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Where Taxpayers and Advisers Meet

vat on charcoal suppies to restaurant

Tushar Shah
Posts: 25
Joined: Tue Nov 08, 2016 1:08 pm

vat on charcoal suppies to restaurant

Postby Tushar Shah » Mon Nov 27, 2017 6:46 pm


One of my client buying charcoal from Indonesia and supplying charcoal to restaurants. He is paying 20% vat at the port and charging 5% reduce rate vat from his client ( Restaurant ). Did he charge correct vat to his customers? Recently, client, had a vat compliance visit an officer asked to send a description of the business so that he will identify that correct vat rate charged to the customers.

Can anyone help me to describe his business correctly for vat point of view? or advise me what description of business fall under reduce and standard rated.

I have gone though HMRC website but could not able to find clear information.

Posts: 2972
Joined: Wed Aug 06, 2008 4:01 pm

Re: vat on charcoal suppies to restaurant

Postby robbob » Mon Nov 27, 2017 7:20 pm

I have some sympathy i don'rt think Notice 701/19 is the clearest in all (Or any?) respects - if in doubt I would recommend clarifying with hmrc in writing. ... -and-power
Ok in notice 701/19 we have

2 VAT liability of fuel and power - overview
The reduced rate of VAT applies to supplies of fuel and power for qualifying use (see Section 3).
fuel and power where the amount supplied does not exceed the small quantities, called the de minimis limits (see sections 3-7 for the limits on each type of fuel)
Ok onto section 3

3.1 What is ‘qualifying use’?
Qualifying use means:

domestic use (see paragraph 3.2), or
charity non-business use (see paragraph 3.3).
If you apply the reduced rate to supplies of fuel and power incorrectly and cannot satisfy us that you have taken reasonable steps on these points, you may have to pay any VAT that you have undercharged.

Ok onto section 3.2

3.2.2 Supplies deemed to be for domestic use
Supplies of certain small quantities of fuel and power - known as de minimis - are always treated as being made for domestic use, even when the supply is to a business customer. These limits are explained in Sections 4 (gases), 5 (electricity), 6 (oils), and 7 (solid fuels). Supplies within the limits should be taxed at the reduced rate. You do not need a certificate to apply the reduced rate to such supplies (see paragraph 3.5).

ok onto section 7
7.1.2 Wood, peat and charcoal
A supply of wood, peat or charcoal that you hold out for sale solely as fuel qualifies for the reduced rate provided that your customer does not intend to resell it. This applies regardless of the amount you supply.

so if i am reading the booklet correctly i would say it looks like the reduced rating will be applicable providing the customer is not intending to resell what you sell them, as a restaurant that seems like a reasonable assumption - could it be that the vat officer is interested more in the trade of the customer of your client that of the client?

Warning this booklet has too many ifs and buts for me to have confidence what i have posted is factually correct :( - would appreciate anyone elses thoughts on how the logic of 701/19 works

Posts: 352
Joined: Wed Aug 06, 2008 4:05 pm

Re: vat on charcoal suppies to restaurant

Postby spidersong » Tue Nov 28, 2017 10:10 am

Meh. I don't really care about the notice's logic as HMRC have lots of poorly written notices, I'll stick with what the courts stick with: the law.

VAT Act 1994, Schedule 7A (Reduced Rate supplies), Group 1, Item 1;
"Supplies for qualifying use of— (a) coal, coke or other solid substances held out for sale solely as fuel;..."

So we need to check what qualifying use is and the notes to the group say:
"Matters included or not included in the supplies.
Note 1 (1) Item 1(a) shall be deemed to include combustible materials put up for sale for kindling fires but shall not include matches.

Meaning of “qualifying use”.
Note 3 In this Group “qualifying use” means— (a) domestic use; or (b) use by a charity otherwise than in the course or furtherance of a business.
Supplies deemed to be for domestic use.
Note 5 For the purposes of this Group the following supplies are always for domestic use—(a)a supply of not more than one tonne of coal or coke held out for sale as domestic fuel;(b)a supply of wood, peat or charcoal not intended for sale by the recipient;"

So if you're supplying charcoal and you're not selling to a reseller then it's under the reduced rate, and the client looks fine on his liabilities to me based on what the original post says.

Tushar Shah
Posts: 25
Joined: Tue Nov 08, 2016 1:08 pm

Re: vat on charcoal suppies to restaurant

Postby Tushar Shah » Wed Nov 29, 2017 1:29 am

Hi Spidersong,

Thanks for reply, It is really helpful.

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