Mail Order Retailers – Have you been accounting for your VAT Correctly?
HMRC has released Revenue and Customs Brief 5 (2018) to explain its policy in respect of goods supplied on approval. This follows their earlier guidance (VRS9150) in which they acknowledge their statement that mail order retailers “normally supply goods on approval terms” is incorrect, and this updated Brief explains that this should instead explain that such companies maysupply goods on such terms but it is often not the case. This is important when working out when to account for VAT on your sales.
The updated guidance (found here) explains how different VAT liabilities may occur. For instance, in a single supply of delivered goods, the delivery is ancillary to the supply of the goods. Therefore the liability of the delivery charge follows that of the goods being supplied. Where goods are supplied on approval, the delivery service is not ancillary and so, technically, could have its own VAT liability different to that of the goods being supplied.
Where businesses have incorrectly treated goods supplied as being on approval terms, the VAT may not have been accounted for correctly. HMRC has therefore allowed a 3 month transitional period (from 18th June 2018) by which businesses must change their accounting systems to account for VAT on these supplies correctly and at the right time. If you would like to discuss the impact that this may have on your business then please get in touch with a member of the Centurion team.
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