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Highlights from the broader tax news for the week ending 19 October 2022, including: new electronic refund system for UK VAT incurred by non-UK businesses; potential claims for incorrect HMRC advice on EMI options; and changes to HMRC’s guidance on the domestic reverse charge procedure.

HMRC opens electronic refund route for non-UK businesses claiming UK VAT

Businesses registered outside the UK who cannot, or should not, be registered for UK VAT, can make a refund claim for UK VAT incurred on business activities undertaken in the UK. For example, taking part in a trade fair.

To date, businesses making such a refund claim have been required to make the claim by post. However, non-UK businesses can now make the refund claim electronically using HMRC’s Secure Data Exchange Service (SDES). Businesses should email newcastle.oru@hmrc.gov.uk to request access, stating “SDES” in the subject field.

Businesses must have applied to be registered for the SDES by 30 November to make a claim by the 31 December deadline for claims for the period from 1 July 2021 to 30 June 2022. For businesses that miss this registration deadline or that do not wish to make a claim electronically, the claim can still be made by post.

Please note that the service is currently being tested and HMRC may stop it at any point. If HMRC needs to stop the service, the online guidance will be updated. This will not affect the claims that have already been submitted.

For more detail, please read Refunds of UK VAT for non-UK businesses (VAT Notice 723A)

Discretion clauses in EMI option agreements: incorrect advice from HMRC

HMRC has updated guidance in its Employee Tax Advantaged Share Scheme User Manual (ETASSUM54300) to clarify how the use of discretion clauses affect enterprise management incentive (EMI) options. HMRC is aware of a small number of cases where it may have provided advice on the use of discretion clauses which was not in line with the updated guidance. HMRC is attempting to contact taxpayers who it believes received incorrect advice that may have resulted in the deduction of income tax and national insurance contributions on the exercise of options.

Any taxpayers who think they may have received incorrect advice that resulted in the deduction of income tax and national insurance contributions on the exercise of options should email: shareschemes@hmrc.gov.uk and include ‘ERS Bulletin 46 Discretion’ in the subject line the email. Further information on the details to include and time limits for making a claim are set out in HMRC’s Employment Related Securities Bulletin 46 (October 2022).

Guidance updated on domestic reverse charge procedure

HMRC has updated its guidance on the domestic reverse charge procedure for specified goods and services.

The domestic reverse charge is a mechanism to counter VAT fraud involving particular goods, including mobile phones and computer chips, and specified services. Some supplies of these specified goods or services are excluded from the domestic reverse charge procedure.

In the recent change to its guidance, HMRC has removed the exclusion for “supplies for final consumption”. Supplies for final consumption will now be subject to the domestic reverse charge unless the supply is also covered by an alternative exclusion.

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