Late registration for VAT can be costly to your business.

Registering for VAT is a must if your turnover reaches a certain level; it’s part of your role to ensure that your business is suitably prepared and aware of when the registration needs to be made.

The VAT registration threshold is £85,000 – meaning that once your turnover crosses this level, in a 12 month rolling period, you may have to register for VAT. This can be a big change for a business and needs serious consideration as to the effects it can have.

A failure to comply with the HMRC rules to register on time can lead to penalties which soon tally up and leave you considerably out of pocket.

The penalty is worked out as a percentage of the VAT due, from the date when you should have registered to the date that HMRC either receive your notification or become fully aware that you were required to be registered. The rate of penalty depends on how late you were in registering:

If you registered: Then the penalty rate will be:
not more than 9 months late 5%
more than 9 months but not more than 18 months late 10%
more than 18 months late 15%

There will always be a minimum penalty of £50.

If you feel that your business could be approaching the VAT turnover threshold then get in touch so that we can help. 0116 2423400

Brook Lucas, Accounts & Tax

Tax Calendar

The following Tax Events are due on 19th July 2017:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th April 2017 to 5th July 2017.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

PAYE Student loan and CIS deductions due for the month to 5th July 2017.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.  

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

Class 1A NIC due for 2016/17.

This deadline is relevant for employers who have provided their employees with benefits for 2016/17. These benefits should have been reported by the 6th July and the amount of the Class 1A employer only NI liability due calculated on the form P11D(b).

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. Interest will be charged if payment is made late. Penalties may also apply. 

We have a Tax Calendar on our website so you never miss a deadline to see future deadlines please visit our calendar  https://www.torrwaterfield.co.uk/resources/tax-calendar 

When Do I Have To Register for VAT?

If you are aware of an increase in turnover, or are unsure about whether you should be VAT registered or not, the following points should help:                                                      

  • If your turnover exceeds the registration threshold of £85,000 over a rolling 12 month period then you will need to register for VAT; you will then need to calculate at what point your turnover broke this threshold.
  • Once you know when you exceeded the registration threshold, you need to register by the end of the following month. For example, if the threshold was breached on 31 August, you have to register by 30 September and will be registered from 1 October.
  • If you expect you will breach the registration threshold in a single 30 day period, you must register for VAT immediately.
  • If you are late registering for VAT, then you must pay what you owe from the point at which you should have registered; as well as interest there may be penalties which depend on what you owe and how late your registration is.
  • It is possible to get an exception from registering if your turnover goes over the threshold temporarily. To do this you need to write to HMRC with evidence as to why you believe your net turnover won’t go over £83,000 (de-registration threshold) in the next 12 months. HMRC will then respond confirming whether an exception has been granted or not – this is not always guaranteed – and if denied, they will register you for VAT.
  • You can also register at any point voluntarily – you must pay HMRC any VAT you owe from the date that you become registered.

If you are unsure, there is a helpful link online (www.gov.uk/vat-registration/overview) which explains in further detail the steps you should take when registering for VAT.

If you have any queries or concerns with regards to any aspect of VAT, feel free to give our office a ring on 0116 242 3400 and we will be happy to discuss this with you. 

Jake Dempsey, Accounts & Tax

When Do I Have To Register for VAT?

If you are aware of an increase in turnover, or are unsure about whether you should be VAT registered or not, the following points should help:                                                   

  • If your turnover exceeds the registration threshold of £85,000 over a rolling 12 month period then you will need to register for VAT; you will then need to calculate at what point your turnover broke this threshold.
  • Once you know when you exceeded the registration threshold, you need to register by the end of the following month. For example, if the threshold was breached on 31 August, you have to register by 30 September and will be registered from 1 October.
  • If you expect you will breach the registration threshold in a single 30 day period, you must register for VAT immediately.
  • If you are late registering for VAT, then you must pay what you owe from the point at which you should have registered; as well as interest there may be penalties which depend on what you owe and how late your registration is.
  • It is possible to get an exception from registering if your turnover goes over the threshold temporarily. To do this you need to write to HMRC with evidence as to why you believe your net turnover won’t go over £83,000 (de-registration threshold) in the next 12 months. HMRC will then respond confirming whether an exception has been granted or not – this is not always guaranteed – and if denied, they will register you for VAT.
  • You can also register at any point voluntarily – you must pay HMRC any VAT you owe from the date that you become registered.

If you are unsure, there is a helpful link online (www.gov.uk/vat-registration/overview) which explains in further detail the steps you should take when registering for VAT.

If you have any queries or concerns with regards to any aspect of VAT, feel free to give our office a ring on 0116 242 3400 and we will be happy to discuss this with you.

Jake Dempsey 

Accounts & Tax 

Spring Budget 2017

I am sure that you have seen the headlines in the papers this morning about the Budget and for a detailed analysis please see the report on our website:

www.torrwaterfield.co.uk/news/budget-report.

The items that have caught my attention and I think are relevant to most people are as follows:

National Insurance for the self-employed

At present, if self-employed, you pay class 2 National Insurance of £145.60 for a complete year, and class 4 at 9% based on your level of profits.  The Government do not think that this is fair as employees pay National Insurance at 12%.  To level this position, class 2 National Insurance will be abolished from 06/04/2018 and the class 4 element will increase to 10% from that date, and to 11% from 06/04/2019, thus bringing the self-employed more in line with the employed.

Dividend changes again …

From 06/04/2016 broadly the first £5,000 of dividend income is taxed at 0 % (Dividend Allowance).  This will continue until 05/04/2018.  However, from 06/04/2018 the Dividend Allowance will reduce to £2,000.  This will mainly affect the family company shareholder and increase their tax liability as follows:

Basic rate taxpayer – additional tax of £225

Higher rate taxpayer – additional tax of £975

Additional rate taxpayer – additional tax of £1,143

Individual Savings Accounts (ISAs)

 The overall limit is increasing from £15,240 to £20,000 on 06/04/2017.

Property and trading income allowances

Although this was mentioned last year it comes into play on 06/04/2017. It is as it says, so if you have property or trading income of £1,000 or less you will no longer need to declare this or pay tax on it.  This could cover small amounts of rent from Air ‘bnb’ activities or trading on ebay. 

New Childcare provisions

 If you are taking out new childcare provisions from 06/04/2017 then, instead of opting for a salary sacrifice scheme and receiving vouchers, for every 80 pence that you contribute the Government will contribute 20 pence. The maximum the Government will contribute will generally be £2,000.

Making Tax Digital

This will be introduced on 06/04/2018 for businesses, the self-employed and landlords who have profits chargeable to Income Tax and pay Class 4 National insurance Contributions where their turnover is in excess of the VAT Threshold, which will be £85,000 from 01/04/2017.

As this is a very new area please contact us for further information.

Salary Sacrifice

 From 06/04/2017 this is changing, but it is still beneficial for both the employer and employee to sacrifice salary in respect of employer provided pensions, childcare vouchers, workplace nurseries and cycle to work schemes. 

Construction Industry

The government are launching a consultation on 20 March 2017 to look at various areas, including the qualifying criteria for Gross Payment Status and options to combat VAT supply chain fraud in supplies of labour.

In addition to the above, certain other changes come into force on 06/04/2017 that have been mentioned in earlier Budgets namely:

Restrictions on residential property interest

Landlords will no longer be able to deduct all of their finance costs from their property income.

Inheritance Tax residence nil rate band

There will be an additional nil rate band for deaths on or after 06/04/2017 where an interest in a main residence passes to direct descendants.

As mentioned above I have only mentioned the areas that I believe will be most relevant to the majority of our clients but other areas can be found on our website.

Please contact us if you have a specific query. 0116 24243400

Julia Harrison, Tax ManagerJulia Harrison April 2012

Correcting Errors on Your VAT Return

Picture the scene: it’s the end of the month, you’ve just submitted your VAT return for the quarter, you close your laptop and there behind it is a small pile of invoices that you’d forgotten to include.

This isn’t uncommon.  Here’s a few questions that you might be thinking:

Can I amend the return that I’ve submitted?

Unfortunately not, once the return is submitted there is no mechanism to adjust or amend it.

Can I just pay the correct amount?

Again, this isn’t accepted by HMRC. Their systems will assume you’ve under/overpaid and may charge interest & penalties or refund any overpayment.

OK, how do I make the correction?

There are two methods to fix an error on a VAT return, and which one to use depends on the size of the mistake.

  • If the net value of the errors is £10,000 or less; or
  • Less than 1% of your box 6 figure and less than £50,000

Then you can adjust the mistake on your next VAT return by adding the value to box 1 or box 4 as required. You will also need to keep details of the inaccuracy should HMRC ever enquire about the return.

If the errors do not meet the threshold above, then you are required to report them to HMRC immediately.

You should complete a form VAT652 which can be found here:

https://www.gov.uk/government/publications/vat-notification-of-errors-in-vat-returns-vat-652

HMRC may charge you interest and penalties if they deem the error to be due to careless or dishonest behaviour.

If you’d like any assistance in making the adjustments, please feel free to get in touch with our team on 0116 242 3400.

Matt Smith- Accountant, Audit & Tax Matt Smith

 

Autumn Statement 2016

On Wednesday 23 November 2016 our new Chancellor of the Exchequer, Philip Hammond, delivered his first (and last) Autumn Statement. 4221396001_5220447677001_5220145961001-vs

“No other major economy makes hundreds of tax changes twice a year, and neither should we” – this is perhaps the most welcome measure announced in the Autumn Statement.  In recent years the Autumn Statement has been a mini-Budget, meaning that many, sometimes significant, tax changes were being announced twice a year.  This has been problematic in terms of giving taxpayers a reduced degree of certainty regarding planning their tax affairs (plus it means I have to write an extra blog each year) so for this announcement alone, Philip Hammond gets a ‘thumbs up’ from me!

Following the spring 2017 Budget, the Budget will be delivered each autumn – spring will be reserved for a statement from the Office of Budget Responsibility to respond to their previous forecast.  The odd tweak of fiscal policy may be made each spring, if economic circumstances require it – personally I think this option has been retained so the Government are able to be more flexible in response to the future impact of Brexit (you can infer from that what you will…I’m taking it as that they have no idea what the impact will be).  I’m also hoping that an autumn Budget will give more time for us all to absorb the changes before they come into force the following April.

Our full Autumn Statement roundup can be found on our website here, but below are the main points that I think are relevant to our clients and their businesses.  A lot of the announcements aren’t new, but are instead Philip Hammond confirming that he plans to keep some of his predecessor’s policies.

Personal Tax Rates and Allowances

The personal allowance is currently £11,000 and will increase to £11,500 from April 2017.  The reduction in personal allowance for those with higher income (‘adjusted net income’ over £100,000) remains so that, from April 2017, there will be no personal allowance available where ‘adjusted net income’ is over £123,000. 

The higher rate threshold will increase from £43,000 currently to £45,000 from April 2017, for those who are entitled to the full personal allowance.

Philip Hammond confirmed his intention to keep George Osborne’s policy to increase the personal allowance to £12,500, and the higher rate threshold to £50,000, by the end of this Parliament.

Corporation Tax Rates and Allowances

The new corporation tax rates from April 2017 to March 2021 were announced at the Budget and have now been enacted – the rate will be reduced from 20% to 19% from April 2017 and a further 2% to 17% from April 2020, which will be welcomed by small and large businesses alike.

Again, this was announced in the Budget but has been kept by the new Chancellor – corporate losses (excluding capital losses) arising after 1 April 2017, when carried forward, will be able to be used against future profits from other streams.  Currently there are restrictions on how the losses can be relieved, which is restrictive for certain types of business.

National Insurance Contributions (NIC)

Previously payable by the self-employed, Class 2 NIC is being abolished from April 2018 – we knew this was coming, however what we didn’t know was how self-employed taxpayers would get entitlement to basic state pension and other contributory benefits and allowances, as payment of Class 4 NIC (also paid by the self-employed) has not in the past been ‘contributory’.  From April 2018, Class 4 NIC will become ‘contributory’ and those paying it will be entitled to state pension etc.  Those with income below the Small Profits Limit (£5,965 in 2016/17) will be able to pay Class 3 NIC, currently £14.10 per week to ‘top-up’ their entitlement.  There will no longer be the option for these individuals of voluntarily paying Class 2 NIC, for which the current rate is a mere £2.80 per week!

The Office for Tax Simplification are tasked with – you guessed it – making tax simpler.  One of their recommendations that is being implemented is the alignment of the thresholds at which employees and employers pay Class 1 NIC.

Other Payroll Matters

Having only been increased in October 2016, The National Living Wage is increasing from £7.20 to £7.50 from April 2017 and smaller increases to the National Minimum Wage are also coming in – full details on our website here

I mentioned in a blog post on 11 October 2016 that the Government have been consulting on the use of salary sacrifice schemes and on Wednesday, the Chancellor outlined the changes to be introduced from April 2017.  Salary sacrifice arrangements (other than relating to pensions, childcare, cycle to work and ultra-low emission cars) entered into after this date will no longer enjoy tax and national insurance savings – however agreements entered into before this date will remain tax and NI-free until April 2018, so subject to the administrative hurdles that have to be jumped for an effective salary sacrifice, there’s still some mileage left in them yet!

Philip Hammond continues George Osborne’s assault on company car drivers with a further 2% increase in the percentage applied to each band of company car from April 2018, and a further 3% from April 2019.  From April 2017, pure electric cars will be charged at 9%, rising to 13% in April 2018 and 16% in April 2019 – a huge increase from the 7% benefit in kind in the current year.  I can only assume this is a reaction to the amount of employers who have provided these cars to employees, and benefited from the low rate.  I do find it a little disappointing that tax incentives are introduced to encourage certain behaviours (such as the provision of electric cars) and then as soon as people actually take the Government up on their offer, it effectively gets withdrawn – this is especially harsh when it relates to company cars as many of these will be leased over a number of years and therefore the business and employees are stuck with the cars that no longer afford them the low tax charges that were in place when the vehicles were first provided.

VAT Flat Rate Scheme Anti-Avoidance

 Businesses registered for VAT under the flat rate scheme pay over VAT at a specific rate (currently between 4% and 14.5%) as determined by their type of business – it simplifies the accounting for VAT as these businesses pay VAT over to HMRC at a lower rate than the 20% they charge to customers, but do not reclaim VAT on most expenses.  For many small businesses, this can be both time-saving and money-saving.  From April 2017 a new 16.5% rate will apply to businesses with limited costs (i.e. labor-only businesses) using the flat rate scheme.  The details on which businesses will be affected by this are on our full Autumn Statement update here

Making Tax Digital

HM Revenue & Customs are consulting on various measures intended to bring the UK tax system into the digital age.  A major change is that from April 2018, most self-employed taxpayers and landlords will be required to keep their records digitally, update HMRC at least quarterly, plus submit a year end declaration.  While HMRC are keen to emphasis that this does not mean five tax returns per year, we eagerly await the details on how the proposals will work in practice when HMRC issue their response to the consultations in January 2017.

If you want to discuss any of this further then please get in touch here.

Katie Kettle, Chartered Certified Accountant

Technical Manager

 Katie Kettle Colour

VAT on Company Vehicles

If you are looking to buy a car through your VAT registered business then there are several things to consider; it can be a great tax saving idea however you must consider all of the implications. The most important point is that the VAT on the purchase of the vehicle can only be claimed back if it is used 100% for business purposes, meaning no private usage at all.

A good example of this would be a pool car. A pool car is available for use by any employee for solely business purposes during working hours and is kept on site when not in use.

You may also be able to claim all the VAT on a new car if it’s mainly used:

  • as a taxi
  • for driving instruction 


The same rules apply for commercial vehicles such as vans, lorries and tractors. As long as they are solely used for business use then the VAT can be reclaimed.

If the vehicle is not used 100% for business then you need to consider the other tax consequences such as a personal tax benefit in kind and an employer National insurance charge.

Please note a daily commute to your regular place of work is not considered as business use according to HMRC guidance.

Leasing a car

If you lease a car, you can usually claim back 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used as a taxi or for driving instruction.

Self-drive hire cars

If you hire a car to replace a business car that’s off the road, you can usually claim 50% of the VAT on the hire charge.

Additional costs

You can usually reclaim the VAT for:

  • all business-related running and maintenance costs, eg repairs or off-street parking
  • any accessories fitted for business use

You can do this even if you can’t reclaim VAT on the vehicle itself.

If you are considering buying a vehicle for your business or would like more details then please feel free to contact us. 

Calum Ainge, AccountantDSC_5428

When do I need to register for VAT?

You must register for VAT when your VAT taxable turnover exceeds the ‘VAT registration threshold’ of £83,000.

This is calculated on a rolling 12-month basis and is not solely based on your year-end accounts turnover … so please be aware of this!

What happens if I don’t register in time?

If you forget to register for VAT when you should, and register late, you must trace back and pay the VAT you owe from the date you should have registered.

If you sell to the general public, and not to other VAT registered businesses, this could cost you a lot of money, as you will not be able to go back and charge your customers the VAT!

You may also be liable for a late registration penalty.

How much time do I get to register, once I need to?

You must register within 30 days of your business turnover exceeding the threshold. You can do this online on HMRC’s website.

By doing this you will create a VAT online account – you need this to submit your VAT returns online to HMRC.

You should receive a VAT registration certificate within 14 working days.

If you know you are close to the threshold, and think you might have to register for VAT soon, then contact us and we will be happy to help you calculate if and when you need to register.

But what if it was a one off?

If you only exceeded the VAT registration threshold temporarily then you can apply for a registration ‘exception’.

You must write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the de-registration threshold of £81,000 in the next 12 months.

HMRC will consider your exception and write confirming if they will allow it. If not, they will register you for VAT.

If you would like to discuss any of this further then please get in touch.

Tom Luckett, Accounts & Tax Tom Luckett.JPG

Voluntary VAT Registration

It is not compulsory to register for VAT until your annual turnover/sales reach £83,000.

However, any business can register for VAT at any time.

So why would anyone want to register for VAT and charge their customers an extra 20%?

Do you sell to the general public?

If so, registering for VAT is not for you!

The general public cannot reclaim the VAT you charge, so your prices will effectively increase by 20%.

You should only register for VAT when you exceed the £83,000 threshold.

Do you sell mainly to VAT Registered Businesses?

If all (or most) of your customers are VAT registered businesses, then it is ok to charge them an extra 20%.  They will simply reclaim this VAT on their own VAT Returns, so they are not out of pocket.

It is probably a good idea for you to register for VAT and earn yourself some EXTRA CASH!!!

How??

Option 1 – Reclaim the VAT on your expenses

By registering for VAT, you must pay HMRC the VAT charged to your customers, less the VAT that you incur on your expenses.

Therefore, VAT can now be reclaimed all business expenses, where VAT has been charged, including:

  • Vans
  • Computers
  • Materials
  • Phone bills
  • Accountancy
  • Etc etc.

Option 2 – Join the Flat Rate Scheme (FRS)

Many businesses can make further profits from the VAT man.

On the FRS, you pay VAT to HMRC as a set percentage of your ‘GROSS’ sales, depending upon your trade sector.  For example, the FRS for a courier is 10%.  You continue to charge VAT at 20% to your customers, whilst paying only 10% to HMRC.

         
  Example: £  
    Yearly turnover (NET) 60,000  
    VAT Charged to Customers (20%) 12,000  
    Cash received into the bank 72,000  
    VAT payable to HMRC (72000 x 10%) (7,200)  
    Income for the year 64,800  
         

As you can see from the above example, by taking the time to submit only four VAT returns each year, you have increased your annual income from £60,000 to £64,800, an additional £4,800.  On the downside, you cannot reclaim VAT as in option 1, but if your purchases and expenses are low, this could be well worth doing.

Note: You also get a 1% discount on the FRS rate for the first year of your registration (an extra £720 in the above example).

TorrWaterfield can assist you with VAT registration, advise on the choice of scheme and help with completion and submission of your VAT Returns.

For further advice, or to discuss whether VAT Registration is for you, please give myself or your usual contact at TorrWaterfield a call on 0116 242 3400.

Stuart Caney, VAT Manager Stuart Caney April 2012.JPG