VAT REMINDER
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• Value-added tax has finally arrived, and from April 1 the standard rate of 10 per cent is chargeable by registered taxable concerns on freight transport undertaken wholly within the United Kingdom.
A taxable concern ("taxable person") is one which has an annual turnover In excess of £5,000, and operators falling within this category should already have registered with the Customs and Excise Department, which is supervising the tax. Those who have not registered should do so immediately.
Cannot reclaim tax Failure to register is not only illegal but places the operator in the same position as the small exempt firm with an annual turnover of less than 15,000. He will have no tax registration number and will be unable to reclaim from Customs the tax which he is called upon to pay on what he buys for his firm's use — such as vehicles and spare parts. He will be faced with the need to increase rates to cover the additional cost.
Exempt operators The truly exempt operator will have to pay tax on his supplies but will be unable to reclaim it, the implication being that his rates will have to be raised — a definite trading disadvantage. Exempt operators are able to request registration if they wish, but this will not necessarily be granted.
Export traffic Transport of freight to a destination outside the UK is zero-rated, so the tax is not levied on such loads. But if the load is carried only to the port of embarkation then the transaction becomes chargeable at 10 per cent. Even if the whole journey to the overseas destination is undertaken, but the UK part of the journey is invoiced separately, then the UK portion becomes chargeable at standard rate.
Tax responsibility It is important that the operator should Ignore the VAT classification of the customer, and consider only the status of the transport operation in deciding whether tax is chargeable.
It is also important to remember that when an invoice for the transport is issued, the operator assumes responsibility for paying the tax on that invoice to the Customs and Excise. This means that the operator must pay at the stipulated date of the tax period even if the customer has not paid his account — and that includes bad debts.
Passenger transport Road passenger transport businesses are zero-rated (not exempt) and can therefore claim back from Customs the VAT they pay on their supplies; but they do not charge VAT to their passengers.
Settling Queries The basis of VAT is set out in two free VAT booklets — the General Guide and Scope and Coverage. These are Customs and Excise Notices No 700 and 701, but a range of free specialist booklets is also available from the local Customs office, which can answer queries and provide guidance.