that the tax authorities are turning their focus on sellers operating in this sector who are not complying with their VAT obligations. The approach by the tax authorities includes a concerted effort to improve member states ability to check cross-border supplies through online stores and may involve joint task forces set up to complete these audits.
Following the introduction of the Revenue Code of Practice for Revenue Audit and Other Compliance the necessity for VAT registered businesses to increase their self policing of the tax has increased significantly.
With the draconian measures introduced covering the determination and imposition of penalties and the dramatic shift from discussion and negotiation to submission and imposition Revenue have clearly taken the upper ground over the tax payer and we have seen more and more instances of Revenue immediately seeking to impose the maximum penalty irrespective of the issue in hand or the level of VAT at stake.
In conjunction with his the rule of thumb over issuing assessments appears to also shifted away from considering the case on materiality and significance to assess, assess, assess.
HMRC have recently announced a policy change for the Place of Supply of delivered goods to consumers within the EU to provide for a clearer interpretation or definition on what constitutes delivered goods under the Distance Sales regime. This change has been made following discussion with the VAT Committee of the European Union and therefore the decision does carry some significant weight. The change provides a clear signal to businesses operating within the distance selling sector that they should review their current arrangements, VAT treatment and compliance approach to ensure they are fully compliant. It is understood that other EU tax authorities are supportive of HMRC’s policy change.