Yes, really. These are things that I think are really worth knowing. All 17.5 of them:
1. Registration limits
Do you know the current VAT registration limit? The point at which you have to register for VAT. You can find full details in this post on the registration limits for 2010 and earlier years.
Remember that you can register for VAT before you reach the registration limit. It might be worth it.
2. When to tell HMRC that you have gone over the registration limit.
You have to tell HMRC within 30 days of the end of the month you went over the registration limit. So, if your turnover in the 12 months to 30 September is over the registration limit you have to fill in the forms and send them to HMRC by 30 October.
You will be registered from 1 November.
3. VAT treatment of what you sell
Do you know what rate of VAT to charge on what you sell? Are you sure? Really, really sure?
There are situations where what you are selling has a different VAT treatment because, for example, you sell it to someone outside the UK, and the VAT treatment might differ depending on whether the customer is a consumer or a business.
Get it wrong and you may find yourself having to pay VAT to HMRC that you haven’t collected. Or you may lose a good customer, which is probably worse!
4. Imported services
What’s so important about imported services? They’re very economic because there is no VAT on them. Or is there?
If you are VAT registered and you import a service from a supplier outside the UK, you need to account for VAT on it as though you sold it. You add this to the VAT on your sales for the VAT period. If you can recover all your input tax you can also add the same amount to the you are claiming VAT on your expenses.
5. VAT Return – file on time
If you regularly put your VAT return in late, you are going to be penalised. That’s money out of your profit margin – wasted.
Finding it difficult to make time to do your VAT return? It will probably be cheaper to get a local bookkeeper to do it for you, especially if it helps to reduce your accountants bill too. It will also be weight of your mind knowing someone else is doing it.
6. Pay VAT on time
For much the same reason as getting your VAT return in on time – paying penalties are a waste of money. Not to mention that businesses that regularly pay late are likely to attract the attention of HMRC, with the resultant hassle of dealing with an inspection.
These two points are good reasons to look at doing your VAT return online, and paying by direct debit. See my most recent post on this.
This is the first part of a three part series, part two will appear in a day or two.
Got a question? Need a bit more information? Leave a comment below and I’ll reply.
Well…
It’s more complicated than that. You have to use the HMRC website and use the form on that page to send them an e-mail.
The form that you have to complete is, err …, comprehensive and will take a few minutes to complete. In addition, it can only be used for telling HMRC about changes to personal data. If you are a business and want to tell HMRC about changes for the business you need to take alternative action.
If you are registered to use Self-Assessment Online you can log on to HMRC’s website and update your details there.
Changes to your business details
Unfortunately you have to use an alternative method to the e-mail system described above. It is no more complicated but means that if you are sole trader you have to remember that you may have to use the two different systems. This being a website for help with VAT issues I’ll confine my comments to that, but if you are looking for guidance on how to tell HMRC about changes relating to other taxes visit this page on HMRC’s website.
For VAT if you are registered for VAT Online services you can go to the log in page on HMRC’s website and update your information there.
Can you reclaim the VAT on a new car?
I was ‘talking’ via a social networking website with a friend recently and the conversation turned to business. May friend asked, “Might I trouble you with a swift VAT query?” and continued “I’m about to buy a car through the company, to use up some excess cash and reduce my Corporation Tax bill, and I was vaguely wondering if there were any wrinkles that would allow me to claim some or all of the VAT back? I can designate it 100% business use and keep full mileage logs if that will help. Any ideas?”
Here’s my response:
“The only way to get any VAT back is, unless you operate a car dealership or a taxi company, to designate it wholly business and have it insured wholly for business – no social domestic or pleasure use. It would also help if it was kept at business premises that are not also your home.
“Really the best way to save VAT on a company car is to lease it – avoiding any suggestion that you might be buying it at the end of the lease. This way you’ll get back 50% of the VAT on the lease payments.
“If you have to buy it outright to eat up all that profit you have, the best you can do is to make sure that all the expenses for it go through the company and you recover the VAT on them.
“Fuel is another issue and it is worth looking at whether the application of a Fuel Scale charge might be beneficial. You claim back the VAT on all your motoring, and pay a fixed amount to HMRC on each VAT return to ‘repay’ the VAT on private motoring. If you do a lot of private motoring, and not much business motoring this could be beneficial.
“These ideas fall flat on their face if you use the Flat Rate Scheme.
“If you have any more questions, just ask!”
And he did!
“A very comprehensive response, thank you.
“OK, one last question, if I may – if I were to claim the VAT back, and a subsequent inspection reversed that, would those nice men with the rubber gloves just ask for the VAT money, or are there additional penalties levied on top?”
This is an important point to which I replied:
“If you claimed back the VAT by mistake and HMRC discover that over claim you will have to pay interest on the amount repaid and might face a penalty of up to 100% of the VAT involved.
My advice is to get it right – even if it hurts a bit – that will be less painful than a penalty later.”
He replied: “OK, sound advice, thanks – given the rather obvious chance of it going against me, I wasn’t planning on claiming anything back if there was even a small penalty. 100% of the VAT involved isn’t small 
Perhaps I’ll just have to buy a company bike as well, then.…”
Now there’s a topic for another post.
HMRC issues phone call scam warning
This is a very important issue, and one of which many might be unaware. Please pass the information on and do so in a way that avoids making this spam. You can find the original press release, of which the text below is a copy, on the COI website.
“HM Revenue & Customs (HMRC) is warning taxpayers to be vigilant following reports that thieves are making phone calls pretending to be the taxman.
The fraudsters inform taxpayers they are due a tax rebate, and ask for their bank card details over the phone. They then attempt to take money from the account using the details provided. Victims risk having their bank accounts emptied and their personal details sold on to other organised criminal gangs.
The warning comes amid a recent surge in the number of tax scam “phishing” emails reported to HMRC. In the last three months, HMRC has shut down over 180 websites that were responsible for sending out the fake tax rebate emails.
Chris Hopson, Director of Customer Contact at HMRC said:
“We only ever contact customers who are due a tax refund in writing by post. We never use telephone calls, emails or external companies in these circumstances. We strongly urge anyone receiving such a phone call not to give any information to the caller, but report it to the police straightaway.
“If customers receive an email claiming to be from HMRC, we recommend they send it to us for investigation before deleting it permanently.”
HMRC thoroughly investigates phishing attacks and works with other law enforcement agencies in the UK and overseas. In the last 18 months, scam networks have been shut down in a number of countries, including Austria, Mexico, the UK, South Korea, the USA, Thailand and Japan.
HMRC strongly advises customers to:
- Check the advice published at www.hmrc.gov.uk/security/index.htm to see if the email you have received is listed
- Forward suspicious emails to HMRC at phishing@hmrc.gsi.gov.uk and then delete it from your computer/mail account
- Do not click on websites, links contained in suspicious emails or open attachments
- Follow advice from www.getsafeonline.co.uk
If you have reason to believe that you have been the victim of an email scam, report the matter to your bank/card issuer as soon as possible. If in doubt please check with HMRC athttp://www.hmrc.gov.uk/security/fraud-attempts.htm”
What’s your views on this behaviour? Leave a comment…
Still doing your VAT Return on paper?
You may know that VAT registered businesses with a turnover of more than £100,000 per year had to start doing their VAT Returns online from April 2010. HMRC has just announced that all other businesses that do paper VAT Returns will have to move to online Returns in 2012.
There are many benefits to doing your VAT Return online:
If you still do your return on paper consider moving to online returns. It is simple and easy to do.
You will need to register for the online VAT service on HMRC’s website. You will be sent a PIN (by post) so you can activate the service. After this you need to set up the payment system – allow a couple of weeks at least to get a direct debit set up. This means you should do this in good time before your next VAT Return is due.
You can always ask your bookkeeper or accountant to do this for you.
I’d love to hear your views or questions on this in the comments section below.
