Highlights from the broader tax news for the week ending 16 March 2022, including: guidance for businesses who continued to use the Lennartz mechanism; and a warning from HMRC about sharing personal information.
Business who continued to use the Lennartz mechanism may have overpaid
The Lennartz mechanism allowed business to recover the full VAT incurred on the purchase of goods used for business and private purposes (subject to any partial exemption restrictions). The business can then account for output tax on the private use of the goods. This was restricted from 22 January 2010 in cases where the purchased goods are used for business and non-business purposes. To ease the administrative and financial burden on businesses, HMRC allowed businesses the choice to continue using the Lennartz mechanism under the rules before 22 January 2010. When a business chose to do this, Finance (No. 3) Act 2010 provides that they continue to account for output tax on the non-business use for the economic life of the asset. Revenue & Customs Brief 6 (2022) highlights that as the standard rate of VAT increased from 17.5% to 20% in 2011, the non-business use of some goods may have been excessively taxed. HMRC’s VAT Input Tax Manual sets out how to calculate whether the fiscal balance point has been exceeded together with the procedure and time limits for making a claim.
HMRC warning about sharing personal information
HMRC has highlighted that criminals are attempting to obtain taxpayers’ Government Gateway logins and other personal details, enabling them to register for income tax self assessment and submit bogus tax refund claims. In some cases, fraudsters are targeting individuals on social media platforms asking to ‘borrow’ their identities. In return, the individual is promised a cut of the tax refund ‘risk-free’. However, the individuals risk involving themselves in tax fraud and having to pay back the full value of the fraudulent claim. Read more.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.