Publish Date
Aug 10, 2023
Industry Insights
On 1 June 2023 in the UK, the default late payment interest rate applicable was 7% and the statutory late payment interest rate applicable was 3.5%.
From 11 July 2023, the rates rose by 0.5% to 7.5% and 4% respectively.
All HMRC interest rates can be viewed here: HMRC interest rates for late and early payments – GOV.UK (www.gov.uk)
HMRC has issued a new VAT error correction tool designed to easily confirm when errors need to be reported to HMRC via a form VAT652 / Notice of Error Correction (ECN) or, alternatively, where the adjustment can be made on a VAT return. The online tool allows you to put in the total value of the error and will confirm the next steps:
If the error is reportable and you choose to correct this via your government gateway account, you will be able to save your application and review your responses before submitting it. On submission you will receive a confirmation ID from HMRC which will include a unique reference number you can use to discuss this with HMRC if necessary.
You are not required to use the online service and can continue to submit VAT652’s and ECN’s to HMRC as previously.
Under current UK VAT legislation, supplies of medical services made by certain registered health professionals are exempt from VAT. From 1 May 2023 this has been extended to non-registered staff providing medical services directly supervised by pharmacists.
The updated brief can be found here: Revenue and Customs Brief 5 (2023): change to the VAT treatment of medical services carried out by non-registered staff directly supervised by pharmacists – GOV.UK (www.gov.uk)
The Government would like to gather and consider views from individuals, businesses and intermediaries on how the Temporary Admission (TA) procedure is working and, in particular, taxpayers’ experiences of using TA in the UK. They are also welcoming views on how to improve the UK’s TA procedure and make it more accessible for users.
If you have any comments which you would like to contribute, please reach out to us and we can submit a collaborated response to HMRC’s call for evidence.
Alternatively, should you wish to respond directly to the consultation, you can do so by emailing: tacustomscallforevidence@hmrc.gov.uk by 11.45pm on 22 September 2023.
The Developing Countries Trading Scheme (DCTS) replaced the Generalised Scheme of Preferences (GSP) on 19 June 2023. The new scheme allows goods originating in 65 eligible countries to be imported into the UK at either reduced or nil rates of duty and was designed to simplify the trading rules for UK traders importing goods from these countries.
Under DCTS there are three categories of preference depending on the level of development of the originating country.
A list of the eligible countries and the preference scheme goods qualify for can be found here.
The Upper Tier Tribunal issued a decision on 24 July 2023 which may have a significant positive impact for businesses involved in share sales where the ultimate aim of the sale is to fund wider business activities which will be subject to VAT. The Tribunal upheld the previous 2021 decision that the sale of shares in a subsidiary, where the aim was to operate another hotel within the corporate group, did not restrict the business’ ability to recover VAT on costs.
This is a significant departure from HMRC’s long-standing policy, please see our recent article here which sets out the facts of the case and the decision and how A&M can assist.
There have been a number of administrative updates from Tax Authorities regarding permanent VAT rate changes:
Changes in VAT rates since 1 July 2023
| Country | VAT / GST Changes | Effective Date |
| Benin | Introduction of 18% VAT rate on non-resident digital services to consumers | 1 October 2023 |
| Costa Rica | Introduction of 13% VAT rate on tourism services | 1 July 2023 |
| Cyprus | Introduction of super-reduced 3% VAT rate and addition of goods to 0% VAT list | 21 July 2023 |
| Fiji | Standard VAT rate has increased from 9% to 15% | 1 August 2023 |
| Ireland | Extension of the temporary reduction of the VAT on Electricity and Gas from 13.5% to 9% | Extended until 31 October 2023 |
| Italy | Extension of the temporary reduction of the VAT on the supply of nature gas to 5% | Extended until 30 September 2023 |
| Thailand | Standard VAT rate will increase from 7% to 10% | 1 October 2023 |
| Turkey | Standard rate has increased from 18% to 20% Basic goods rate has increased from 8% to 10% |
10 July 2023 |
| Vietnam | Temporary reduction of the reduced VAT rate from 10% to 8% | From 1 July 2023 to 31 December 2023 |
There are other proposals which have been put forward to legislatures, however these have not been approved, therefore it is likely we will see more VAT rate changes in the second half of 2023.
Spain – An updated draft of the proposed e-invoicing regulation for B2B transactions in Spain has been published, and the issue of e-invoices by non-resident entities is out of scope. The Spanish Tax Authority undertook a consultation which ended on 10 July 2023.
Germany – A discussion document has been released by the German Ministry of Finance to consult on the proposed implementation of mandatory e-invoicing, due to become effective from 1 January 2025.
The CJEU recently published its much-anticipated ruling in the Cabot Plastics’ case. The key question was regarding whether exclusive services are being provided by a subsidiary (Cabot Plastics Belgium), in a country in which the purchaser, in this case the parent company Cabot Switzerland, had no resources, created a fixed establishment for the purchaser.
The CJEU deemed that a fixed establishment was not created principally because the resources were solely Cabot Belgium’s and it is not possible for the same entity to be both the service provider and the recipient.
We will be sharing an article discussing the CJEU judgement on Cabot Plastics in further detail in the near future so look out for this if you would like to learn more about the judgement.
If you would like to exchange views or discuss the potential impact of the above announcements for your organisation, please feel free to get in touch with your usual A&M adviser, Mairéad Warren de Búrca or Mark McKay.
https://www.alvarezandmarsal.com/insights/indirect-tax-alert-q2-2023
