Have your say: VAT – Partial Exemption and Capital Goods Scheme

Partial Exemption computations have always been difficult at the best of times. The Capital Goods Scheme has been an equally awkward complication. The government is looking to simplify these regimes and has issued a ‘call for evidence’.

This is our chance as a profession to have our experiences heard.  We are therefore reaching out to our network of professionals and asking for your experiences so we can provide a robust response to HMRC. Their detailed call for evidence can be found here.  Making a consolidated, single response to the consultation where we take into account the views from our extensive network of accountancy firms and professionals will have more impact, so we would be grateful to hear your experiences.

Our response to HMRC’s consultation will not contain the names of any feedback received from you.

Following the findings of the 2017 Office of Tax Simplification (OTS) VAT report on routes to simplification, the government said it would explore ways to improve the operation of Partial Exemption and the Capital Goods Scheme.

The call for evidence seeks to gather views and feedback on simplification of the current partial exemption and Capital Goods Scheme rules, particularly around:

·         Applying for a special method
·         Partial exemption de minimis threshold
·         Capital Goods Scheme
·         CGS intervals
·         Broader suggestions for improvements and experiences of other countries’ systems

We Need You!
A summary of the call of evidence questions is shown below and we would be grateful to receive your views. Please feel free to respond to all or as many questions as you wish. Your responses will be added to other replies we receive and amalgamated within our final response to HMRC.

It would be helpful if you could send any comments or examples to us by Friday 13 September 2019, via email to our VAT team at Punnit.Vyas@gabelletax.com.

For further information and help on Partial Exemption or the Capital Goods Scheme, phone the TaxDesk on 0845 4900 509 and ask for Punnit Vyas.  

Summary of questions
Partial Exemption Special Methods 
1. Does your business use a PESM? If so, what was your experience in getting the PESM approved?
2. How long did the approval process take?
3. Do you find the administration involved with PESMs challenging?
4. Would allowing businesses to apply PESMs without seeking approval improve the system? Please give reasons for your answer.
5. Would there be issues created by removing the requirement to seek approval of a PESM?
6. Would an increased focus on the use of sectoral frameworks be of benefit, particularly if approvals were removed?
7. Do you have other suggestions to improve or simplify the application of the PE regime?
8. Do you have other suggestions on how the way in which HMRC interacts with partly exempt businesses could be improved?

Increasing the de minimis limit 
9. What is your experience of carrying out the de minimis test?
10. What would the advantages and disadvantages of increasing the de minimis threshold be to business?
11. Are you aware of the existing simplification, and do you make use of it?

Removal of the de minimis limit 
12. What would be the advantages and disadvantages of removing the de minimis test?
13. Do you have other suggestions to improve or simplify the application of the de minimis regime?
14. Do you have any suggestions on how to determine what can be considered as ‘insignificant’ that would be different to the current de minimis tests?

CGS Thresholds 
15. What is your experience of the CGS?
16. How much time and resource do you allocate to carrying out CGS calculations? Does this have an impact on your business?
17. To what extent does the CGS help to prevent cases of tax avoidance and unfair competition?
18. What would be the advantages and disadvantages of increasing the threshold for land and property businesses?
19. Would there be any other issues involved with increasing the land and property threshold?
20. If the threshold for land and property is increased, do you think we should consider having a different threshold for alterations, extensions, annexes, and refurbishments, (i.e. retain the current threshold) or would it increase complexity?
21. Are there other ways in which the CGS can be improved?

22. Do you have experience of computers being included in the CGS?
23. Would removing computers from the CGS be a simplification for business?

24. What do you think of the current interval length?
25. Would a change in the number of intervals help businesses with their administration of VAT? Why?

Other possible areas to review 
26. Do you have other suggestions to improve and simplify the application of the PE and CGS regime?
27. Do you have any experience of the operation of PE and the CGS in other countries? How does the UK compare?
28. Do you have any other comments?