February 2023 VATwatch

Processing of Option To Tax Forms Changes from 1^st February

Following a short consultation, HMRC has decided to change the way they process Option to Tax (OTT) Forms with effect from 1 February 2023.

A letter confirming receipt of OTT forms will no longer be issued. Instead, when a Notification of Option to Tax is submitted to optiontotaxnationalunit@hmrc.gov.uk, an automated email response will be sent. This should kept for your records. The date on the automated response will confirm the date that HMRC was notified. An OTT form sent by any other method will not receive confirmation of receipt, but HMRC will make contact if further information is required.

HMRC Change Policy for Scaffolding on Zero Rated New Build Housing

For scaffolding supplied for zero-rated construction of dwellings the services of erecting and dismantling scaffolding can be zero-rated. Charges for the hire of scaffolding are not covered by the zero rate and are liable to VAT.

The VAT liability of any supply of scaffolding will depend on what is being supplied under the contract in each case.

The hire of goods on its own is not a service that is covered by the reverse charge. Any VAT due on the hire of scaffolding for new build housing work should be accounted for under normal VAT rules.

A contract for the hire, erection and dismantling of scaffolding is within the scope of the Construction Industry Scheme. If the scaffold supplier’s invoice shows separate charges for the hire of scaffold and the cost of the labour to erect and dismantle it, the labour element will be VAT zero-rated as a service carried out in connection with the construction of new build housing.

The reverse charge does not apply if the scaffolding is supplied for a zero-rated construction project.

This is a change to the previous policy. For a transitional period up to 1 February 2023, businesses can use either reverse charge accounting or normal VAT rules.

New Guidance for Insurance Companies applying for Partial Exemption Special Measures

HMRC have released guidance in relation to Partial Exemption Special Methods for insurance companies.

The guidance has been written and compiled jointly by the Association of British Insurers (ABI) and HMRC. The guidance is relevant to those dealing with partial exemption for insurers.

The guidance is intended to help insurers gain approval for a fair and reasonable partial exemption special method (PESM) with the minimum of cost and delay.

The guidance is neither mandatory nor binding and HMRC will consider whether to approve any PESM that an insurer declares fair and reasonable.

The guidance will be updated regularly by ABI and HMRC jointly to reflect new issues arising and to help ensure consistency of treatment across the insurance industry.

HMRC Releases Annual UK VAT Statistics

You can view the statistics, which show information on VAT receipts, Home VAT and Import VAT.

It includes Home VAT declared on traders’ returns classified by sector and trade group, VAT registrations, de-registrations and trader population.

It also contains a historic series of annual and monthly VAT receipts and VAT registrations and de-registrations.

Thank you for taking the time to read this VATwatch round-up.