CRT v Andy Wingfield Update

[mayalld]

 

But as a boat licence / certificate is neither land, buildings or a secondhand car it would appear that C&RT do not have the authority to arbitrarily decide that they can charge VAT.

The Zero rating, exempt or not, charging, or not charging, of VAT on a licence will be specified by HMRCE

The Zero rating, exempt or not, charging, or not charging, of VAT on a certificate will be specified by HMRCE

 

Those were offered as two EXAMPLES of areas in which there is flexibility.

 

You could always ask CRT what the statutory basis or extra-statutory concession is involved.

 

However, the fact remains that whilst it is easy to grandstand that CRT are charging VAT where they shouldn't, the alternative would actually cost boaters MORE rather than less.

[NilesMI]

 

You could always ask CRT what the statutory basis or extra-statutory concession is involved.

 

Whereas I was actually asking you what was the basis for your assertion that CRT could decide for themselves.

 

 

However, the fact remains that whilst it is easy to grandstand that CRT are charging VAT where they shouldn't, the alternative would actually cost boaters MORE rather than less.

 

The questions of; 1) whether VAT is being charged correctly, and 2) the effect that would have on the costs for individual boaters, or boaters generally, are two separate issues and you cannot seek an answer to one, with reference to the other.

 

If anyone thnks they are being incorrectly charged VAT, they should complain to CRT, in the first instance, and if no meaningful response is forthcoming, complain to HMRCE. They were called Customs & Excise when I dealt with them and from my experience they are very strict about the rules, which are many and complex and often counter-intuitive. I seriously doubt that CRT are charging VAT incorrectly and somehow HMRCE hasn't noticed.

[WotEver]

I seriously doubt that CRT are charging VAT incorrectly and somehow HMRCE hasn't noticed.

However if they are charging for a license when they should be charging for a certificate then HMRC wouldn't notice, would they?

 

Tony

[GillianOlcay]

 

However, the fact remains that whilst it is easy to grandstand that CRT are charging VAT where they shouldn't, the alternative would actually cost boaters MORE rather than less.

 

I used to do our VAT returns for BMS Ltd; the more zero-rated work we did, the more we got back from HMRC each quarter, as VAT charged is set off against the VAT reclaimed. Less VAT charged, the more paid back.

 

How could CaRT actually benefit from charging VAT on zero-rated certificates? Would it not be the case that their overall income would rise by not charging VAT on certificates of registration? Stopping the practice would actually cost boaters LESS rather than more, would it not?

 

[MtB]

 

I used to do our VAT returns for BMS Ltd; the more zero-rated work we did, the more we got back from HMRC each quarter, as VAT charged is set off against the VAT reclaimed. Less VAT charged, the more paid back.

 

How could CaRT actually benefit from charging VAT on zero-rated certificates? Would it not be the case that their overall income would rise by not charging VAT on certificates of registration? Stopping the practice would actually cost boaters LESS rather than more, would it not?

 

 

 

No.

 

Dave's post 1047(!) explains why not.

[Sabcat]

 

 

No.

 

Dave's post 1047(!) explains why not.

 

Dave's post is actually wrong. CRT are VAT registered, therefore they reclaim the VAT they pay minus the VAT they charge. If they happen to sell zero rated products (certificates) along with licences that are vattable makes no odds to that at all. Take it from someone who sells zero rated poducts (leaflets) as well as stuff we do charge VAT on.

[DaveP]

The question about CRT being able to reclaim more or less VAT hinges on whether income is either rated (at 0, 5, 20 percent etc) or exempt. So, if their total income was split only between river certs and full licences then unless the certificates are exempt from VAT, they'd be able to reclaim all the VAT incurred on their expenditure.

 

If river certs are exempt, then CRT won't be allowed to reclaim that portion of VAT incurred on their expenditure in proportion to the part of their income the river certs represent - if river certs were 10% of income and rated income was the rest, they'd only be able to reclaim 90% of the VAT on their purchases.

 

Don't confuse zero-rating and exemption, they have very different effects except on the <b>amount</b> of VAT charged to the customer.

 

All the above is very simplified!

[Tony Dunkley]

 

Have you checked back to calculate how much VAT you have paid on your own past PBC’s Tony?

 

Not yet, Gillian, but I don't need to go back far, having only ever bought six, starting when I bought the boat I'm living on at the moment in 2009.

I do need to look out the Invoices, for obvious reasons, but I'm pretty certain that C&RT are simply following BW's lead in collecting VAT at standard rate on a zero-rated item. Some years ago I did question the VAT that BW were then slapping on various zero rated items in respect of commercial carrying vessels.

[Tony Dunkley]

 

As I understand it (and I am open to correction), EA registrations are VAT exempt, rather than zero rated. (and if you want to quibble as to whether it matters that you use the term "licence" to refer to licences and registrations collectively, then it is actually considerably MORE important that we are clear on this point.

 

CRT charges VAT on its products (licences and registrations), and it pays VAT on its supplies.

 

Because of the way the finances operate, it actually reclaims MORE in input tax that it pays out for VAT collected.

 

If they opted (and it is an option that they can choose to take or not) to have river registrations exempt from VAT, then not all their supplies would be in scope for VAT, and they would be allowed to reclaim only a portion of the input VAT.

 

Or to look at it more simply, for every pound in VAT that they collect on river registrations, and pay to HMRC, they get MORE than a pound back from HMRC in extra input VAT

 

Utter piffle.

Input VAT is what a purchaser pays on goods or services.

In true C&RT style, they're managing to swindle boaters and, effectively, reduce their own income in the process by increasing their own VAT settlement liability to HMRC.

[Tony Dunkley]

The question about CRT being able to reclaim more or less VAT hinges on whether income is either rated (at 0, 5, 20 percent etc) or exempt. So, if their total income was split only between river certs and full licences then unless the certificates are exempt from VAT, they'd be able to reclaim all the VAT incurred on their expenditure.

 

If river certs are exempt, then CRT won't be allowed to reclaim that portion of VAT incurred on their expenditure in proportion to the part of their income the river certs represent - if river certs were 10% of income and rated income was the rest, they'd only be able to reclaim 90% of the VAT on their purchases.

 

Don't confuse zero-rating and exemption, they have very different effects except on the <b>amount</b> of VAT charged to the customer.

 

All the above is very simplified!

 

From what I've gleaned from HMRC and the EA , boat Licences are standard rated, whereas boat registration [fees] are zero-rated.

C&RT are very well aware of this, as this internal memo proves :~ https://www.whatdoth...om/request/1...

[Tony Dunkley]

However if they are charging for a license when they should be charging for a certificate then HMRC wouldn't notice, would they?

 

Tony

 

Spot on !

Are they being rather clever, and knowingly dishonest, by misrepresenting 'registrations' [Pleasure Boat Certificates] as 'Licences', or is this just one of lifes' happy coincidences ?

[WotEver]

Spot on !

Are they being rather clever, and knowingly dishonest, by misrepresenting 'registrations' [Pleasure Boat Certificates] as 'Licences', or is this just one of lifes' happy coincidences ?

The memo linked to in your previous post would suggest the former.

 

Tony

[MtB]

The memo linked to in your previous post would suggest the former.

 

Tony

 

 

But why would anyone at CRT bother? To them it's just a job. They go home each night and forget about it, unlike us. CRT employees have no interest or advantage to gain by defrauding us or HMRC.

 

 

 

(Spilling edit.)

Edited February 22, 2016 by Mike the Boilerman

[WotEver]

But why would anyone at CRT bother?

Because it's in their interest to make boaters believe that they're purchasing a special license as opposed to a simple certificate?

 

I honestly have no idea, but the contents of the email (not the 'rowers' bit) strike me as very odd.

 

Tony

 

Edited to enable me to defeat autocorrect...

Edited February 22, 2016 by WotEver

[Tony Dunkley]

 

 

But why would anyone at CRT bother? To them it's just a job. They go home each night and forget about it, unlike us. CRT employees have no interest or advantage to gain by defrauding us or HMRC.

 

 

 

(Spilling edit.)

 

What sort of fraud would you be interested in, then ? . . . . I think you should steer clear of VAT fraud, in view of your grasp of how VAT works being as tenuous as Dave Mayall's.

[MtB]

 

What sort of fraud would you be interested in, then ? . . . . I think you should steer clear of VAT fraud, in view of your grasp of how VAT works being as tenuous as Dave Mayall's.

 

 

Lol, another one who doesn't know the difference between the two meanings of the word 'interest'!

[mayalld]

 

Dave's post is actually wrong. CRT are VAT registered, therefore they reclaim the VAT they pay minus the VAT they charge. If they happen to sell zero rated products (certificates) along with licences that are vattable makes no odds to that at all. Take it from someone who sells zero rated poducts (leaflets) as well as stuff we do charge VAT on.

 

Dave's post is actually right.

 

You have made the Schoolboy error of assuming that "exempt" and "zero rated" are the same thing.

 

They aren't.

 

If you sell zero rated goods and services, you can reclaim the input VAT on your supplies.

 

If you sell goods or services that are VAT exempt, you cannot reclaim input VAT.

 

If you sell a mixture, then the amount of VAT that you can reclaim is pro-rata to the proportion of your sales in each category.

 

So, worked example;

 

I run an organisation that supplies two products;

 

Product A sells for £1000 and I sell 75 each year

Product B sells for £500 and I sell 25 each year.

 

I receive a government grant in addition to my income

 

My expenditure on VAT-able supplies is £75,000 + VAT each year

 

Take two scenarios;

 

1) Both are standard rated;

 

Gross Income from Product A is £75,000

VAT on Sales is £12,500

 

Gross Income from Product B is £12,500

VAT on Sales is £2,083

 

Expenditure is £90,000

Input VAT is £15,000

 

VAT liability is -£417

 

Shortfall of income is £2,083

 

2) A is standard rated, B is exempt;

 

Gross Income from Product A is £75,000

VAT on Sales is £12,500

 

Gross Income from Product B is £12,500

 

83% of sales are subject to VAT

 

Gross Expenditure is £90,000

Input VAT is £15,000

reclaimable input vat is £12,499

 

VAT liability is £1

 

Shortfall of income is £2,501

 

All the customers paid EXACTLY the same for what they bought, but by having all the supplies in-scope for VAT, there is £418 more money.

 

Zero rating is usually good news. Exemption less so.

[Tony Dunkley]

 

Dave's post is actually right.

 

You have made the Schoolboy error of assuming that "exempt" and "zero rated" are the same thing.

 

They aren't.

 

If you sell zero rated goods and services, you can reclaim the input VAT on your supplies.

 

If you sell goods or services that are VAT exempt, you cannot reclaim input VAT.

 

If you sell a mixture, then the amount of VAT that you can reclaim is pro-rata to the proportion of your sales in each category.

 

So, worked example;

 

I run an organisation that supplies two products;

 

Product A sells for £1000 and I sell 75 each year

Product B sells for £500 and I sell 25 each year.

 

I receive a government grant in addition to my income

 

My expenditure on VAT-able supplies is £75,000 + VAT each year

 

Take two scenarios;

 

1) Both are standard rated;

 

Gross Income from Product A is £75,000

VAT on Sales is £12,500

 

Gross Income from Product B is £12,500

VAT on Sales is £2,083

 

Expenditure is £90,000

Input VAT is £15,000

 

VAT liability is -£417

 

Shortfall of income is £2,083

 

2) A is standard rated, B is exempt;

 

Gross Income from Product A is £75,000

VAT on Sales is £12,500

 

Gross Income from Product B is £12,500

 

83% of sales are subject to VAT

 

Gross Expenditure is £90,000

Input VAT is £15,000

reclaimable input vat is £12,499

 

VAT liability is £1

 

Shortfall of income is £2,501

 

All the customers paid EXACTLY the same for what they bought, but by having all the supplies in-scope for VAT, there is £418 more money.

 

Zero rating is usually good news. Exemption less so.

 

I think you need to get yourself a new calculator, . . . . and an explanatory booklet on how VAT works.

[mayalld]

 

I think you need to get yourself a new calculator, . . . . and an explanatory booklet on how VAT works.

 

If you know better, then do tell.

 

I know EXACTLY how VAT works, including how VAT works when you make some exempt supplies.

 

Alternatively, you could just offer nothing on the subject but an assertion that I'm wrong.

[erivers]

Mr Mayall - Your convoluted 'smoke and mirrors' calculation only works if you concede that CRT is charging its customers VAT on an exempt supply and not accounting to HMRC for the tax received.

 

CRT certainly confirms in its tariff document that "Prices include VAT at 20%".

 

That looks very close to fraud to me.

[mayalld]

Mr Mayall - Your convoluted 'smoke and mirrors' calculation only works if you concede that CRT is charging its customers VAT on an exempt supply and not accounting to HMRC for the tax received.

 

CRT certainly confirms in its tariff document that "Prices include VAT at 20%".

 

That looks very close to fraud to me.

 

Not so.

 

My calculation assumes that in the first case (all supplies subject to VAT), CRT account for the VAT collected of £14,583, but reclaim the input VAT of £15,000 (perfectly possible if you are making a loss that is financed from grants)

 

In the second case, they charge exactly the same for product B, but there is no VAT liability, so they account for only £12,500 (which is correct, that is all they collected), but in this case, they can reclaim only 83.33% of the input VAT (£12,499)

 

Nobody ever said that VAT was simple

[erivers]

So are you seriously asking us to believe that CRT is accounting to HMRC for VAT that it has no authority to collect in the first place and for which it does not issue the required VAT invoice?

 

VAT may not be simple - it's yet another European imposition after all - but Section 2 of the Fraud Act is rather easier to understand:

 

Fraud by false representation

(1)A person is in breach of this section if he—

(a)dishonestly makes a false representation, and

(b)intends, by making the representation—

(i)to make a gain for himself or another, or

(ii)to cause loss to another or to expose another to a risk of loss.

(2)A representation is false if—

(a)it is untrue or misleading, and

(b)the person making it knows that it is, or might be, untrue or misleading.

[GillianOlcay]

We took over a business just before a random VAT inspection of the books, and the Inspector discovered that our predecessor had claimed a proportion paid for VAT on rent on which no VAT was due [or itemised]. So I know HMRC can be very hot on claims for VAT payments respecting zero-rated invoices; we had to repay them the amount claimed. I seriously doubt they would expend the same resources on investigating why a business was paying them more than justified [although one would like to think that in a random check such as with us, they would have so informed us].

I also seriously doubt that anyone in CaRT’s accountancy department was attempting a financial fraud that did not benefit them; I suspect that the reasoning behind charging VAT is, as Tony suggests, to re-inforce the ‘licence’ status of the registration certificates. Then again, I suppose it could just be laziness. Regardless, if done knowingly [as the linked email suggests], then erivers would be correct that fraud has been perpetrated. The victims would be the boaters, just not HMRC.

Interesting as the discussion over ‘exempt’ v ‘zero-rated’ is, if registration certificates are indeed zero-rated as suggested, then the issue is immaterial to the fundamental argument here, is it not? The end result of not charging VAT where unjustified would be increased revenue?

[Tony Dunkley]

So are you seriously asking us to believe that CRT is accounting to HMRC for VAT that it has no authority to collect in the first place and for which it does not issue the required VAT invoice?

 

 

There is one detail that needs to be made clearer with regard to C&RT's misleading Invoices.

Before C&RT stopped sending out printed Pleasure Boat Certificates, or registration certificates [which looked exactly the same as a boat Licence] they did enclose a 'Craft Licence Invoice' showing VAT applied at standard rate, and in respect of a 'Licence' for 'Rivers only use'.

The 'Rivers only use' wording also appeared on the Pleasure Boat Certificate, whilst the word 'Licence' was conspicuous by it's absence.

Edited February 23, 2016 by Tony Dunkley

[Alan de Enfield]

A 'River Registration' can be priced at no more than 60% of a Canal Licence (by law)

 

Is that 60% based on the net of VAT licence price or the VAT inclusive price ?

 

If it is based on the VAT inclusive price then the cost to the boater will remain the same but C&RT will get a greater income as they will no longer be 're-paying' HMRCE the VAT on the 'registration'.