As it’s the end of the year, I feel like having a bit of light-hearted fun, so I thought I would try and come up with the 12 VAT Facts of Christmas. I know ‘fun’ and ‘VAT’ don’t usually appear in the same sentence so here it goes:
A VAT Tribunal found that a Snowball (the marshmallow variety you eat) is in fact a cake so therefore, just like Jaffa cakes, Snowballs are zero-rated for VAT.
Roast swan used to be a popular delicacy in the UK. Nowadays though, all swans belong to either the Queen, the Dyers Company or the Vintners Company and it’s illegal to trap and kill them for food. This means that because they are no longer a species generally eaten in the UK the supply of swans would be subject to VAT at the standard rate.
Christmas gifts to staff which are of minimal value (less than £50 in UK) are considered to be trivial and no Output VAT needs to be charged. Yippee I hear your employees shouting.
A number of countries in Europe have a church tax (Austria, Germany and Iceland). However, you only pay if you are considered to be a recognised member of a religious body. The tax is paid in addition to the usual income tax.
Is your office all a-glow with the glitter and flicker of Christmas decorations? Well good news, the cost of decorating your office is tax deductible as running costs of the office.
Well it wouldn’t be Christmas if I didn’t mention at least once that costs of entertaining customers or non-employees at your Christmas party is not deductible. VAT recovery on entertaining anyone other than staff is a blocked expense.
A donation that is freely given, and for which nothing is received in return, is outside the scope of VAT. Therefore, where an element of the purchase price for charity Christmas cards is optional and is clearly set out as a donation to charity, no VAT is chargeable on that part of the payment. In addition, Christmas cards donated to a charity for sale are VAT zero-rated when sold by that charity (or its trading subsidiaries). In all other circumstances, VAT is chargeable on the full price paid for charity Christmas cards.
For non-EU established businesses it’s the countdown to being able to submit their VAT refund claim for the year 2015…roll on 1 January 2016!
If it’s luxury it will be VATable – wine, champagne, port, chocolates and confectionary plus all the necessary party accessories such as crackers. However, with every rule there is always an anomaly and interestingly smoked salmon is VAT free, as are Christmas puddings.
As I near the end of my banter about VAT and Christmas you can guess I am now clutching at straws …..So what is the VAT liability of a partridge in a pear tree? This would be a mixed supply for VAT purposes as the pear tree would be zero-rated. Plants, bushes and trees that are normally used in the UK for the production of edible fruit are zero-rated and the partridge would be standard-rated as an ornamental bird. A mixed supply is one which has two or more constituent parts, each one with its own purpose. The issue is how to value the elements of the supply and there is case law on this issue. Of course, the difficulty would be overcome in this case if the partridge was intended to be eaten as this would change the liability to a zero-rated supply!
You can if you wish file your tax return on Christmas Day but you may not want to admit it publicly. On 25 December 2014, 1,773 taxpayers filed their UK tax returns online and, in total, 24,228 UK online returns were received between Christmas Eve and Boxing Day. There are reports of taxpayers even using PlayStations to file returns.
It’s the time for giving so do you know whether your tip or service charge is subject to VAT? The treatment of the money received depends on whether the money is freely given by the customer or whether it’s a compulsory charge by the business.
When a tip is given freely by the customer then the money is outside the scope of VAT. This is because the money is not part of the consideration for the supply. However in the case of Service Charges, if the Service Charge is a compulsory service which has been added onto the cost of the meal, then it is VATable at the same rate as the food/drink supplied. This applies even if the service charges are passed on fully to staff as bonuses.
…Well if you have read this far I applaud you! I think all that is left to say is from all of us at Abacus have a wonderful Christmas and a Happy New Year!
Samantha Snow, Client Services Manager
Abacus Corporate Services Limited