HMRC has published Revenue & Customs Brief 25/10 announcing the change of policy. Following representations from charities that pay per click advertising should be zero-rated HMRC has reviewed its approach and concluded that it should change the VAT treatment of pay per click advertising supplied to charities.

The Revenue & Customs Brief invites businesses that have supplied pay per click advertising the charities to make claims for overpaid VAT. HMRC say that claims will only be accepted for supplies made in the last four years and subject to the unjust enrichment rules. This means that claims can be made for supplies made in the last four years, i.e. back to 2006 at the time of writing, and the VAT refunded to the charities from which it was collected.

Action to take

Suppliers of pay per click advertising

You should seek confirmation from your charity clients that they qualify for the zero-rating of advertising services using the form of declaration in the VAT Notice on “Charity advertising and goods collected in connection with donations” if you consider it necessary. At the very least you need to show that the service was provided to a charity.

You should also prepare a detailed claim for submission to HMRC. The claim should include as much supporting evidence as possible.

Charities

Contact your pay per click advertising suppliers and request a refund. It will no doubt help your supplier if you provide a list of the invoices involved together with the amounts, and suitable confirmation that you are a charity. You may wish to use the form of declaration shown in Section 10 of VAT Notice 701/58 (January 2010).

If you need further help with this contact your usual VAT adviser.

Related posts:

1. Sponsorship – can it be zero-rated as charity advertising?
2. Charity Challenge Events – are they exempt fund-raising events?
3. Charities – Donated Goods – Gift Aid – is there a sting in the tail?

Related posts brought to you by Yet Another Related Posts Plugin.

HMRC have published Revenue & Customs Brief 21/10 which outlines how hotel booking agents can operate in a way that allows their business clients to recover the VAT on hotel bills. This would clearly reduce the VAT bill of any business using hotel booking agents’ services. So would HMRC have transgressed the rules they had laid out in draft on deliberate wrongdoing by tax agents.

Under the draft legislation a tax agent was defined as anyone who suggested a way in which another person could reduce their tax liability. There was no need for there to be any payment for the advice.

This would suggest that if that legislation was in place HMRC would, by issuing this Revenue & Customs Brief, have broken its own rules and would therefore have to fine itself for deliberate wrongdoing!

In addition, given the amounts of tax involved, it would appear that HMRC would also have to add itself to the published list of deliberate wrongdoers – they’d be named and shamed!

What are your views on this? Add a comment – I’d love to read what you think about this.

Related posts:

1. VAT Tribunals – reform legislation published
2. Option to Tax – changes to legislation
3. VAT Notes 4 issued by HMRC

Related posts brought to you by Yet Another Related Posts Plugin.

Here’s some important information for businesses with a VAT return period ending on 28 February 2010:

Do your VAT return before Easter!

Why?

Because HMRC will be upgrading there online system over Easter. And you won’t be able to access the system from Saturday 3 April 2010 until 6 April 2010.

Don’t believe me? Have a look at HMRC’s website where it says:

Normally you would have seven days in which to submit your return. By carrying out this work over Easter HMRC are reducing the time available for you to do your VAT return. My recommendation is to get your VAT return submitted before Saturday to avoid problems that might arise should the work overrun or there be too many trying to do their VAT return on Tuesday 6 April 2010.

Penalties

If you are late submitting your VAT return you will probably be sent a surcharge liability notice. If this is the first time you receive one it means that you are liable to a penalty if you submit a VAT return late in the following twelve months, i.e. for a VAT period ending 28 February 2010 you have to submit all VAT returns, and pay the VAT, on time for all periods up to 28 February 2011.

If you receive a surcharge liability notice and it is not your first, you may be charged a penalty. The penalty will be calculated as a percentage of the tax due, on a rising scale, from 2% to 15%, depending on how many times you have been late with your VAT return.

Frightening, isn’t it?

I’d love to have your comments on this. What do you think? Should HMRC have done this work later in the month to avoid putting unnecessary pressure on businesses?

Related posts:

1. Doing VAT returns online…
2. Online filing for VAT Returns
3. HMRC move the goal posts on making VAT payments to them by cheque

Related posts brought to you by Yet Another Related Posts Plugin.

For periods starting after 30 April 2010

The fuel scale charge applies to all business cars which are used for
private motoring. The following table sets out the fuel scale charges
for VAT periods commencing after 30 April 2010.

The amount listed under Scale Charge is the VAT inclusive amount. You need to subtract the VAT due to get the figure to include in Box 6 on your VAT Return.

For vehicles which do not have a CO2 emissions figure, you should identify the CO2 band based on engine size, as follows:

Whilst every effort has been made to ensure that the figures in the following tables are accurate you should still check that the figures are correct.

Related posts:

1. VAT Fuel Scale charges – not got a CO2 figure for your car?
2. Fuel Scale Charge information from 1 January 2010
3. Fuel Scale charge information for 2009

Related posts brought to you by Yet Another Related Posts Plugin.

Remember to check your turnover every month if you are close to the VAT registration limit…

Why?

I had a phone call yesterday from a tax adviser. They had a client who had gone over the registration limit, albeit briefly, three years ago. The client decided to take no action as they expected their turnover to fall below the registration limit during the following year.

What they overlooked is that there is a requirement to notify HM Revenue & Customs (HMRC) that they had exceeded the VAT registration limit within 30 days. Because they took no action they left themselves open to a penalty for failing to notify HMRC that they’d exceeded the VAT registration limit.

HMRC intervene

As it happens, HMRC did notice the failure to notify when they were reviewing the business’s tax returns. This is one of the downsides for the taxpayer of the merger five years ago of Customs & Excise and the Inland Revenue.

As a result of this, HMRC have compulsorily VAT registered the business, and are now seeking back tax and a penalty.

The worst thing is that this was completely avoidable, and there would have been no back tax to pay. Had the business notified HMRC in time it could also have applied for exemption from VAT registration on the basis that it expected its turnover in the next 12 months to be below the VAT registration limit.

How to avoid this happening to you

You can avoid this penalty trap by keeping track of your taxable turnover at the end of every month for the past twelve months. As soon as you see that you have exceeded the VAT registration limit you have to notify HMRC. If you expect your turnover in the following 12 months to fall below the registration limit you can apply for exemption from VAT when you notify HMRC.

If you find yourself in this position and need help, ask your accountant, bookkeeper or a VAT specialist.

If you have any questions or comments on this I’d love to hear from you – use the comments section below.

Related posts:

1. VAT Registration limits – updated for 2009
2. The Budget 2008 – an overview of the VAT changes
3. Five Things You Need to Know About VAT Accounting

Related posts brought to you by Yet Another Related Posts Plugin.

HMRC has announced that from 1 April 2010 it will be treating payments made by cheque for VAT as received on the date cleared funds reach its bank account.

This is a significant change and one of which businesses need to take account. From 1 April 2010 if you send in your VAT return and payment to arrive by the due date the payment will be late because it will clear on a date after receipt. This will leave your business liable to a late payment penalty. Currently late payment surcharges are on a sliding scale from 2% to 15% – be late paying at your peril.

After 1 April 2010 you will need to make sure you send your payment to HMRC so that they have sufficient time to present the cheque and for the funds to clear by the due date. This is effectively reducing the time available for preparing and submitting VAT returns and payments by as much as seven days.

Submit and pay electronically

Comment

This change by HMRC is probably to help cash flow and generate additional revenue from increased penalties. HMRC still require businesses using the, for example, Cash Accounting Scheme or the cash basis of the Flat Rate Scheme for Small Businesses to account for VAT on cheques on the day they are received.

This appears to be yet another attempt by HMRC to put more businesses into the penalty régime by moving the goal posts, whilst requiring the businesses to account for VAT on a less beneficial, for the business, way.

What are your views? Leave a comment below.

Related posts:

1. Online filing for VAT Returns
2. Do your VAT returns online?
3. VAT Accounting schemes that can be useful to you

Related posts brought to you by Yet Another Related Posts Plugin.

Chris Lodge, the manager of Kaslers’ road traffic accident department explains how new rules will affect simple injury claims from next year.

Getting it Right

A brand new streamlined process for dealing with

Road Traffic Accident injury claims.

After being injured in a road accident, the last thing anybody needs is long drawn out legal process.  Fortunately, in the very near future, the waiting time for most of these cases is going to be dramatically shortened – if the lawmakers have finally got it right.

With effect from April 6^th 2010, a completely new process for road accident injury claims becomes compulsory and where the insurer of the driver responsible for the accident admits liability immediately, the claim should normally be finalised in a matter of a few months.

Here’s how it works

Stage one

First, the injured person’s lawyer will have to email a very detailed Claim Notification Form to the insurers via a central website operated by the Ministry of Justice.

Once they have received the form, the insurers have only fifteen business days to state whether or not they accept liability.  If they do AND comply with certain other time limits, the claim will be dealt with under the new procedure.  The insurers will benefit because the legal costs they have to pay will be much reduced and the injured person will benefit from a far simpler and faster process.

Stage Two

If the injured person owns the car driven in the accident, then his or her lawyer will probably arrange for either the repairs, or an inspection and valuation if the vehicle is a write-off.  As far as injuries are concerned, the lawyer will arrange to have the person assessed for treatment and an examination by an independent medical practitioner who will prepare a medical report in the format required by the new process.  This will cover the extent of the injuries and their likely ongoing effects on such things as the ability to work and go about normal daily activities.

This medico-legal report, together with further details of the claim, must be emailed to the other driver’s insurers within fifteen business days of it being approved by the injured person.

The Final Settlement Pack

When the claim is ready to be settled, the lawyer must discuss and agree with the client the amount of compensation to be sought.  Clearly, this must be a realistic figure based on the lawyer’s expertise in personal injury work.  The compensation claim, together with a list of the injured person’s out of pocket expenses, will then be submitted electronically through the central website to the other driver’s insurers in the form of a Settlement Pack

The insurers then have a further fifteen business days either to agree the amount sought or make a counter offer. After that a further twenty business days are allowed to enable negotiations to continue.

The Interim Settlement Pack

If the medical report indicates that further medical evidence may be needed at a later date before the claim should be settled,  the injured person’s lawyer should ask for a payment on account of the claim of £1000.00, which cannot be refused.  (They can seek more than this where valid reasons are provided).  The claims process is then put on hold until they can produce the final medical evidence at which point the Final Settlement process is followed.

What happens if the claim leaves the process?

If the insurers do not accept liability; do not comply with the time limits described above; deny that the symptoms referred to in the medical report were caused by the accident; or if they allege fraud, the claim leaves the new process and the matter is then handled by the current more lengthy and expensive process.

Generally, it will not be in the interest of insurers to allow the claim to leave the new process as the legal costs they will have to pay, if the claim succeeds, will be far greater.

What happens if the value of the claim cannot be agreed?

Stage 3

If no agreement about the value of the claim has been reached after the period allowed for negotiations has expired, it remains in the process, but the insurers must pay the value of their last offer and Court proceedings are then issued.   These can take the form of an oral hearing, or (if both sides agree) by means of detailed written statements sent to the court so that the District Judge can value the claim.

Whilst the District Judge at the Court will be aware that settlement offers have been made by both sides, the amount of the final offers will be kept in a sealed envelope until after the amount to be awarded has been decided.

Getting it right here is very important because if the District Judge awards more than the insurer’s highest offer, the insurer must pay both side’s legal fees of the Stage 3 process, plus the court fees.  However, if the amount awarded is less than that offered by the insurers in Stage 2, the injured person will be liable for the costs of both sides of the Stage 3 process.  Plainly, it is essential that the injured person’s lawyer has ensured that they have adequate legal expenses insurance (legal protection) to cover them in case this happens and that the legal expenses insurers have agreed with the lawyer’s recommendation that the claim proceeds into Stage 3.

Getting the right advice

A single word of warning.  Generally the new process will be far better for accident victims than the current one as both sides are both obliged and incentivised to proceed very quickly.  However there is the risk that, because the legal fees will be so much lower, shortcuts may be taken by legal representatives.  Their clients may even advised to accept offers well below the true value because lawyers will receive no additional payment for the extra work put in, or the additional time necessary to pursue claims through to their proper conclusions.

For more information, see the official website.

Chris Lodge has specialised as a Road Traffic Accident Solicitor for over 25 years and sits as a representative for the Motor Accident Solicitors Society on a Ministry of Justice working party testing and piloting the electronic notification form described above.

Got any questions or comments? I’d love to read them – use the comments section below.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

For small businesses the Flat Rate Scheme (FRS) can be very useful as it simplifies the preparation of a business’s VAT return. Before you rush off to sign up for the FRS you should take a few moments to consider whether using the FRS will benefit your business. This scheme probably isn’t beneficial for businesses that apply the zero or reduced rate to most of their supplies.

How it works – in simple terms

You continue to raise invoices as normal, applying VAT at the appropriate rate. When you come to the end of the VAT period you use the total amount invoiced, i.e. the value plus the VAT, to work out how much VAT you owe to HMRC. You take this figure and apply the flat rate for your business. The answer is the amount of VAT you have to pay to HMRC.

What you don’t do is claim any VAT on general expenses as the flat rate has been set to take account of this. Where you make a major purchase you may be able to recover the VAT on the cost in addition to using the flat rate scheme. This only applies to capital items of more than £2,000.

Who cannot use the flat rate scheme?

The scheme cannot be used by businesses using:

• the Cash Accounting scheme – the FRS has its own cash accounting method.
• Retail schemes – the FRS has its own retail method.
• a margin scheme for second hand goods.

There are other reasons why a business might be excluded from the scheme. These are full details of these in HMRC’s guidance in Notice 733: Flat Rate Scheme for small businesses

Businesses that expect their turnover to exceed £150,000 (excluding VAT) in the coming twelve months aren’t allowed to join the scheme.

Should you use it?

The answer is: it depends! You need to weigh up what you would be paying to HMRC using the normal scheme and how much you would pay under the FRS. Many would expect to pay no more in VAT using the FRS or even paying less. Given the benefits, however, some might prefer to pay a little more as the savings in time and hassle might outweigh the cost of using the scheme.

HMRC very kindly provide a ready reckoner to help you work out whether you could benefit from using the scheme.

The biggest difficulty?

This would probably be deciding which flat rate to use. There is a table of the flat rates and the broad business area in the ready reckoner, and additional guidance to help you work out which description to use. It is important to get this right as if HMRC think you have got it wrong and paid too little VAT they’ll want to assess for the underpaid tax. Alternatively, if you set it too high and pay too much VAT, you are losing out.

Discount for new VAT registrations

Businesses in the first year of VAT registration get a 1% reduction on the flat rate they apply. This covers only the first year of the business’s VAT registration. If you are entitled to the discount there are two things to remember:

1. Apply the lower rate until the end of the first year of the business’s VAT registration; and
2. Apply the full rate after the end of the business’s first year of VAT registration.

Got a question on this article or just want to make a comment? Please leave it in the comments section below. I’d love to hear from you.

Related posts:

1. Flat rate scheme – new rates
2. VAT Accounting schemes that can be useful to you
3. Five Things You Need to Know About VAT Accounting

Related posts brought to you by Yet Another Related Posts Plugin.

I’ve got some good news and some bad news.

First the good news: for VAT the time in which you can make a claim for underclaimed VAT has been increasing to four years since 1 April 2009. This means that until 1 April 2010 you can put in a claim for underclaimed for periods that ended after 31 March 2006. Up to 1 April 2009 the time limit was three years.

Now the bad news: this means that errors where you’ve underpaid VAT also have a four year window within which they have to be adjusted. This means that HMRC can also assess for errors made in the four year period too!

Now the even worse news: for direct tax, e.g. income tax, the time limit for claims is reduced to four years. If you want to make a claim for tax before 1 April 2006 you need to make it before 1 April 2010. The silver lining is, of course, that HMRC won’t be able to assess for back tax if they don’t do it before 1 April 2010!

Do seek help from a professional adviser if you need to make a claim and might be affected by these changes.

Related posts:

1. VAT Registration limits – updated for 2009
2. Correcting errors and the new penalties – how they interact
3. H M Revenue & Customs lose their appeals on three year cap

Related posts brought to you by Yet Another Related Posts Plugin.

1 January 2010 – increase in rate of VAT

The table below has been recalculated to show the rates at 17.5% for fuel scale charge.

Remember that you will have to apply the right rate for the period. Where your VAT period spans the change in rate you will need to apply the right rate: the 15% rate for the first part and 17.5% for the second part. There is a table on this site that sets out the same data below but calculated at 15%.

For periods starting after 30 April 2009

The fuel scale charge applies to all business cars which are used for private motoring. The following table sets out the fuel scale charges
for VAT periods commencing after 30 April 2009.

The amount listed under Scale Charge is the VAT inclusive amount. You need to subtract the VAT due to get the figure to include in Box 6 on your VAT Return.

For vehicles which do not have a CO2 emissions figure, you should identify the CO2 band based on engine size, as follows:

Whilst every effort has been made to ensure that the figures in the following tables is correct you should still check that the figures are correct.

Related posts:

1. Fuel Scale charge information for 2009
2. Fuel Scale charges from 1 May 2010
3. Fuel scale charge for periods starting before May 2009

Related posts brought to you by Yet Another Related Posts Plugin.