29 January 2020

Q&A February 2020

Q. I’ve received a refund of the PPI premiums I paid on top of my mortgage. Do I need to declare this sum on my tax return?

A. The refund of payment protection insurance (PPI) premiums should not be included on your tax return as it is a repayment of a fee that you were incorrectly charged. However, the bank will have also paid you 8% interest on the PPI refund, and that interest should be declared on your tax return, just as if it was interest paid on a regular savings account. Some banks deducted 20% tax from the interest element of the refund, others did not, so you should check the documents you received with the refund to see if your payment had tax deducted from it or not.

Q. I have started sketching, and I occasionally sell prints of my drawings through my website. Do I have to charge VAT when I sell to overseas customers? This is a tiny part of my income and I am not registered for VAT in the UK.

A. The requirement to charge VAT to the overseas non-business customers depends on exactly how you supply your art, and where those customers are based. If you receive an order through your website, and send out a paper print, that is not an electronic service, so no VAT applies.

If you send out your prints as PDF files or similar electronic images attached to an email, which is an electronic service, you may have to charge VAT at the rate that applies in the EU country where your customer is located. However, that VAT is only chargeable if the artwork is automatically delivered over the internet (where there is little or no human intervention in the delivery process). As you sell only a few prints to overseas customers, you will probably personalise your email to each customer. That human intervention removes requirement to charge VAT to the overseas customer.

You should seek advice about your specific circumstances before taking any action. Contact us if you have any questions or, if you would like to sign up to our monthly newsletter, please complete the form below or sign up here.

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