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Offshore land owners
VAT treatment of fees for tax return preparation.
We provide accounts and tax return preparation services to a number of offshore property owners, both corporate and individual. However, we have not always been able to confirm the correct VAT treatment of our fees and how far the definition of services extends in relation to UK land.
We have asked several VAT advisers, but they have all said this is not entirely clear and that it is very difficult to determine. For safety, we have therefore treated the preparation of tax returns and accounts that include UK rental income as standard rated (services in relation to UK land) and the preparation of accounts (for related entities) that do not include any UK rental income as outside the scope.
We are also not sure whether a non-resident individual is considered to be a ‘business’ for VAT purposes, or a consumer. Any clarification that readers can provide will be much appreciated.
Query 19,531 – Confused.
Status decisions
Employment status decisions for subcontractors.
My client is a building company (A Ltd) that does not meet the small criteria under the Companies Act and I therefore need to be able to explain the forthcoming IR35 changes to them. The work is carried out by subcontractors working through their own limited companies (say B Ltd).
If my client company is painting 100 houses on a building site for a major national builder (C Ltd), it seems clear that the responsibility for assessing IR35 will lie with that national builder. However, if my client is contracted to paint Joe Bloggs’ house, to my mind, the ‘end user’ is Joe Bloggs who will not be asked to make the decision on IR35. In those circumstances, does this mean that the new rules will not apply to this chain of supply?
Alternatively, because Joe Bloggs is not a business, is the ‘end user’ the business that is making the supply to him? I have made an attempt to get to the bottom of this through the draft legislation but that simply refers to clients. In our case, the client would be Joe Bloggs.
Can Taxation readers advise who has to make status decisions in these two scenarios? First, when the end user is the national company and, second, when the end user is a private individual.
Query 19,532 – Determinant.
Twist to the tale
VAT dilemma with machine sale.
One of our clients hires out expensive equipment to customers in the construction industry. The client is UK-based and is a trading subsidiary of an American parent company.
In 2017, a piece of equipment valued at £750,000 was imported from the USA to UK and declared as an import for VAT and duty purposes. The equipment remained under the ownership of the American parent company, which has been making an annual rental charge of £100,000 to the UK company. For ease of administration, my client arranged to be the importer of the equipment and claimed input tax of £150,000 on its June 2017 VAT return, supported by a C79 certificate.
Is the UK company correct to claim this input tax, on the basis that it has only rented and never owned the equipment? Also, my client has never accounted for VAT on the annual rental payments from the American parent company; in other words, under the reverse charge. Is this important because my client is fully taxable so claims input tax on all of its expenses?
The twist to the tale is that the US company is now going to sell this equipment to the UK company for £500,000 and has asked my client for advice on what it should do about VAT.
Readers’ help on these issues would be welcome.
Query 19,533 – Digger Man.
IR35 responsibilities
Can a company insist that PAYE is operated on workers?
We act for a small limited company client that has gangs of labour who are all under the construction industry scheme (CIS) regime.
Their client is a large multinational which, with the new IR35 rules coming online, is advising businesses working for it that, from 6 April 2020, it will no longer engage with limited companies or personal service companies off-payroll, whether directly or through agencies or intermediaries. Instead, if they are to continue providing services to it, all contingent workers will have to register and be paid under PAYE through an approved employment agency.
If this requirement is not followed, the multinational may serve notice to terminate the engagement in accordance with the provisions in their contract.
The multinational has advised agencies providing workers that a letter to this effect has been sent to workers and that the agency should expect them to be in touch.
The agencies have also been asked to confirm their PAYE arrangements and have been told that any future workers will only be considered if they are paid under PAYE.
As advisers, we are contemplating pointing out that our client’s company is not controlled by the workers provided and therefore is unaffected by the legislation, which we think is the right thing to do. However, given the strict tone of their statement we would not be happy to provide any details of the arrangements that our client does have with its individual workers as this may be a breach of confidentiality. Is our understanding of the position correct?
Any comments from Taxation readers would be very welcome.
Query 19,534 – Confucius.
