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VAT Voice by Andrew Needham & Steve Allen

Andrew Needham and Steve Allen, Directors of VAT Solutions (UK) Ltd, outline some useful VAT tips relating to the private use of mobile phones and the recovery of VAT on travel and costs incurred in the UK.

Customs get tough on mobile phone bills

Most employers provide some of their employees with mobile telephones to enable them to contact them for business reasons. In some cases, the employers allow staff to make private calls, whilst others do not.

Customs have announced a crackdown on companies wrongly reclaiming VAT on personal usage of company mobiles. We are informed that a special taskforce has been set up to aggressively pursue businesses that have not been accounting for VAT correctly, and have already assessed a number of UK companies a total of £1m.

What can I claim the VAT back on?

In all cases, the expenditure on the purchase and line rental for mobile phones is seen as being incurred for business purposes, and the VAT on this element of the bill can be reclaimed.

If the company has a policy prohibiting private use, then the tax incurred on the calls can also be recovered in full, as they should only be for business use.

Normally, VAT cannot be reclaimed on personal calls made by staff on company mobiles unless a charge is made for the private use, and output VAT is accounted for on this charge.

If a business allows its employees to make private calls on their mobile phones, and no charge is made for this use, then the VAT on the bill should be apportioned using any “fair and reasonable” method. It would be best to get this method agreed in writing with Customs by writing to your nearest business Advice Centre with any proposed method. Any internal controls on private use of mobile phones or accounting for output VAT should be documented so that Customs can see that they are being enforced.

Any business failing to demonstrate measures to separately account for business and personal calls, will be viewed by Customs as being in breach of the VAT rules governing apportionment and accounting for output VAT. Businesses with no clear accounting procedures, policy enforcement, and ongoing monitoring processes in place to govern personal usage, can expect to be targeted by Customs, who will look to issue assessments with interest and possible penalties going back three years.

Tip 1

If private use of a mobile phone is allowed, Customs’ Internal Guidance (V1-13, Chapter2, Section 5F) states that they should make a judgement whether the amount of private use and tax on the call element of the bill justifies further action. If the amount can be seen as effectively “de minimis”, it can be ignored. So always argue that any private use is minimal, and have a company policy that says “no private calls except in exceptional circumstances”.

Where the phone package allows the business to make a certain quantity of calls for a fixed monthly payment, and there is no separate standing charge, it must apportion the VAT on the total charge for the package if private use is allowed. Similarly, where the contract is for the purchase of the phone, and the advance purchase of a set amount of call time for a single charge, the apportionment will also apply to the whole charge.

Tip 2

Any specialist task force like this will concentrate on the larger businesses, where the most revenue is at risk. Small and medium-sized businesses will probably only be visited by a normal VAT inspector, but they will have a heightened awareness of the problem. If you can demonstrate that you have systems in place, and that you enforce them, they are unlikely to look any further.

Andrew Needham
Director, VAT Solutions (UK) Ltd
Email: andrewneedham@vatsolutions-uk.com

Get your kick from a VAT 66 (and VAT 65)

If you travel or incur costs in the EU, it is now the time of year to make sure that you claim the VAT back on any of these costs, for example, hotel bills, conferences or exhibitions you have attended.

How do I make a claim?

The first thing you need is a certificate from your local VAT office and the application form. To get these just phone the National Advice Service (0845 010 9000) and ask for a VAT 66 Certificate of Status and a VAT 65 application form. You can also print off the application form from Customs web site at www.hmce.gov.uk. When you get the form it must be completed in the language of the country you are claiming the refund from. This sounds difficult, but the actual text you will need to write is minimal. You then list the invoices and VAT amounts and send the VAT 65 and 66 along with the original invoices to the countries tax authorities. A list of their addresses can be found in Customs Notice 723 or on the Customs website.

Tip

The period of a claim is a calendar year, you then have six months to make the claim. This means that you should have sent the claim by 30 June in the following year, most countries are fairly stiff about the time limits and late claims are normally rejected, so make sure you make your claim on time.

Steve Allen
Director, VAT Solutions (UK) Ltd
Email: steveallen@vatsolutions-uk.com

VAT Solutions (UK) Ltd
11 Winmarleigh Street,
Warrington,
WA1 1NB

(T) 01925 242497
(F) 01925 242498
(M) 07810 433927
(W) www.vatsolutions-uk.com

VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via the following address: www.vatsolutions-uk.com/newsletter.doc