VAT refunds for businesses that provide free trade samples
 
Historically, businesses have accounted for VAT when they provided more than one trade sample to the same person or organisation. Following a case involving EMI, this has now changed.  The European Court of Justice (ECJ) has confirmed that businesses do not have to account for VAT when they provide more than one free sample. This decision is expected to result in EU member states (including the UK) changing their VAT regulations. Where a business has accounted for VAT on free samples in the last 4 years, they may be able to obtain a refund from HMRC. Such claims need to be submitted quickly in order to maximise any potential claims.  An interest payment will also be due for any claims agreed by HMRC. This is to compensate affected businesses. You should contact any of your clients that may be affected by this ruling. We can help you to  quantify claims, make the relevant disclosures and where appropriate, obtain repayments from HMRC.

AXA/Denplan
 
On the 28th October 2010, the European Court of Justice (ECJ) ruled in the case of AXA / Denplan that the collection and processing of monthly payments (from patients to dentists under Denplan in this specific case) are standard rated VAT supplies of ‘debt collection’ rather than exempt supply of ‘payment or transfer’. In coming to this conclusion, the ECJ ruled that ‘debt collection’ is not limited to a debt where the debtor had defaulted but can include a ‘debt’ which is not payable immediately but will be paid in time.  
 
As a result, this case could affect any business involved in collecting payments or transfers that they have to date exempted these services from VAT. Therefore, if any of your clients operate a VAT exempt payment plan– or indeed outsource this operation – they may be affected by this ruling. We would suggest that you identify any of your clients that may be affected by this ruling and we can assist you in identify the impacts and implications for each specific case.
 
Increase VAT

The standard rate of VAT will be increased to 20 per cent on 4 January 2011. For any sales of standard-rated goods or services made on or after 4 January 2011 VAT at the 20 per cent rate must be charged. If you have clients who operate a cash business and calculate their VAT using the VAT fraction, they must use the revised VAT fraction of 1/6 on their standard-rated VAT inclusive sales from 4 January 2011. The change only applies to the standard VAT rate. There are no changes to sales that are zero-rated or reduced-rated for VAT or to the VAT exemptions. Any sales made at these rates are unaffected by this change.

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