Weekly VAT News

Removal of VAT exemption for private school fees – HMRC guidance

On 29 July 2024, a technical note and draft legislation were published providing that as of 1 January 2025, education services and vocational training supplied by a private school or a ‘connected person’ for consideration will be subject to VAT at the standard rate of 20%. HMRC have now issued guidance for education providers: Check if you must register for VAT if you receive private school fees and Charging and reclaiming VAT on goods and services related to private school fees. The guidance states that it is based on the draft legislation, and will be updated if there are any changes announced in the Budget on 30 October. Education providers will be able to register for VAT from 30 October. The registration date will be determined by reference to whether the VAT registration threshold (£90,000 per annum) has been exceeded in the previous 12 months, or the expectation is that it will be in the next 30 days, which will depend on the value of fees received for terms starting on or after 1 January 2025 and the date payments are received. The guidance sets out HMRC’s policy on the VAT treatment of payments received before 1 January 2025, with a number of examples provided for reference. The guidance also provides high-level commentary on the supply of education services with other goods/services (such as school meals, transport, and welfare services), grant/bursary payments, supplies provided in the classroom, and board and lodging, among other issues, as well as advice on reclaiming VAT, including on capital expenditure. (Contact: Laurie Pay)

Voestalpine Giesserei Linz GmbH: input tax recovery on goods provided free of charge– CJEU

Voestalpine Giesserei Linz GmbH (VGL), a company established in Austria, produced moulded parts in Romania, where it was VAT-registered. A contractor and sub-contractor undertook the processing in Romania, and once the processing had been carried out, the parts were sent by VGL to customers in the European Union. VGL made available to the contractors a building and a crane installed in that building, free of charge, to carry out the processing work. The CJEU has considered VGL’s ability to recover input tax on its purchase of the crane. The fact that the contractor and sub-contractor benefited from the crane did not of itself mean that VGL would be denied input tax recovery. Provided making the crane available was necessary to ensure the processing of the parts, there was a direct and immediate link between the purchase of the crane and VGL’s taxable outputs or wider economic activity, and VGL would be able to recover the input tax. The CJEU also considered Romanian law that denied input tax recovery where the taxpayer did not keep separate accounts for its Romanian fixed establishment. The CJEU noted that in accordance with the principle of VAT neutrality, input tax recovery must be allowed if the substantive requirements are satisfied, even if some of the formal requirements are not met. Although VGL had not kept separate accounts for its Romanian fixed establishment, the tax authorities could not deny the right to input tax recovery if they were able to carry out the necessary checks to establish the existence of that right. Subject to the findings of the referring court, the CJEU was supportive of VGL’s claim for input tax recovery on the costs of the crane. (Contact: Oliver Jarratt)

Safety and security declarations on EU imports – implementation delayed until 31 January 2025

The waiver for safety and security declarations on EU imports was due to end on 31 October 2024. However, the government has announced that safety and security declarations will now be introduced on 31 January 2025. The declarations are the final step in the implementation of the Border Target Operating Model, following the introduction of health certificates on 31 January 2024 and the imposition of physical checks on 30 April 2024. (Contact: Sam Kiely)

This week’s CJEU VAT calendar

On 17 October, the CJEU will deliver judgment in Digital Charging Solutions on charging points for electric vehicles.

Webcast – HMRC Guidelines for Compliance 8 – Help with VAT compliance controls

On 18 September 2024 HMRC published extensive new VAT guidance as part of the Guidelines for Compliance (GfC) initiative. GfCs set out HMRC’s view on risk and best practice. This is the first time such comprehensive VAT compliance guidance has been issued by HMRC, its objective being to support businesses in carrying out VAT compliance activities and approaching processes and controls to minimise VAT risks. Join our webcast on Wednesday 23 October 2024 at 2.00pm–3.00pm, where we will be exploring what the guidance covers and what steps your organisation might take in response. Our VAT Governance and Compliance specialists will discuss the key areas covered in the new guidelines, the potential impact on the end-to-end VAT compliance cycle, and key areas to consider from a risk and governance perspective. Please register here. (Contact: Adam Routledge)