|
Changes to the option to tax - buildings to be used for a relevant residential or relevant charitable purpose
Revenue and Customs Brief 33/10 issued on 29 July 2010, announces HMRC’s policy on changes to the option to tax for buildings used for relevant residential or charitable purposes.
HMRC’s previous Brief 39/09 issued on 1 July 2009, announced changes to the application of the zero-rate to new buildings and that, following a review, the phrase 'solely for a relevant residential or relevant charitable purpose' could incorporate a de minimis margin. In order to avoid unnecessary disputes in marginal cases, HMRC accepted that 'solely for a relevant residential or relevant charitable purpose' is satisfied for new buildings where the relevant use of the building by the charity or relevant residential user is 95% or more. In light of this review, HMRC announced the withdrawal of Extra Statutory Concession (ESC) 3.29, which allowed charities to claim zero-rating where a building was used 90% or more for a relevant charitable use.
ESC 3.29 also allowed charities to prevent the option to tax applying on supplies of buildings to them (other than parts used as offices) if they were solely used for a relevant charitable purpose. For consistency therefore, R&C Brief 33/10 announces that HMRC accept that where the customer and supplier agree, the option to tax can be disapplied on supplies of a building or part of a building that is to be used 95% or more for a relevant purpose in the following situations:
- where a building or part of a building (other than one used as an office) will be used by a charity solely for a relevant charitable purpose;
- where a grant is made in a building or part of a building designed solely for a relevant residential purpose
- where a grant in a building or part of a building is made to a person who intends to use the building solely for a relevant residential purpose.
EU VAT refunds – deadline for claims to be extended?
On 15 July 2010 the European Commission announced a proposal to extend the deadline by which businesses are required to file claims for refunds of EU VAT incurred during 2009 in other Member States. Under the new electronic system that came into force on 1 January 2010, refund claims have to be filed by 30 September 2010, but several countries were late in launching their web portals and some have been beset by technical problems. Because of this Commission is suggesting that the deadline for claims should be extended to 31 March 2011. It is also proposing that it should be given powers to harmonise the diverging views of Member States on the operation of the refund scheme.
However the extension requires the agreement of all EU Member States before 30 September 2010 and recent news suggest that a number of EU Member States may oppose the change. Therefore we recommend that businesses with claims for 2009 continue to work to the original 30 September deadline until the position is clarified.
VAT exemption for shared services
The Government has started discussions with charities and other affected sectors to consider options for implementing the EU cost sharing exemption. It was announced in the June 2010 Budget that a formal consultation will be launched in the autumn.
Changes to the zero rate for new buildings used for a relevant charitable purpose
Revenue & Customs Brief 26/10 issued on 21 June reminds charities that the ‘charitable buildings' concession (ESC 3.29- the 90% concession) will be withdrawn on 1 July 2010. Any charity wishing to make use of the concession before 1 July 2010 must issue the necessary certificate before that date (late certificates will not be permitted) and by 1 January 2011, either:
- the building must have been constructed to a point above foundation level; or
- the charity must be in occupation of the building if it is being acquired or leased.
After 1 July the ESC will be withdrawn, and charities, and those who use buildings solely for a relevant residential purpose, will be able to acquire or construct new buildings zero-rated for VAT providing they are able to demonstrate that the building concerned is intended to be used
95 % or more for a ‘relevant residential' or ‘relevant charitable' purpose. HMRC state that any method can be used to measure qualifying use, provided that it is fair and can be verified without undue difficulty or cost. Time, headcounts and floor space can still be used and HMRC's prior approval is not required. HMRC have issued VAT Information Sheet 13/10 which provides detailed guidance and examples of calculations. It also sets out what happens if there is a change of use of the building.
Zero-rating for charities using Pay-Per-Click internet advertising
HMRC have announced that they now accept that Pay Per Click-sponsored links appearing on search engine websites qualify for zero-rating when supplied to a charity, and that the supply of copyright and design services associated with such sponsored links also falls within the zero-rating. Revenue & Customs Brief 25/10 issued on 7 June 2010 explains the revised policy.
Until now HMRC had taken the view that a PPC-sponsored link is not an advertisement itself but merely a means of access to the charity's website. As such, they had considered the costs of providing PPC were excluded from the zero-rating fir charity advertising, but they now accept that they are covered by the relief.
As VAT is a cost to most charities this is good news. Charities which have incurred VAT on PPC services should be asking their PPC suppliers to make a claim for back dated overpaid VAT and to issue credit notes for the VAT previously charged. To evidence the claim charities should give suppliers a zero-rate certificate in the form set out in Notice 701/58 para 10.5, and quote HMRC Brief 25/10. For more information see our latest Newsletter.
|
