Tag Archives: VAT

VAT refunds if your customer won’t pay

Many business owners tell us that far too much of their time is spent chase up customers on their invoices. When you’ve provided goods or services, you’re entitled to receive your money by the due date. But if they refuse to pay you for your work, or if your client goes bust, how do you account for VAT charged?

First, make sure you’re on the right VAT system for your business

 Cash Accounting Scheme

Does your company turn over less than £1.35million each year? Do you send over 30, 60, or 90-day invoices? If so, you should be on the cash accounting scheme.

If your business allows deferred payment when a customer places an order, you are always at risk of that customer not paying. This will have a damaging effect on your company’s cashflow because the money you’re spending is not being replaced by customers paying you.

With the standard VAT system (the so-called “accrual” scheme), you’ll have to include (and pay) the VAT you’ve charged on your invoices when you submit your VAT filing to HMRC. If your customer does not or cannot pay, you will have to wait months to receive a credit against the VAT you’ve paid on your bill because of the current rules regarding refunds.

The cash accounting system, unlike the standard VAT system, means you only have to pay VAT on invoices which have actually been paid. You don’t even need to ask HMRC to switch to this scheme – just talk to Kelsall Steele.

 

Flat VAT Schemes

HMRC launched the flat VAT scheme to make working VAT out simpler for the companies they collect from. The flat rate pulls in near exactly the same amount as the standard VAT scheme for HMRC but using it means working out your bill is a lot less time-consuming.

Under this scheme, you’re not able to claim back the VAT on goods and services your business buys (input VAT). Instead, you pay a pre-determined percentage of your turnover and VAT every quarter.

Say you invoice a customer for £1,000 + VAT, so £1,200 in total. You would keep 13% (£156 if that was your flat rate) of the invoice for your quarterly VAT bill.

On the flat rate VAT scheme, had this customer not paid you, you subtract the flat rate VAT element (£156) from VAT charged (£200) to work out your special allowance under the flat rate scheme, in this case £44. You then include it in your VAT account on the next return.

 

When can I make a claim?

To claim back against bad debt, certain criteria must be met.

If the invoice is more than 6 months’ overdue for payment, it has been officially written off in your accounts, and the output VAT on the invoice has been declared and paid to HMRC on a VAT return, you can make a claim.

Records to keep – even after your claim

Once you’ve submitted your bad debt claim, you still need to keep your evidence organized. HMRC may enquire about your request up to four years after you make your claim. Make sure you file:

  • A copy of the VAT invoice you’re claiming relief on
  • How much you are writing off as bad debt
  • The VAT on which you have made the claim
  • The total amount of VAT you charged on the sale
  • The customer’s name
  • The invoice number
  • The invoice date
  • Any part-payment received, shown separately on each invoice
  • The VAT period you claimed relief in
  • The VAT period in which you originally paid the VAT

What happens if your customer eventually pays?

If you’ve already received your VAT refund and then your customer finally pays you what they owe, you’ll need to let HMRC know.

Just put the total you’re repaying in Box 1 of you VAT return. If your customer pays you the full amount, you pay back the VAT to HMRC in full. For a part payment, you would need to pay the VAT back on the part payment.

Talk to your accountant

If you want to speak to us about all aspects of credit control and VAT, call us at any time on 01872 271655 or email enquiries@kelsallsteele.co.uk.

VAT Flat Rate Scheme – Limited Cost Business

Are you using the VAT Flat Rate Scheme? If so the new rules could affect you!

From the 1st April 2017 HMRC have changed the rules. From this date if you are using the VAT Flat Rate Scheme you have to check for each VAT period to see if you are a ‘Limited Cost Business’.

Depending on whether you fall into or out of the criteria for the given period, will depend on whether you will have to use 16.5% or your normal Flat Rate Scheme percentage. It may be that you will fluctuate between the 16.5% and the normal rate each quarter.

You will be classed as a limited cost business if the amount you spend on relevant goods including VAT is either:

  • less than 2% of your VAT flat rate turnover
  • greater than 2% of your VAT flat rate turnover but less than £1,000 per year, this is time apportioned, if you prepare quarterly returns the amount is £250

For each period you will need to calculate:-

  • your turnover
  • the cost of goods, these are purchases which are exclusively used for business use,

There are some types of expenses which cannot be included in the costs these goods include:-

  • vehicle costs including fuel, (unless you’re operating in the transport sector using your own, or a leased vehicle)
  • food or drink for you or your staff
  • capital expenditure
  • goods for resale, leasing, letting or hiring out if your main business activity doesn’t ordinarily consist of selling, leasing, letting or hiring out such goods
  • goods that you intend to re-sell or hire out, unless selling or hiring is your main business activity
  • any services

If you’re a limited cost trader this means that you may pay more VAT than you do on standard accounting. If you would like us to check to make sure the Flat Rate Scheme is still appropriate for you or if you would like further advice please get in touch.

Self-employment Business start-ups – FAQ

Self Employment FAQ

Starting-up in business, becoming self-employed, can be a bit of a daunting process, especially if you are not sure of some of the steps you need to go through. There are a few ‘hoops’ you need to jump through so we have put together a few basic pointers for those who are thinking of making that move in self-employment.

We can help you at every step of the way, so please feel free to contact us if there is anything you would like further information on or help with.

  1. Do I need to tell HMRC?
    • You will need to register as self-employed with HMRC and the easiest way to do this is online at gov.uk. Tell them as soon as possible after your self-employment begins.
  2. What will they ask me?
    • Your National Insurance number, address, date of birth and details of the business including nature of the business, date it began trading and your business address. If you have previously registered as self-employed you would have had a 10 digit unique taxpayer reference number. They will ask for this if you have it.
  3. Do I need to register for VAT?
    • You only need to register for VAT when your sales exceed £83,000 in a rolling 12 month period. However, you may wish to voluntarily register to enable you to claim back the input VAT on your expenses. This does mean you have to charge output VAT on your sales so it’s only advisable to voluntarily register if this will not affect your competitiveness e.g. if your customers are VAT registered and can reclaim the VAT you charge them.

Don’t forget that if you become VAT Registered you will need to file VAT Returns online with H M Revenue & Customs. You will need to create a Government Gateway account and register to file VAT Returns online. Make sure you allow enough time for this process before your first VAT Return becomes due!

  1. Do I pay myself a salary?
    • No, the money you draw from your business is not classed as a salary and is not a business expense. You do not pay tax on the money you draw from the business, only on the business profits. You can of course employ other people and pay them a salary which is a business expense.
  2. When do I pay tax?
    • Your first tax return will run from the day you start self-employment up to the following 5 April. Any tax will be due on the 31 January following that e.g. if you start self-employment on 1 June 2016, your first tax return will run to 5 April 2017 and if you have made a taxable profit, you will pay tax on 31 January 2018.
  3. Do I need to register for national insurance?
    • When you register as self-employed you will automatically be registered to pay national insurance. If your income is high enough, you will pay national insurance at the same time as any income tax.
  4. What records should I keep?
    • You need to keep records of your business income and expenditure. This will include bank statements, sales invoices and purchase invoices, details of the entries on your VAT Return and payroll records if you employ people. Keep records for at least 5 years from the 31 January following the tax year e.g. you must keep your records for the year ended 5 April 2016 at least until 31 January 2022.
  5. What happens once I’ve registered as self-employed?
    • HMRC will issue you with a unique taxpayer reference number and send you a notice to complete a tax return. You will need to enter on this tax return all your business income and expenditure to calculate your taxable profit and any tax that may be due. The tax return needs to be filed by the 31 January following the tax year end date (e.g. tax returns for the year ended 5 April 2016 are due to be filed by 31 January 2017).
  6. Aren’t things changing soon?
    • Yes! Over the next few years the Government’s plans to ‘make tax digital’ (MTD) will be rolled out and, depending on the size of your business, you may have simpler rules to follow for reporting your income and expenditure. You will also have to report more regularly, probably 4 times a year. More details will follow as they come through!

Pre-Registration VAT Expenses

Pre-registration claims for VAT – looking back

If you have recently become VAT registered and are about to prepare your first VAT Return, don’t forget to look back at your previous expenditure to see if there’s any pre-registration expenses that can be claimed for.

If you have purchased goods in the last 4 years that you still have in stock at the date of registration, then you can enter these on your VAT Return and re-claim the input VAT paid. Also, if you have purchased assets in the last 4 years, e.g. machinery and equipment, that you still hold at the date of registration , then you can re-claim the input VAT paid on these.

You can also re-claim input VAT on services that you received within the 6 months prior to registration. However they must relate to the ongoing business and not to completed projects or to goods that were used up before registration e.g. you cannot claim for repairs to a machine that was sold before you registered for VAT.

You need to have the invoices on record to be able to back up your claim in case H M Revenue & Customs were to query it.

Don’t forget that you need to register online to be able to file your first VAT Return. You can do this using your government gateway account.

If you have any queries with respect to preparing or filing your VAT Return, don’t hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk

Personal use of Goods or Services

Taking it yourself or giving it away?

If you run a business you may well use some of the services or goods that you supply, for yourself, rather than selling them on to customers. Although this is a personal transaction, for VAT purposes, it could well be classed as a ‘sale’ that you may have to charge VAT on.

If you are VAT-registered and you take for personal use some of your business stock, materials, finished goods or business assets (e.g. computers or tools), then this is a taxable supply for VAT purposes. This also applies if you temporarily use your business assets personally or lend them out to, say, an employee for their private use.

The VAT to charge depends on what you received in exchange for the personal use of goods or services. If you receive money, then you class the amount received as the VAT-inclusive sale price. You then calculate the VAT due at the relevant VAT-rate (20%, 5% or 0%).

You may receive part-money, part-goods, so you then establish a value for the goods, and again, class the total value as the VAT-inclusive sale price.

If you don’t receive anything for the goods or services then you calculate the VAT based on the value of what you’ve supplied. This value is the VAT-exclusive sale price and you calculate VAT on this amount at the relevant rate.

You can however give away a business asset as a gift without any VAT arising if the total cost of all the gifts made to that person in the year is £50 or less.

If you lend out a business asset or use it personally but the business does not receive any money in return, then you enter it on your VAT Return as a sale at the value of the cost to your business of lending it out.  The cost will be the annual depreciation of that asset (the amount it reduces in value each year), pro-rated for the amount of time it was lent out for non-business use. This will be the VAT –exclusive sale price and VAT will be due on that amount at the relevant rate.

It is more difficult to establish a cost value for the use of services that you make available for personal use. There is no hard and fast rule in establishing this, but you will need to use a method that is fair and reasonable, reflecting the cost to the business of providing this service.

If you use your own business goods or services for the business itself instead of selling it on to customers, there will be no VAT due as this is not classed as a taxable supply. There are a few exceptions to this however, for example, using your own labour to work on certain non-domestic buildings or changing the use of cars that you have claimed input VAT on.

If you think any of these rules may apply to you or if you would like any help in preparing your VAT Returns, please don’t hesitate to contact us on 01872 271655

VAT: Invoice Discounts – The Update

Does it pay to be prompt  – the update

It is quite common for suppliers to offer invoice discounts to their customers if they pay promptly by a certain date. It’s a great idea from a cash flow point of view, but how does it work for VAT purposes? The rules were changed on 1st April 2015 and a few months in, how are businesses coping from a practical point of view?

Previously, the VAT was calculated with the assumption that the customer would pay early and take the discount. For example, if an invoice was raised for £100 + VAT, but the supplier offered a 10% prompt payment discount, then the VAT would not be £20 (£100 @ 20%) but instead it would be £18 which is the VAT on £90 (£100 less 10% discount). If the customer didn’t pay in time, then they would have to pay £100 + VAT of £18, as the VAT was not adjusted if the discount was not taken up.

Changes to the rules

However, as of April 2015, the supplier has to include VAT based on the full amount of the invoice, and if they offer a discount which is taken up by the customer, they will then need to adjust for the VAT accordingly.

One way of doing this is to issue a credit note for the amount of the discount with the corresponding VAT element. For example, the supplier will issue an invoice of £100 + VAT of £20 (£100 @ 20%). If the customer takes up a 10% discount, they will then pay £108 (£90 + VAT of £18) leaving a shortfall of £12. The supplier will then need to issue a credit note of £10 + VAT of £2 (£10 @ 20%) to balance the ledgers.

The overall effect of these invoices and credit notes, is that 20% VAT will be charged and paid on the invoice, regardless of whether any discount is taken up.

Alternatively, if they do not want to send out credit notes they can put additional information on their original invoice. H M Revenue & Customs recommend the following wording :

“A discount of X% of the full price applies if payment is made within Y days of the invoice date. No credit note will be issued. Following payment you must ensure you have only recovered the VAT actually paid.”

It is also recommended that the invoices provide details of the discounted price and the VAT on the discount price.

If the discount is taken up, the supplier will have to adjust their ledgers accordingly to ensure that they only declare the amount of VAT that is actually paid over.

It is very important that all businesses are diligent in keeping the relevant paperwork with respect to these transactions so that it can be clearly seen that the correct amount of VAT has been entered on their VAT Returns.

If you would like to know more about how this affects you, please don’t hesitate to contact us or email Lydia on Lydia.williams@kelsallsteele.co.uk.

Paying HMRC

A question we get asked quite regularly is “How do I pay HMRC?”, below is a summary of the key ways of paying HMRC for Corporation Tax, VAT and Personal Tax:

Corporation Tax

If your taxable profits are less than £1.5m HMRC will expect you to pay the Corporation Tax in one go, the deadline for this is 9 months and 1 day after the end of your accounting period. If the payment is late then HMRC will charge you interest based on the amount of Corporation Tax owed.

  • At the Post Office – For payments up to £10,000 you can pay at the Post Office by debit card, cash or cheque made payable to ‘Post Office Ltd’. You will need a payslip which HMRC will send to you after we have electronically submitted your Company Tax Return.
  • Online or telephone banking – There are two bank accounts you can use to pay your Corporation Tax to HMRC, the payslip which HMRC send you will detail which account to use, but if in doubt use Cumbernauld. As the reference, use your 17 character Corporation Tax reference which can be found from the payslip HMRC will send you.
Account Name Sort Code Account Number
HMRC Cumbernauld 083210 12001039
HMRC Shipley 083210 12001020
  • Online by Debit or Credit Card – You can pay directly to HMRC online using the following link. You will need your 17 character reference number which can be obtained from the payslip HMRC will send you. It is worth noting that HMRC will charge you 1.4% of the payment value if you pay by Credit card.

If your taxable profits exceed £1.5m HMRC will expect quarterly payments.

Value Added Tax – VAT

The deadline for paying your VAT is normally the same as the filing deadline, being 1 month and 7 days after the end of the VAT period. There are several ways to pay your VAT:

  • Direct Debit – The easiest way to pay your VAT is to set up a Direct Debit, once you have submitted a VAT return HMRC will automatically set up to take the payment owed, or if you are due a repayment this will be made directly into your bank.
  • Online or telephone banking – You can make your VAT payment using online banking or telephone banking using the account details just below. The reference you will need to include will be your 9 digit VAT registration number which can be found on your VAT registration certificate.
Account Name Sort Code Account Number
HMRC VAT 083200 11963155
  • Bank or Building society – You can pay at your local bank or building society, however you will need order paying-in slips from HMRC, these can take up to 6 weeks to arrive. Payment can be made using cash or a cheque made payable to ‘HM Revenue & Customs only’ followed by your 9 digit VAT registration number.

Personal Tax

Payments for personal tax are generally required to be made to HMRC twice a year. On 31 January you are required to pay the prior year’s tax (Balancing payment), and also the first payment on account for the year ahead. On 31 July you need to make your second payment on account.

  • At the Post Office – For payments up to £10,000 you can pay at the Post Office by debit card, cash or cheque made payable to ‘Post Office Ltd’. However, you will need to still be getting paper statements from HMRC and also have the paying-in slip which HMRC sent you.
  • Online or telephone banking – There are two bank accounts you can use to pay your personal tax to HMRC, your bill should tell you which account to use, but if in doubt use Cumbernauld. As the reference use your 11 character Unique Taxpayer Reference (UTR) followed by the letter “K” which can be found on your tax return or your HMRC online account.
Account Name Sort Code Account Number
HMRC Cumbernauld 083210 12001039
HMRC Shipley 083210 12001020
  • Online by Debit or Credit Card – You can pay using your credit or debit card using the following links. You will need your 11 character Unique Taxpayer Reference (UTR) followed by the letter “K” which can be found on your tax return or your HMRC online account.

Pay HMRC online via Debit Card

Pay HMRC online via Credit Card  – (Incurs 1.4% fee)

  • Post a cheque – You can post a cheque to HMRC, the cheque will need to be made payable to ‘HM Revenue & Customs only’ followed by your Unique Taxpayer Reference (UTR). You will need to send the cheque with a payslip, if you did not receive a payslip from HMRC you can create your own payslip online.

The cheque and payslip should not be folded or fastened together, they should then be sent to the following address:

HM Revenue & Customs
Bradford
DB98 1YY

VAT MOSS (Mini One Stop Shop)

VAT MOSS

Changes to the VAT law affecting the supply of digital/electronic services (to non-business customers) came into effect on 1 January 2015. As a result of these changes, VAT is now applicable on the supplied services at the rate applicable in the consumers home country.

UK businesses who fall within the scope of these rule changes are required to register for VAT, regardless of whether their turnover is above or below the £81,000 threshold. Once registered, the business can enrol via the HMRC Online portal for the VAT MOSS service, enabling them to account for and pay over the VAT collected on cross-border sales.

Despite initial fears, those businesses whose turnovers fall under the £81,00 threshold will not have to charge VAT to consumers based in the UK. On registration for the service, they should select the ‘Supplies of Digital Services (below UK VAT threshold)’ option. They will however still need to complete and file VAT return alongside the the MOSS return each quarter.

Will the changes affect me?

The new rules will apply to UK businesses who meet the following conditions:

  • supply digital services to consumers in another EU member state.
  • those services supplied are to private consumers
  • there is a charge for the supply of the service

What is the definition of a ‘digital service’?

The broad term ‘digital services’ can be further broken down into three categories, those being broadcasting, telecommunications and e-services. Although not exhaustive, the following examples give an idea of what is covered in each category.

Broadcasting: The supply of audio or audio-visual content to the general public, for simultaneous listening or viewing; live streaming of a broadcast at the same time as radio or television transmission.

Telecommunications: Fixed and mobile telephone services including videophone, VoIP (voice over Internet Protocol); Call management services such as call waiting / voicemail, caller ID; Paging services; Internet access

E-Services: The supply of test, photos, screensavers, ebooks (PDF) or other digitised documents; Supply of music, film or games, gambling or programmes on demand; Online magazines; Web supply or hosting; Advertising space on a website; software or software updates.

Can I reclaim the VAT on business expenses?

Yes, you can – but only on those expenses which are wholly or partially attributable to the sale of your digital services to cross-border consumers. Any reclaim for VAT on these expenses should be entered on your VAT 100 UK VAT submission. This is separate to your EU sales which will be recorded on the VAT MOSS form.

When are the VAT MOSS returns due for submission?

The VAT MOSS returns are calendar quarter only. If you are already registered for VAT in the UK then this may differ from your current VAT return quarters. If you will be registering for VAT and MOSS at the same time and fall under the threshold, HMRC will ensure your VAT and MOSS quarters are aligned. The quarters and submission/payment deadlines are as follows:

  • 20 April for quarter ended 31 March
  • 20 July for quarter ended 30 June
  • 20 October for quarter ended 30 September
  • 20 January for quarter ended 31 December

Where can I get further information?

You can find more information on the VAT MOSS from the gov.uk articleRegister for and use the VAT Mini One Stop Shop‘ and also from the HMRC website.

We are here to help, if you would like further clarification on the changes, if you’re uncertain whether you’re affected, or if you just want some general advice on the subject please don’t hesitate to contact us on enquiries@kelsallsteele.co.uk or call us on 01872 271655

VAT: Invoice Discounts

Does it pay to be prompt?

It is quite common for suppliers to offer discounts to their customers if they pay promptly by a certain date. It’s a great idea from a cash flow point of view, but how does it work for VAT purposes?

Currently, the VAT is calculated with the assumption that the customer will pay early and take the discount. For example, if an invoice is raised for £100 + VAT, but the supplier offers a 10% prompt payment discount, then the VAT will not be £20 (£100 @ 20%) but instead it will be £18 which is the VAT on £90 (£100 less 10% discount). If the customer doesn’t pay in time, then they will have to pay £100 + VAT of £18, as the VAT is not adjusted if the discount is not taken up.

Changes to the rules

However, as of April 2015, the paperwork side of things is going to be a bit more time-consuming. The supplier has to include VAT based on the full amount of the invoice, and if they offer a discount which is taken up by the customer, they will then need to issue a credit note for the amount of the discount with the corresponding VAT element. For example, the supplier will issue an invoice of £100 + VAT of £20 (£100 @ 20%). If the customer takes up a 10% discount, they will then pay £108 (£90 + VAT of £18) leaving a shortfall of £12. The supplier will then need to issue a credit note of £10 + VAT of £2 (£10 @ 20%) to balance the ledgers.

The overall effect of these invoices and credit notes, is that 20% VAT will be charged and paid on the invoice, regardless of whether any discount is taken up.

Any suppliers who currently do offer prompt payment discount will have to ensure that as of 1 April 2015, any software they use to generate invoices will correctly calculate the VAT, reflecting the change in the rules. They will also have to be prepared to take on the additional administrative burden of ensuring credit notes are sent out to prompt payers.

If you would like to know more about how this could affect you, please don’t hesitate to contact us or email Lydia at Lydia.williams@kelsallsteele.co.uk.

VAT and Members’ Sports Clubs

HMRC have recently issued updated guidance on the VAT treatment of sporting services provided by non-profit making bodies in light of a decision by the Court of Justice of the European Union (CJEU) regarding a case brought by Bridport & West Dorset Golf Club.  The benefit of this decision is not restricted just to golf clubs, rather it applies to all non-profit making members’ sports clubs.

The issue concerned the fact that under UK law members’ fees were treated as exempt from VAT, but fees charged to non-members for use of the sporting facilities were liable to standard-rated VAT.  The CJEU has now decided that this distinction was incompatible with European law, and that it is immaterial whether the sporting services are provided to members or non-members.  All charges should therefore be, and have always been, exempt from VAT.

HMRC have now accepted the Court’s decision and the extended scope of the VAT exemption, and are amending UK legislation to reflect it.  More importantly, they are also now processing claims from members’ clubs for the repayment of VAT that has previously been accounted for in respect of non-members’ fees.  There are still a number of technical hurdles that need to be addressed before the monies will be repaid, and we would be happy to assist any club affected either with the making of a claim or with securing repayment of an already submitted claim.

If you would like further information on this subject, or help on submitting a claim, please don’t hesitate to contact a member of our team on 01872 271655

VAT Accounting Schemes

Keep it simple

In order to simplify the VAT preparation process, HM Revenue & Customs do allow several alternative VAT accounting schemes for certain business types. If you are eligible, they could save you time and money.

A summary of the main alternative VAT accounting schemes are as follows :

Annual Accounting Scheme

If your estimated VAT taxable turnover for the following 12 months does not exceed £1.35million, you are not part of a group, you have not used the scheme within the last 12 months and you are up to date with your VAT payments then you will be eligible for this scheme.

Instead of completely quarterly VAT Returns, you can complete just one annual Return. Throughout the year, you make interim payments (either 9 monthly or 3 quarterly) based on your previous years actual VAT payments. When you submit your VAT Return, you will then make a balancing payment or receive a balancing refund.

The main benefit of this scheme is to aid with cash flow management.

Cash Accounting Scheme

If your estimated VAT taxable turnover for the following 12 months does not exceed £1.35million and you are up to date with your VAT Returns and payments then you can apply to use this VAT scheme.

Instead of entering items on your VAT Return at the date they have been invoiced, you only enter them at the date they have been paid or received by you. There are some exceptions to this, for example, assets bought on hire purchase or lease purchase must still be entered at the invoice date.

The main benefit is again a cash flow management one, as you only have to pay over output VAT when you have received the cash from the customer. If the customer never pays you, you will never pay over the output VAT.

Flat Rate Scheme

If your VAT taxable turnover is less than £150,000, you are not part of a group and you haven’t used the scheme within the last 24 months then you will be eligible to apply.

Instead of declaring output VAT on your taxable sales and claiming input VAT on your purchases, you can simply pay over a fixed percentage of your total VAT inclusive turnover each quarter. Each business type has a different HMRC approved percentage rate, (e.g. hotels would pay over 10.5% of their total income), but newly VAT registered businesses can reduce the percentage by 1% for the first 12 months. This percentage must be applied to your total sales, which would also include zero-rated and exempt sales. If a large proportion of your sales are zero-rated or exempt, i.e. you do not have to charge VAT on them under the standard VAT rules, then this scheme may not be beneficial for you.

You cannot claim back the input VAT on your purchases with the exception of capital asset purchases with a VAT-inclusive cost of £2,000 or more.

The main benefit of this scheme is to reduce the burden of the paperwork required to complete a standard VAT Return and for some businesses, it could significantly reduce the overall VAT payable to HM Revenue & Customs.

HMRC’s website contains a list of the approved Flat Rate Scheme percentage rates you would have to charge if you changed to the Flat Rate Scheme.

Contact Us

If you think you could benefit from using any of these schemes, or would like any further information, please do not hesitate to contact us and we will be happy to help.

VAT Refunds on Self Builds or Conversions

If you are building a place to live or converting a building into a dwelling then you may be able to claim back the VAT you pay on some of the building materials and conversion services. You can claim this VAT refund even if builders are doing the work for you.

This will also apply if you are finishing a partly completed building e.g. if you buy the shell of a building and then have it fitted out. It has to be self-contained accommodation though so a ‘granny annexe’ would not be eligible. For a conversion to qualify, it must be the conversion of a building that is non-residential or at least has not been lived in for the last 10 years.

You can only claim for building materials that are incorporated into the building and for the services of a builder, not for professional costs like architects and surveyors or even for the hire of equipment. There are specifically excluded items that you cannot claim for e.g. free-standing or integrated appliances, consumables, audio equipment and electronic components for garage doors and gates.

You must make your claim after the work is completed, preferably when you have your completion certificate from the local planning authority and from the date of that certificate you have three months to make your claim.

You will need a VAT invoice for every item in your claim, also evidence of completion e.g. the certificate or a letter of completion from the local authority and copies of planning permission. You can download the relevant forms for a VAT reclaim from the HMRC website.

If you would like more information or help with establishing if your building work will qualify or on how to make a claim, contact Lydia Williams on 01872 271655 or lydia.williams@kelsallsteele.co.uk

VAT – Provision of Storage Facilities

HMRC have recently highlighted a change in the VAT treatment of the provision of storage facilities that took place on 1st October 2012. If you let out space for storage to individuals or businesses then you may need to check that you are using the correct VAT treatment.

Previously, if you had a building that was not opted to tax and you let out part of that building for storage, then you would not have to charge VAT on the supply of that storage. However, all other storage providers, e.g. traditional removal companies, had to charge VAT at the standard rate (currently 20%). In order to ‘level the playing field,’ from 1st October 2012 onwards, all providers of storage facilities have to charge VAT at the standard rate regardless of whether their property is opted to tax or not.

An example of an individual who may be affected by these changes would be a farmer who is currently letting out part of their farm buildings. However, if the space is being used to store live animals then it would remain exempt from VAT, as live animals are not classed as ‘goods’ and these rules only apply to the storage of ‘goods.’

There are a few other situations to watch out for as it may be that you let out space to someone who uses it only partially for storage and partially for other uses (e.g. office space). You have to look then at what the main use of the facility is. Using the office space as an example, if the office space is minimal and the majority is used for storage, then the whole supply still remains standard-rated. However, if you are renting to a retailer who has a shop and a storage area, although the storage area may be larger in size than the shop, it is clear that the premises are being used primarily for retail, not storage, so as far as the VAT is concerned, the treatment would not change (i.e. would be exempt unless the property is opted for tax).

The HMRC guidance emphasises the fact that it is the owner of the facilities who needs to establish the correct VAT treatment. You need to be aware of how your customers are using your facilities and they will need to keep you informed if they change the way they use it.

If you have any questions on this, or are unsure if this applies to you then please contact Accounts Manager Lydia Williams on 01872 271655 or e-mail lydia.williams@kelsallsteele.co.uk