CPA Bulletin

32 CPA Bulletin > May 2021 www.cpa.uk.net Legal NEWS LEGAL: 1 In recent months, a fewMembers have been visited by HMRC Inspectors who have raised an issue regarding the member’s charging calculation for VAT on gas oil (red diesel) top-ups. The VAT issue centres on those occasions when the plant’s fuel tank needs refilling – or topping-up after the plant has been off-hired and returned to the depot. Those Members who have been visited by HMRC have been informed that by refilling the plant’s fuel tank, they should treat this as a surcharge, and the customer should be charged at 20% VAT, and not 5%. The Inspector’s viewpoint is that this refilling constitutes a separate supply to the hire of the plant, as the hire has ended with the plant back at the owner’s depot. Some Members have suggested to the Inspector that this is a single supply, i.e., that it still relates to the hire as the plant had a full fuel tank when hired out, and this ‘fill-up’ is putting the status of the plant to the position it was in when it went out. Others have raised a separate point in that the quantity of fuel used to ‘fill-up’ the tank is below the de-minimis level for on-site supplies (2,300 litres), and therefore 5% VAT applies. The Inspectors are not accepting either point and are maintaining their position - as per the Value Added Tax Act 1994, that members should charge 20% VAT. The CPA has taken legal advice from a tax specialist at Gateley Legal, CPA’s legal advisors. The tax specialist has agreed that the Inspector’s interpretation is consistent with the legislation. Members are advised to review their current accounting practice when charging their customers for refuelling the plant’s tank after the hire has ended. It is recommended that, if necessary, they obtain independent financial or legal advice, if they are uncertain on how best to proceed. Please contact David Smith if you need more information on this at david.smith@cpa.uk.net 5% or 20% on Gas Oil ‘Top-ups’ - HMRC Interpretation Reverse VAT As Members have contacted the CPA with numerous queries concerning the interpretation of the Domestic Reverse VAT legislation, some sample questions and answers can be found in the Q&A section of the CPA Bulletin starting on page 34, Revision to the CPA Conditions We are progressing through the various CPA’s terms and conditions; and updating them to reflect legislative and industry practices which have changed since the 2011 conditions were launched. There have been no major amendments to the Model Conditions, but with the growing use of electrical-powered or rechargeable plant, an additional clause has been created to highlight the Hirer’s responsibilities when this type of plant is supplied. The Supplementary Conditions are at various stages of completion. Any suggested amendments have been checked back against the Model Conditions to ensure there was no conflict, or whether the suggested amendment would be better served in the Model Conditions. There are some technical issues remaining that need clarifying before they can proceed to the next stage. Some new terms and conditions are being produced. A set of Consumer Contract Lift Conditions has had its first draft completed; and the RPA’s POS Conditions are currently with the Working Group’s Owners/Directors for their approval, before going on to the next stage. It is expected that the CPA’s 2021 updated conditions will be on schedule for launch this summer. IR35 - Changes Introduced in April From 6th April 2021, the IR35 tax changes took effect. HM Revenue & Customs (HMRC) had previously deferred the introduction by one year due to the impact of the Coronavirus. The legislation has expanded significantly on the engagement of contractors through a personal service company or other intermediary. In law, a contract of employment can only exist if there is a direct contractual relationship between the employer and the employee. So if an individual is engaged to supply their services through some other intermediary (such as a private limited company fromwhich they take a small salary plus dividends) and the intermediary (not the individual) has the contract with the end- user client, this will not be an employment relationship in the legal sense. Such devices obviously give rise to opportunity to disguise true employment and avoid employment tax and other employment obligations. The impact this will have will mean end user clients of independent contractors must undertake detailed assessments to determine whether each contractor is caught by IR35; and if so, tax the individual as if they were an employee. If, following any particular assessment, the end-user considers that IR35 does apply to a particular contractor relationship, the end-user will have the obligation to notify the intermediary and, if the engagement continues, operate PAYE - taxing the payments to the intermediary as if it were income from employment.