Ebay and Amazon pledge to assist with VAT compliance

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The growth in online e-commerce is an important part of the UK economy but has also created opportunities for abuse of the VAT system. HMRC have asked for the assistance of online market place companies to help them identify online trader who may not be complying with the requirement to register for VAT. Ebay and […]

VAT threshold when more than one business

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If related businesses are trading in parallel there is the possibility that HMRC could argue the turnover of each business should contribute to the same VAT registration threshold (£85,000 until at least April 2020) rather than each business separately.  This is known as “business aggregation for VAT purposes”.  Put simply rules prevent businesses artificially staying […]

VAT registration when changing entity type

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When a business changes entity, e.g. from a sole trader or partnership into a limited company, to what extent does the VAT status of the original entity affect the new one? The important point is whether the original entity was a taxable entity, this means that they were either already VAT registered or liable to […]

Does your accounts system comply with MTD for VAT?

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Making Tax Digital (MTD) for VAT is scheduled to start in April 2019 which means that your VAT information needs to be submitted to HMRC digitally. On 18 December 2017, HMRC published draft legislation together with examples of how the business account records might link with the HMRC computer in order to comply with MTD […]

Budget News – VAT Threshold

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The £85,000 VAT threshold will remain at the same level for two years pending further consultation. The Office of Tax Simplification has pointed out that this high limit (one of the highest in Europe) distorts competition and is a disincentive to business.

Reclaiming Input Tax on Director Entertainment

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The general rule is that if the entertainment is provided only for directors (or partners) of a business the VAT incurred is not input tax. This is because the goods or services are not deemed used for a business purpose. The VAT therefore cannot be reclaimed on the VAT return. However, where directors and partners […]

Reclaiming Foreign VAT On Expenses

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If your business has suffered VAT on expenses incurred in another EU country, for example overseas hotel and restaurant bills, then it is possible to reclaim the foreign VAT. The foreign VAT must not however be reclaimed on the UK VAT return but by using HMRC ‘s VAT online services system. You must claim by […]

Making Tax Digital

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Making Tax Digital will be mandatory for VAT purposes from April 2019. From then, businesses with a turnover above the VAT threshold (currently £85,000) will have to:    Keep their records digitally – for VAT purposes only    Provide their VAT return information to HMRC through MTD-compatible software. Other businesses will be able to adopt […]

Staying under the VAT threshold with multiple businesses

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A business is either registered for VAT or not registered for VAT.  A business cannot have some activities registered and some not. Similarly, the VAT threshold (2017-18 £85,000) cannot be avoided by artificially splitting a business into separate parts and arguing each part is under the threshold. However it can be possible for two people […]

VAT on e-books likely to be reduced

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Currently in the UK most physical books are sold with 0% VAT and most e-books are sold with 20% VAT.   Until Brexit has actually completed, the UK remains part of the EU wide VAT system.  It is therefore of interest that MEPs are to vote on a EU Commission proposal to reduce the rate of […]

Should you charge VAT when supplying a charity?

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Generally speaking VAT registered business have to charge 20% VAT on all supplies (sales) that they make.  For certain categories of supplies (e.g. energy saving for residential property) the reduced rate of 5% applies.  For yet other goods (e.g. most uncooked food) the zero rate applies. When supplying another VAT registered business, the VAT charged […]

New 16.5% VAT Flat Rate for service-based businesses

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It was announced in the Autumn Statement that from 1st April 2017, “businesses with limited costs, such as many labour-only businesses” will have their VAT flat rate percentage increased to 16.5%. HMRC refers to such businesses as “a limited cost traders”. For such businesses this will remove the benefit of being on the Flat Rate […]

Uber case – does this affect you?

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The crux of the recently highly publicised Uber case is the question of who is supplying the end client. Uber argued it was the drivers supplying the end client:  Client buys service (transport) from driver; driver buys service from Uber (logistics).  (Uber just an agent) The Employment Tribunal found that it was Uber supplying the […]

Do you need to register for VAT outside of the UK?

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If you supply goods or services to businesses outside of the UK you need to consider carefully your UK VAT position.  We have a factsheet VAT on International Transactions and would be happy to have a further discussion on this (contact us here). But having sorted out the UK situation, that is not the end […]

VAT reclaim on cars

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There is a general rule barring VAT claims for input tax relating to cars.  However two recent cases have highlighted that a company can in certain circumstances claim back VAT input tax on cars bought and used solely in the business.  This will be unusual and will be very much the exception to the rule. […]

Appeal those surcharges – better than 50:50 chance of winning!

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Default surcharges are penalties raised by HMRC mainly in relation to late VAT returns and payments.  These are raised by computer automatically based on facts.  When a real life HMRC officer gets involved and hears a traders case, more than half surcharges reviewed are cancelled.  If you receive any penalty, or indeed any letters from […]

VAT Implications of Employee Mileage Claims

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Where employers reimburse their employees 45p per mile for using their own cars they are able to reclaim input VAT based on the advisory fuel rates. In the case of a 1600cc diesel car that would be 1.5 pence per mile.  (9p x 20/120). Such a claim needs to be supported by a receipt from […]

Advisory Fuel Rates from 1 September 2016

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Advisory Fuel Rates from 1 September 2016 When calculating the VAT element of mileage payments, these rates apply from 1 March 2016. You can use the previous rates for up to 1 month from the date the new rates apply. Engine size Petrol – amount per mile LPG – amount per mile 1400cc or less […]

VAT input claims – sufficient evidence

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A recent case has reminded of the need to have proper purchase invoices in order to support VAT input tax claims.  In P Brookes v CRC, Upper Tribunal (Tax and Chancery Chamber), 6 April 2016 the taxpayer had claimed input tax on costs for which he had no purchase invoices.   The taxpayer then belatedly obtained […]

EC Sales List 31-Mar-16

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Don’t forget that if you have made any EC sales during the quarter ended 31 March 2016 that you need to report these to HMRC on an EC Sales List (ECSL).   You can submit your ECSL through HMRC Online Services here, it is possible that you may need to enrol for the service if […]

VAT thresholds

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The VAT registration thresholds increase by £1000 from 1 April: Registration threshold from 1 April 2016 = £83,000 (based on past 12 months or next 30 days) De-registration threshold from 1 April 2016 = £81,000 (based on expected turnover next 12 months) All figures are in our tax rates table. David Wilsdon

Hurry – buy whilst the VAT reduced rate lasts…

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The European Court have ruled that the UK blanket reduced VAT rate for energy saving materials is unlawful.  The UK government are likely to make restrictions to the reduced VAT rate rules in Finance Act 2016.  We don’t have further details yet.  Clearly if you are thinking of buying (or if you currently sell) reduced […]

Errors on VAT Returns

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If you make an error on a VAT return then you simply adjust for it on the next VAT return, providing the error does not exceed £10,000.   However, if HMRC were undertake a VAT investigation and found the error was caused due to not taking ‘reasonable care’ then they could still charge a penalty. […]

Mileage allowance – Reclaiming VAT

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If an employee or director uses their own vehicle for allowable business journeys the company can pay them a tax free allowance to compensate them for this. Reclaiming VAT If the company is VAT registered then they may be able to reclaim some input tax (VAT on purchases) in relation to this payment. VAT is […]

VAT de-registration cannot be back dated

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A recent First-tier tribunal has upheld HMRC’s position that a trader cannot ask to be de-registered from VAT from an earlier date. If you find you may be better off de-registering from VAT (usually because some or all of your customers cannot reclaim VAT) and you are below the VAT de-registration threshold (currently £80,000) then […]

Scam emails

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Always be suspicious of any email mentioning a refund from a “tax credit office agent”. Look out for links to fake version of the GOV.UK website. Never provide details or similarly sensitive information on the basis of an email request. HMRC’s director general of benefits and credits, Nick Lodge, HMRC, said the department never asks […]

Flat rate scheme: 1% first year deduction

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Remember that a business registering for the flat rate scheme for VAT is eligible for a 1% reduction from their normal rate for the first 12 months. Get in touch with us if you prepare your VAT returns yourself and would like some further information.

Choosing a category for flat rate schemes

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Choosing a flat rate scheme category Deciding on the category for “business activity” when registering for the flat rate scheme can prove tricky. One general approach to take is to consider how the business activity would be described to a person on meeting them for the first time using everyday words where possible, such as […]

VAT on transfers which are not going concerns

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A recent VAT tribunal case illustrates how important it is to take proper advice on a business sale. The Ryford Arms was sold by Pontardawe Inn Limited. The purchaser of the premises and goodwill of the Ryford Arms was a company known as Claden Limited; However the fixtures, fittings and equipment were acquired by the […]

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