Archive for the ‘VAT’ Category

Have you made your key tax declarations?

Sunday, November 13th, 2016

There are some key declarations that you’ll need to make sure you’ve included.

Have you declared your credit card sales?

Where credit card sales have been omitted from business takings, HMRC are encouraging taxpayers to come forward and make a disclosure of the income that has been omitted to avoid incurring interest and penalties on top of the unpaid tax.

As you may be aware HMRC now receive information from third parties such as banks and credit card companies and will then match that data with business accounts, and will then open detailed enquiries if the figures appear to be inconsistent. They can go back up to 20 years and the more serious cases can lead to criminal prosecution.

If you have other undeclared income or gains that don’t relate to credit card sales, there are other HMRC disclosure facilities to enable you to bring your tax affairs up to date.

Please get in touch with us if you wish to discuss this as full co-operation can help minimise penalties.

Have you declared your overseas income and gains?

Where an individual is resident in the UK, he or she is generally taxable on worldwide income and gains whether or not it is brought back into the UK. Again, there can be significant interest and penalties on top of the unpaid tax if HMRC find out.

HMRC now exchange information involving savings and investments overseas with about 90 other countries and again match that data with individuals’ tax returns.

There is a special HMRC worldwide disclosure facility to allow taxpayers to bring their tax affairs up to date.

Note that there are special rules for individuals who are resident but not domiciled in the UK and those people’s tax status is likely to change from April 2017. Please contact us if you need advice on this matter.

 

Any questions

If you’d like to discuss any taxation queries you may have, contact us today.

VAT Flat Rate Scheme guidance updated

Wednesday, June 8th, 2016

HMRC have issued updated guidance on the operation of the VAT Flat Rate Scheme which allows taxpayers to calculate the VAT payable by applying a flat rate percentage to their VAT inclusive turnover, rather than netting off output and input VAT due on sales and purchases.

The revision in the guidance follows a number of unsuccessful visits to the First Tier Tribunal (FTT).  HMRC has issued a revised version of VAT notice 733 Flat Rate Scheme to update their guidance in accordance with the FTT decisions.

The previous version of the notice listed a number of trades and professions (at paragraph 4.4 of the guidance) and indicated the relevant sectors and percentages that these types of business should choose. These had a higher percentage than the 12% rate which applies to ‘business services not listed elsewhere’.

The FTT was critical of HMRC in their rigid interpretation of their own guidance. Although this section of the guidance has not been removed, taxpayers are now advised to ‘use ordinary English’ and choose the sector which ‘most closely describes what your business will be doing in the coming year’. The new guidance confirms that HMRC will not change a business’s choice of sector retrospectively as long as the choice was reasonable.

Queries on VAT matters

If you would like to discuss this with one of our Tax specialists then contact us on 01782 566101

 

 

Internet link: VAT Notice 733

Dividend Allowance and rates of tax

Monday, January 18th, 2016

Further details have been provided of the new rates of income tax on dividends and the new Dividend Allowance which will apply to dividends received on or after 6 April 2016.

The rates of income tax on dividends will be:

  •    7.5% for dividend income within the basic rate band (ordinary rate)
  •    32.5% for dividend income within the higher rate band (upper rate)
  •    38.1% for dividend income within the additional rate band (additional rate)

There will also be a new Dividend Allowance of £5,000 where the tax rate will be 0% – the dividend nil rate. The Dividend Allowance applies to the first £5,000 of an individual’s taxable dividend income and is in addition to the personal allowance.

Where an individual receives dividend income, from UK or non-UK resident companies, that would otherwise be chargeable at the dividend ordinary, upper or additional rate, and the income is less than or equal to £5,000, the dividend nil rate will apply to all of the dividend income. Where the dividend income is above £5,000, the lowest part of the dividend income will be chargeable at 0%, and anything received above £5,000 is taxed at the rate that would apply to that amount if the dividend nil rate did not exist.

In calculating the tax band into which any dividend income over the £5,000 allowance falls, savings and dividend income are treated as the highest part of an individual’s income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.

The following example illustrates how the new Dividend Allowance and rates will work:

Patricia has a salary of £40,500 and dividend income of £7,000 in 2016/17. Her total income is therefore £47,500. The total of her personal allowance and basic rate band comes to £43,000. Therefore part of her dividend income would be taxed at the upper rate were it not for the operation of the new dividend nil rate.

So £5,000 will be taxed at 0% and £2,000 will be taxed at the upper rate of 32.5%

If you would like advice on how the new dividend rules will affect you please do get in touch.

 

 

 

Making tax simpler for charities

Tuesday, October 13th, 2015

In September HMRC updated their detailed guidance notes which outline how the tax system operates for charities. The notes include how to apply to be recognised as a charity for tax and the operation of gift aid and payroll giving.

Over the last five years the government has brought in a range of changes to the tax system to make it simpler for charities to make the most of tax reliefs, so that more money can go to good causes.

Gift aid small donation scheme
Through the gift aid small donations scheme charities can claim a gift aid-style top-up on small donations eg a donation to a charity vendor in the street, up to a limit of £5,000 per year. This limit will increase to £8,000 per year from April 2016.

Charities online
Charities can submit claims for gift aid tax relief online which speeds up the claims process. 95% of charities now use this online system and the claims are processed within five working days.

HMRC outreach team
To date an HMRC outreach team has delivered face-to-face presentations to over 650 charities to spread awareness and help charities to successfully claim tax relief.

Community amateur sports clubs
The government has amended the law so that local sports clubs registered as community amateur sports clubs can receive corporate gift aid to help these clubs benefit their local communities.

Social investment tax relief
The social investment tax relief scheme has been created to encourage people to invest in social enterprises including charities. Individuals making an eligible investment will be able to deduct 30% of the cost of that investment from their income tax liability.

Lower IHT rate
If people leave at least 10% of the net value of their estate (its worth, minus any debt, other liabilities and reliefs) to charity, then 36% inheritance tax can be paid instead of 40%.

For more information visit the Government website

Taxing dividends from April 2016

Wednesday, September 9th, 2015

In the Summer 2015 Budget, George Osborne announced fundamental changes to the way in which dividends are taxed and HMRC have issued a factsheet setting out examples of how the new regime will work.

An extract from the HMRC Factsheet states:

‘From April 2016 you have to apply the new headline rates on the amount of dividends you actually receive, where the income is over £5,000 (excluding any dividend income paid within an ISA).

The Dividend Allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive.

Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.’

The changes will affect dividend receipts from 6 April 2016 however those who extract profits from their company as dividends may wish to consider whether to increase dividend payments before this date.

The table below shows a comparison between the current and prospective tax rates.

Dividend falls into :Basic rate bandHigher rate bandAdditional rate band
Effective dividend tax rate now (taking into account notional tax credit)0%25%30.6%
Rate from 6 April 20167.5%32.5%38.1%

 

For more information about the Dividend Allowance visit the Government website for their Fact Sheet – click here

New additions at Slaters Chartered Accountants

Monday, July 6th, 2015

Slaters Chartered Accountants Exterior Signage
Slaters chartered accountants have appointed new recruit Steve Mastin who joins the practice as a tax assistant. Steve’s appointment follows recent new starter Dave Johnson, who joined the practice as senior accountant, increasing the workforce to a team of 16. Based on London Road in Chesterton, Newcastle-under-Lyme, Slaters is currently planning to expand its existing premises to accommodate the growing team.

Steve’s background is in the legal profession, prior to joining Slaters he worked for six years at Manchester law firm Pannone, where he was responsible for managing the personal tax affairs and investment portfolios of more than 300 high-net-worth individuals.

Practice owner Steve Slater said: “Steve’s addition to Slaters’ tax department greatly increases our capacity to offer additional tax services, both personal and business, but it also means that we can provide our existing clients with more of a personal service.”

Senior accountant Dave is responsible for client management, including accounts preparation, company formations and accounts finalisation meetings. He joins Slaters from Stoke-on-Trent solicitors J S Williamson & Co, where he spent eight years as an account senior.

Steve Slater added: “We’ve already started to build a portfolio of clients for Dave to manage. As a qualified certified accountant and a senior member of the team, he brings a wealth of knowledge and experience to his new role, which will be of great benefit to his clients, making their accounts more efficient and ultimately saving them money.

Slaters Chartered Accountants Team Picture“It’s great to see the business grow and everyone at Slaters is looking forward to the new skills that both Steve and Dave can bring.

“I’m personally pleased with how the company is progressing and I’m excited to see our plans for expansion be put into practice later this year. The extended office space will allow us to take on further members of staff; in particular we are hoping to add to our payroll department and also the accounts team.”

 

Slaters Chartered Accountant specialise in supporting all aspects of owner-managed businesses from sole traders to groups of limited companies. Its range of services includes accounts, management accounts, bookkeeping, payroll, VAT and taxation. The team are dedicated to delivering excellent services through a friendly but professional approach.

VAT fuel scale charges and recovery on vans

Tuesday, May 12th, 2015

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2015.

VAT registered businesses use the fuel scale charges to account for VAT on private use of road fuel purchased by the business.

Please do get in touch for further advice on VAT matters.

Internet link: GOV.UK news

VAT recovery on car-derived vans and combi vans

HMRC have issued a list of makes and models of car derived vans and combi vans which VAT registered businesses can use to determine if the VAT paid on the purchase can be reclaimed as input tax.

The issue is that VAT will normally be claimable in full on the purchase of a commercial vehicle.  However if the vehicle purchased is a passenger car VAT is not recoverable unless it is used ‘exclusively for the purposes of a business’. Generally cars are therefore VAT ‘blocked’ and no input VAT is recoverable.

The VAT guidance states

‘Motor car means any motor vehicle of a kind normally used on public roads which has three or more wheels and either:

  1. a) is constructed or adapted solely or mainly for the carriage of passengers; or
  2. b) has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows’

Whether or not a vehicle is commercial is not specifically defined but instead the definition of a car excludes:

  • vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver
  • vehicles of more than three tonnes unladen weight;
  • caravans, ambulances and prison vans
  • special purpose vehicles such as ice cream vans, mobile shops, hearses, bullion vans and breakdown and recovery vehicles
  • vehicles constructed to carry a payload of one tonne or more.

Many car-derived vans are not cars for VAT purposes as they have no rear seats, have metal side panels to the rear of the front seats and a load area which is highly unsuitable for carrying passengers etc.

HMRC have issued the clarification due to developments in the car-derived van market as some vehicles with a payload of less than one tonne, have ‘blurred’ the distinction between cars and vans.

If you would like help with this or any other VAT issue please contact us.

Internet link: GOV.UK news

Lack of awareness of VAT

Tuesday, May 12th, 2015

According to research 36% of the UK’s smallest businesses are unaware of the rules governing VAT thresholds.

A third of the UK’s smallest businesses are unaware of the rules governing VAT thresholds, recent research has revealed.

This lack of understanding could mean that approximately 780,000 businesses are at risk of being fined by HMRC.

Meanwhile, according to the research, 9%% of small businesses intentionally limit their trading in order to avoid reaching the VAT threshold.

Under the current rules, where a taxable person (for example an individual, company or partnership) has VAT taxable turnover of more than the current registration threshold of £82,000 in a rolling 12 month period or where turnover is expected to exceed the registration threshold in the next 30 day period then they must register for VAT.

It is important to monitor turnover, as there is a penalty for late registration in addition to the tax payable.

 

Click here to view our Tax Tables.  If you’d like to discuss your VAT liability then Please contact us .

Internet links: icaew news   GOV.UK news

New business start ups

Wednesday, May 6th, 2015

 This posting lists a few (but not necessarily all) of the tax issues you will need to consider when you are planning a new business:

  1. Get you business registered with HMRC, failure to do this can lead to penalties. If you are incorporating your business, HMRC generally pick up your business registration via their links with Companies House. But if you are aiming to be self employed, as a sole trader or in partnership, you will need to notify HMRC within certain time limits of your commencement date.
  2. In similar vein, if you need to employ staff you must register as an employer with HMRC.
  3. If you intend to register for VAT from the date you commence to trade you can still recover input VAT that you have paid on certain setup costs that you expended prior to the official start date.
  4. If you intend to register your business for VAT could you take advantage of one of HMRC’s special VAT schemes? For example:
  1. Cash accounting: pay over the VAT you have collected on your sales when you are paid by your customer, rather than when you issue your sales invoices. There are turnover limits to registration, but this option can have a significant impact on cash flow if the amounts you are owed is more than the amounts you owe.
  2. Flat rate scheme: using this scheme you calculate the amount you owe as a fixed percentage of your turnover each quarter (including VAT). For smaller businesses, who do not have significant VAT inclusive costs, this scheme can produce additional profits and simplify the calculation of your quarterly returns.
  3. Annual accounting: using this scheme you send in one VAT return a year instead of the usual four. Also for nine months of the year you make agreed payments on account to cover VAT due. The scheme is simple to administer, only one set of calculations per annum, and the monthly payments help to spread the cash flow impact of payments made.
  1. Invest in tax planning. The UK’s tax code is one of the most complex in Europe. We recommend that you take tax planning advice before you start in business and again at certain key moments in your trading year. At the very least you should discuss your trading results with your advisor before the end of your first trading year. It always pays to see what planning options are available before you take action to implement change.

If you are about to set-up a new business please call, we offer a no obligation first appointment to prospective new clients.    

Reclaim VAT from mileage payments

Tuesday, May 5th, 2015

If you pay your employees a mileage rate for the business use of their personal vehicles, as long as you do not exceed the approved rates per mile, there is no necessity to report these payments to HMRC and the payment will not be treated as a taxable benefit. Employers and employees may also find the notes that follow instructive:

  1. The maximum tax free rates per mile for the use of a car are: 45p per mile for the first 10,000 business miles and 25p per mile thereafter.
  2. Employers are not obliged to pay these rates, but if they are exceeded the excess will need to be reported to HMRC as a benefit in kind.
  3. If employers pay less than the 45p (25p) rates the employee can obtain tax relief on the difference by making a claim to HMRC.
  4. Employers can reclaim the deemed VAT on the fuel elements of the mileage allowance payments by using the approved fuel rates. See table below.

 Advisory fuel rates per mile from 1 March 2015 are:

  • 1400cc or less: petrol 11p; LPG 8p.
  • 1401-2000cc: petrol 13p; LPG 10p.
  • Over 2000cc: petrol 20p; LPG 14p.

 Diesel rates are:

  • 1600cc or less: 9p
  • 1601-2000cc: 11p
  • Over 2000cc: 14p

 Example:

 David is paid for a 200 mile business trip at 30p per mile (his annual business mileage claims are well below the 10,000 maximum). He runs a 1500cc petrol car. He can make a claim to HMRC to deduct £30 mileage allowance from his taxable pay (200 x 15p).

 His employer can recover VAT input tax on the fuel element (200 x 13p) x 1/6 = £4.33.

 If you would like help to make back-dated claims to recover VAT if you are an employer; or make a claim if you are paid less than the 45p (25p) rate, please call for further advice.