• Skip to main content
  • Skip to primary sidebar

DFC Accountants

Accountancy and Business Services in Cardiff, Wales

  • home
  • privacy statement
  • how we can help
    • accountancy
    • bookkeeping
    • VAT
    • payroll
    • taxation
    • share dealing losses
    • exit or succession planning
    • solutions for you
  • digital tax
  • meet the team
  • wealth management
  • advisory
  • news & updates
  • Login
  • contact us

VAT on contract termination fees – 28/01/2021

28th January 2021 by

On 10 September 2020 we explained HMRC’s revised view on fees paid on contract cancellation and terminations, as set out in Revenue and Customs Brief 12/2020. The shocking point was that the change in VAT treatment was to be retrospective to cover payments made in the last four years.

There was a lot of push-back from businesses and VAT specialists about this change in practice, and now HMRC has reversed its position. It has reissued Revenue and Customs Brief 12/2020 that now says the change in VAT treatment will apply from a date in the future, which has yet to be defined.

This leaves businesses with no clear guidance at all.

HMRC now say that if the previous policy (of the business) was to treat the payment to end the contract as outside the scope of VAT, then that treatment can be followed. Alternatively, if the business wants to treat the contract cancellation payment as further consideration under the contract, that’s fine too.

It’s a mess, and there is no HMRC ruling to say a particular payment should be treated in the same way by the customer and the supplier. We expect there to be further HMRC guidance issued very soon on the VAT treatment of payments for dilapidations, which are often made when a property lease comes to an end. Watch this space.

Written by the Tax Advice Network

Filed Under: Uncategorised

Primary Sidebar

Contact Us

02920 448 120
julie.burrows@dfcaccountancy.co.uk
Address:
2 Alexandra Gate
Ffordd Pengam
Cardiff, Wales, CF24 2SA

News & Blog

  • VAT payments – 11/02/2021 11th February 2021
  • Furlough calculations – 11/02/2021 11th February 2021
  • DRC Exemptions – 11/02/2021 11th February 2021
  • Scottish Budget – 04/02/2021 4th February 2021
  • MTD filing – 04/02/2021 4th February 2021

© 2021 DFC Accountants Ltd · Site by The Clever Web Company

Address: 2 Alexandra Gate, Ffordd Pengam, Cardiff, Wales, CF24 2SA
Email: julie.burrows@dfcaccountancy.co.uk