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HMRC has updated the following three VAT toolkits:

  • VAT partial exemption
  • VAT input
  • VAT output.

The toolkits help complete client returns and all toolkits have been updated to include a new facility that allows reference notes to be added and saved or printed.

The toolkits are designed to help reduce the most common errors that HMRC comes across and are aimed at tax agents and advisers. Each toolkit has three key elements and can therefore be used in a variety of different ways:

  • a checklist
  • explanatory notes
  • cross reference.

Though not mandatory to use they are best practice to use, especially when you come across a more unusual return or a return that you infrequently complete. They can also be used as a refresher and the law and tax treatment changes due to litigation and finance acts. HMRC hopes that the toolkit will help improve tax compliance.

The toolkits are not a comprehensive guide to all errors in a particular area of tax as only the most common errors are covered, nor do they cover tax avoidance and deliberate attempts to avoid tax; this is covered by HMRC’s normal compliance procedures.

Using the toolkits can also help with penalties, where a taxpayer takes reasonable care when submitting a return any potential penalty can be reduced to zero. Appointing an agent demonstrates reasonable care has been taken however this does not absolve a business of their tax responsibility. In determining whether a business has taken reasonable steps HMRC would look at the individual facts.

HMRC has a whole host of toolkits:

Individual, business and corporations

  • business profits
  • capital allowances for plant and machinery
  • capital gains tax for land and buildings
  • capital gains tax for shares
  • capital v revenue expenditure
  • chargeable gains for companies
  • company losses
  • directors’ loan accounts
  • expenses and benefits for employment
  • income tax losses
  • national insurance contributions and statutory payments
  • private and personal expenditure
  • property rental
  • small profits rate and marginal relief
  • VAT input
  • VAT output
  • VAT partial exemption.

Trusts and estates

  • capital gains tax for trusts and estates (supplement)
  • inheritance tax
  • trusts and estates.

View the toolkits now

Article contributed by ACCA