No. 23 VAT and Financial Systems
Schools Newsletter January 2010.
Happy New Year to you all!
This newsletter is to bring you up to date with
current VAT legislation and financial systems
information for those of you who bank cash on
behalf of the Authority.
VAT to go back to 17.5%
You should all have received a guidance leaflet which was mailed to you in
December in respect of the change in rate of VAT to 17.5% on 1 January
2010. The guidance covers the transitional period for goods and services
and how you should be accounting for VAT. If you have not received your
guidance or are unsure which VAT rate to apply for goods and services
please contact the tax and financial systems team.
Direct Debit Payments
Where payment of periodic bills, such as utility bills, is
made by direct debit, it is still necessary to hold a VAT
invoice to support VAT recovery. Often suppliers will
send you an annual “schedular invoice” in which case when
the VAT rate reverted to 17.5% on 1 January 2010 the
original “scheduler invoice” ceases to be valid from 1
January 2010 and must be replaced by a new schedule. If
you have not received a new schedule then you cannot
claim back any VAT on your direct debit future payments. You must code
the costs as a gross cost until a new schedule is issued to you.
New EU VAT Package Regulations from 1 January 2010
From 01 January 2010 new VAT legislation has been introduced for any
goods purchased from the EU or for any sales of goods/services which
you undertake with EU countries. The legislation is attached to this
newsletter. If you are asked to place an order with a company in the EU
which does not have a GB VAT code please contact us immediately so we
are aware of the transaction. It is very important that the VAT is
accounted for within the correct VAT period to HMRC. This will be
generally be before we receive your SIMS VAT summary statement. If
the Authority does not account for the VAT value in the correct period
then HMRC will serve a penalty on the Council – this will be picked up as
your supplier will be electronically completing the necessary paperwork
with HMRC. We will pass the penalty onto your school if information has
not been passed to us in time.
If there is a sale of goods/services by your school to the EU then these
transactions will now have to be declared on a EU Sales List. There is no
de minimus level for transactions – we must capture them all. Again, as
soon as you are aware of a sale please contact the tax team so we are
able to complete the relevant paperwork on your behalf and, once again,
account for the VAT in the correct monthly period. It may be too late if
you leave it to the point of raising the invoice on your system. Again,
HMRC will serve a penalty for any VAT not declared or declared in the
incorrect VAT return. Therefore, please contact us immediately.
Goods Purchased outside the EU
Please note that the above legislation is for EU countries
only. If you are purchasing goods from non-EU countries
then there may be no need for you to provide the Local
Authority VAT registration number. This is because UK
VAT may anyway fall due on an import when the goods enter the UK, e.g.
by air. To reclaim back any VAT levied you will need to obtain a C79 form
from HMRC. You can only reclaim once HMRC have sanctioned your C79
form so in the interim you must code any costs as gross to your budget.
Whether you can reclaim local turnover taxes charged (if any) will depend
on the rules of the exporting country and this is something for you to
establish with the company BEFORE you place the order. Please note that
the USA does not have VAT at the moment.
New Penalty Regime
Just a reminder about the new penalty regime which has
been introduced from 01 April 2009 a new penalty regime
for any errors where VAT has not been accounted for
correctly. Not only will you have to pay back the error
value to HMRC but they will automatically now levy a penalty depending on
the severity of the error. HMRC will assess the “severity level” of the
error. To summarise the penalties will be levied as follows:
Up to 30% of the value of the error – “careless” or failing to take
Up to 70% of the value of the error – deliberate not taking into account
of guidance/legislation but not concealed within the ledger accounts
Up to 100% of the value of the error – deliberate and concealed within
the ledger accounts misdeclaration of tax.
It is more imperative than ever to ensure that you account for all your
VAT transactions correctly. If you are ever in doubt about anything
please ring us or E mail us and we will endeavour to get back to you as
soon as possible. We are able to visit your school to give tax advice and
help – we do not charge a fee – we just want you to get it right!
Less detailed VAT invoice for goods to the value of £250
If you procure goods or services up to the value of £250
then a less detailed VAT invoice may be accepted which
allows you to recover any VAT charged – please note the £250 limit is
inclusive of the VAT. The VAT invoice only needs to show:
the seller's name and address
the seller's VAT registration number
the time of supply (tax point)
a description of the goods or services
If the supply includes items at different VAT rates ( zero and taxable) then for each
different VAT rate, your simplified VAT invoice must also show:
the total price including VAT
the VAT rate applicable to the item
School Trips and TOMS (Tour Operator Margin Scheme)
Just a reminder that from 1 January 2010 the “opt out”
from TOMS for travel packages supplied to schools is
abolished. Please see January’s 2009 newsletter for
further details. Basically it can mean that travel packages
may now contain irrecoverable VAT which will fall as a
bottom line cost to the scheme thus increasing the costs to the
school/parental contributions. The only exceptions are:
- where elements of a travel package are procured individually from
different suppliers i.e. the school purchased the trip directly 'bit
by bit', say buses, hotels etc then a Tour Operator would not be
involved - so the TOMS Scheme won't be used. You would then be
able to recover the VAT - but administratively more onerous, or
- where what is supplied by the tour operator comprises wholly in-
house supplies i.e. they don't buy in anything but use their own
accommodation, etc - as is the case with some specialist school trip
Please check with your operator who will be in a position to confirm how
they are accounting for VAT within their travel package.
There is a national scheme where schools can apply
to the Co-op under their Green Energy for Schools
Programme for a £10,000 grant towards solar
panels. Matched funding is available under the
joint DECC/Defra Low Carbon Building Programme.
Co-op pay their £10,000 contribution direct to the installer – usually
Solar Century- and the school is then invoiced for the remaining £10,000
(funded from DECC/Defra) plus £3,000 VAT ( VAT on the full value of
£20,000). Please note that if you are a Voluntary Aided school you are
not in a position to reclaim back the VAT back as this work is deemed to
be Governor responsibility. HOWEVER, please make the most of your
charitable status and provide the installer with a charity certificate
which should allow you to get some (or all) of the work charged at a VAT
rate of 5% on the basis that the installation falls within the provisions of
Item 1(b) of Group 2 of Schedule 7A of the VAT Act 1994 – note 1(e)
relates directly to solar panels.
Chartered Educational Psychologists – VAT exemption
HMRC have confirmed a change in legislation backdated to 1 July 2009
stating that psychologists are now subject to regulation by the Health
Professionals Council and so their services are now EXEMPT from VAT
under the health and welfare section.
VA schools and insurance funded work.
Remember that, as capital expenditure, insurance-funded reinstatement
works at a voluntary aided school are governor-responsibility and so not
eligible for VAT recovery. It is important therefore that the insurance
policy agreed makes this clear so any irrecoverable VAT is covered and
refunded to the VA school. This may well, of course, impact on the
Sports Competition Entry Fees
Sports competition entry fees are EXEMPT from VAT where such are
used wholly to fund the provision of prizes at the event. Otherwise, if
there are no significant prizes and fees are used to cover the costs of
staging an event then the entry fees are taxable if you are paying this
money into your delegated budget.
Just to confirm HMRC’s stance with regard to electronic invoicing which
more suppliers are switching to :
Electronic invoicing only applies where the invoices are automatically
uploaded into your Accounts Payable system and as such the payment is
generated automatically. I am not aware SIMS has the facility to do this
– the same for most payment systems – so no transition to a paperless
office as yet! Therefore, you will have to print off the electronically
received invoice and treat it as a conventional paper invoice and apply the
normal rules apply to determine whether it's a valid VAT invoice.
Financial Systems News
Please ensure that you have sent back the
forms detailing who the accountancy officers
are at your school. We have been instructed
by our Audit department that we need to
have details and signatures of each
accountancy officer at all of our buildings. If
you or your deputy leave your establishment you must inform Peter Lumb
so we can update our database accordingly. Remember it is only the 2
staff members who are listed on the form who are able to access the
system and pay in income.
New Security Carrier from 4th January 2010
For those of you who bank income via Trafford you should now have all
received confirmation visits and literature from the new security carrier
G4S. If any of you have not received a visit or are unsure about any
aspect of the new contract please contact Peter Lumb on 0161 912 1121
who will help you.
And last but not least for Financial Systems, if you have any receipting
queries please email them to email@example.com
VAT: You can contact Catriona with any queries:
Telephone: 0161 912 4316
Fax: 0161 912 4327
E mail: firstname.lastname@example.org
Bankings: Peter Lumb can answer any queries re. Bankings:
Telephone : 0161 912 1121
Fax: 0161 912 4327
Introduction of the EU VAT Package 01 Jan 2010
The importance of VAT and its impact cannot be stressed too strongly. The
rules dictated by VAT legislation are not negotiable and the Council has no
flexibility about whether or how it applies the rules of VAT. It is a tax law and
we, as the Council, have to operate within that law.
EU VAT Package
PURCHASING GOODS from the EU
The EU VAT Package is to be introduced from 1 January 2010 and is one of the
biggest changes to the fundamentals of VAT for some time. Powers were
announced in the Budget to enact the necessary measures to implement the VAT
Package which means that it will be necessary to identify non-UK suppliers and
customers which the Authority pays and vice versa the Authority will have to
declare any business/services it supplies to EU countries. The Budget measures
for the purchasing of goods are as follows:
o There is a change for the default place of supply for most cross border
transactions. From 1 January 2010 the cross-border procurement of
services – as within EU Procurement law – will be subject to the reverse
charge mechanism even if the services are procured in connection with
the Authority’s non business activities. This means that you will pay VAT
at the time the goods come into the UK. The rate of VAT payable is at
the same rate that you would have paid had the goods been supplied to
you by a UK supplier. This VAT is known as acquisition tax and you can
fully reclaim back the VAT as input tax. HOWEVER, you must inform the
tax and systems team immediately if you are to purchase goods from an
EU country so we are in a position to declare the VAT charged within the
correct VAT return period which we calculate on a monthly basis. This is
very important as the tax has to be declared on:
The 15th day of the month following the one in which the goods
come into the UK or
The date the supplier issued their invoice.
whichever is the earlier.
When you buy services from suppliers in other countries you may have to
account for the VAT yourself – depending on the circumstances. This is
called the “reverse charge” and is also known as “tax shift”. Where it applies,
you act as if you are both the supplier and the customer – you charge
yourself the VAT and then, assuming that you are passing these goods or
services onto another client you charge the same value of VAT that you have
calculated onto your client. So there is no net cost to the Authority as the
two values of tax cancel each other out. Both these values need to be
declared within the same VAT period claim.
As soon as you place an order for goods and services from an EU
supplier please get in touch with us. It is not sufficient for us to find out
about these transactions when the invoice is paid via Accounts Payable as
often there will be a significant period of time between the tax point data
and the actual date the supplier is paid via SAP. This will result in the
Authority not declaring the VAT on the supply in the correct VAT period.
Failure to declare in the correct period results in a penalty being served
by HMRC. This will be passed onto your cost centre if it results in your
failure to let the tax and systems unit know about the purchase when
you placed the order.
Therefore, phone 0161 912 4316 or e mail:
email@example.com with the relevant information as soon as
you become aware that you are placing an order for goods or services
with a non GB VAT registered company.
THE SALE OF GOODS AND SERVICES TO THE EU
If the Authority provides goods/services to an EU company then we have a
statutory responsibility to list this to HMRC on an EU Sales List. There is no
de minimus limit for these transactions so we have to capture all
transactions. Again, please contact the tax and systems section as soon as
you become aware that this business transaction is to take place. Please do
not wait until payment is received or you are about to raise the paperwork.
Once again, we have to declare the transaction in the correct monthly VAT
return to HMRC. Failure to do so will result in a penalty being served against
the Authority which will be passed onto your departmental budget if staff
have failed to contact the tax and financial systems team. If the sale is over
£270,000 then an Intrastat Supplementary Declaration needs to be
completed by the tax and systems team so please enclose details of all
contract values when you contact the tax and financial systems team.
There are a number of services being provided by Local Authorities to EU
business customers such as translation services, educational development
services, consultancy services, royalty rights etc.