Reclaiming VAT on the Flat rate VAT scheme

[Manors]

Hi
Just wondered if anyone could clarify this for me. We are an hotel on the flat rate Vat scheme and have just put in some new bathrooms for which the plumber invoiced us for the suites and wall covering (not including any materials for new walls, doors, plaster or labour etc.) which came to just over £2,600. Can we reclaim the VAT on this under the Capital Goods section. I have looked on the VAT HMRC website but it isn't really clear and the helpline is taking ages to answer the phone!. Many thanks

[chrismac1]

An individual invoice over £2k can be claimed as a one-off capital item, so I think you can claim it.

[Manors]

Thanks for your response. I realise that you can claim on invoices over £2k but the VAT website doesn't make it clear whether this sort of work would be classed as building materials -
Quote from the website : Building materials and work are not capital goods. You can't claim back the VAT if you have building work done (even if it includes expenditure on materials), and you can't claim back the VAT if you buy building materials yourself for someone else to build with.
I have spoken to my accountant who says I must check it out with the VAT helpdesk but trying to get through to them is nigh on impossible. After about 20 attempts at all times of the day I have now resorted to emailing them. I will report back when I get the answer!!
Ros

[RAL]

I have spoken to my accountant who says I must check it out with the VAT helpdesk...

I am surprised that your accountant did not know the asnwer and asked you to ring VAT help line. Just wanted to make you aware that help or advise provice by vat helpline is not binding to HMRC.

If you managed to speak to them they will refer back to the vat notice for FLAT RATE SCHEME.

Otherwisw you may have to pay a fee to vat expert to get his/her advice.

[Manors]

Hi again,
My accountant was erring on the side of caution because of the "grey" area involved in this. He suggested speaking to the helpline would provide me with a reference number so that if I did reclaim it and then the Vat man came back and said it was not eligible I would at least have proof that I had taken their advice. I shall wait with bated breath to see how long it takes them to answer my email - I need an answer by the end of next week because that is when my return is due in. Just out of interest, how can their advice not be binding - if they don't know the rules, who on earth does??
Thanks
Ros

[RAL]

There was a vat case, where company claimed that he was advised by the HMRC and accordingly he treated. He lost the appeal and had to pay about £300k to vat man.

HMRC published statement of practice on this very subject, the same SP says the same thing.

Unfortunately I can not find the link. I will post here if I find.

Telephone advice is not binding. However, you can write and ask for claification on the rules. I would be surprised, if you would get anywhere.

[Manors]

mmm...
I am amazed at that! But I am talking about £300 ... wonder whether it is really worth the bother, although there is a principle at stake here. I shall bide my time for a few more days and then make a decision.
Thanks for your comments.
Ros

[Manors]

Finally got a response (??) from HMRC. As previous posters suggested didn't get a straight answer!!

Ros

Thank you for your email dated 2 March 2010, regarding your request for HM Revenue & Customs to agree your understanding of section 15 of Public Notice 733 - Flat rate scheme for small businesses.

HM Revenue & Customs (HMRC') policy prevents this Department from providing a definitive response where we believe that the point is covered by our Public Notices or other published guidance, which, in this case, I believe it is.

If you are happy that you meet the definition of capital expenditure goods, under the flat rate scheme, which reading your email you appear to be, then you do not need HMRC' to confirm your understanding.

If you feel that the guidance is unclear or does not provide guidance on the situation at hand, then you can apply for a clearance, you will need to give reasons for not being able to make a decision based on the guidance available and why you feel that it is unclear.

Guidance on clearances can be viewed using the link below:

http://www.hmrc.gov.uk/cap/clearance-service.htm

If you wish to make a clearance application, please use the checklist, which can be accessed using the link below:

http://www.hmrc.gov.uk/cap/annex-a-checklist.pdf

If you have any further queries regarding this matter, please do not hesitate to contact the email address above, quoting our reference number.


Yours sincerely


Mr Barry Walker
Written Enquiries Officer

[Budget83]

They are wonderful arn't they.

If I was to prepare a property account and a new bathroom suit was put in I would call that capital. If I was preparing your accounts and there was expenditure on a new bathrrom suit I would call that capital too. It is in essence there to generate money.

IAS 16

Regonition of an asset

Its probable that future economic benefit associated with the asset will flow to the entity... check
The cost of the asset can be measureed realiably ..Check

I would call this capital and have the Vat back.

[Manors]

Thanks for that "confirmation" Budget 83. I bit the bullet and reclaimed - but now I am wondering whether I should reclaim for my new solar panels, new boiler and new televisions. I just have this fear that all this in one financial year might trigger an investigation and I really can't be doing with that - but why shouldn't I claim back what I am entitled to? Do others think in a similar vein?
Thanks
Ros