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How long does it take to register for VAT?
It currently takes around a month for HM Revenue & Customs (HMRC) to process applications for VAT registration, although it can take longer if they need to carry out additional checks.
GOV.UK say it could take as little as 14 working days.
HMRC aims to process 70 per cent of applications within 10 working days and most are processed within a month.
But there are cases where it can take a lot longer, possibly even 6 months.
Between applying for VAT registration and receiving your VAT registration number, you must still account for and pay any VAT due. You become liable for VAT from the date you must be registered or asked for your voluntary registration to start, not the date that you actually apply for registration or the date you receive your VAT registration number.
You may also reclaim any VAT you pay on your purchases from the date you must be registered, so you must also keep records of any invoices where your suppliers have charged you VAT.
Until you receive your VAT registration number you must not charge VAT, or show VAT on your invoices. To make sure that you do not lose income in the period after you applied for VAT registration but before you receive your VAT registration number, you should increase your prices by an amount equivalent to the VAT rate relevant for your goods or services, and explain to your customers why you are doing so.
Once you receive your VAT registration number you can then reissue those invoices, amended to show your VAT registration number and the VAT charged. This will make sure that your VAT-registered customers may reclaim the VAT that they have paid.
From a business perspective this is messy, you have to ask you customers to pay 20% extra on the promise that you will later give them a credit and a vat invoice so that they can reclaim the VAT!
I think HMRC should give this some thought, perhaps VAT registration could be fast tracked or done instantly by phone or online?
steve@bicknells.net
Partially-exempt Businesses
If your business supplies some goods or services which carry VAT, and other items which are exempt from VAT (such as charitable events and financing), the business is likely to be partly-exempt for VAT purposes. Being partly-exempt means you may not be able to reclaim all of the VAT on your purchases (input VAT).
Where the input VAT that relates to your exempt sales is no more than £625 per month, and it is also less than half of your total input VAT, you can reclaim all of the input VAT. In other cases you can only reclaim the input VAT which relates to the supplies that carry VAT. There are various methods to apportion input-VAT which can be agreed individually with HMRC, or you can use the standard method.
Whichever method you use to allocate input VAT, this should be reviewed at least once a year, to see if it still gives the best outcome for your business. We can help you with this.
If you pay VAT on road fuel used for private journeys, based on the road fuel scale charges published by HMRC, you need to be aware that the concession for partly-exempt businesses is withdrawn from 1 January 2014. Under this concession the business is permitted to reduce the output VAT due on the road fuel scale charges in line with its partial-exempt position. If you have been using this concession we definitely need to review the methods you use to apportion input VAT from 1 January 2014.
VAT Simplified Invoices
HMRC have released an update this month to their notice on Keeping VAT records. One of these changes relates to VAT simplified invoices which were introduced earlier this year as part of the simplification and harmonisation of VAT rules in the EU. Previously only retailers were exempt from providing full VAT invoices to unregistered businesses.
However the changes mean that any business issuing VAT invoices for £250 or less (including VAT) can issue simplified invoices.
What to include in a simplified invoice:
Your name, address and VAT registration number
The time of supply (date)
A description which identifies the goods or services supplied
The each VAT rate charged, the amount of VAT charged.
How does a simplified invoice differ from a full VAT invoice:
In addition, a full VAT invoice must include:
A sequential number based on one or more series which uniquely identify the document
The date of issue (if different from the time of supply)
The name and address of the person to whom the goods or services are supplied
For each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency
The gross total amount payable, excluding VAT, expressed in any currency
The rate of any cash discount offered
The total amount of VAT chargeable, expressed in sterling
The unit price
The reason for any zero rate of exemption.
VAT invoices over £250
If issuing VAT invoices over £250, a full invoice must still be issued or a modified VAT invoice showing VAT inclusive rather VAT exclusive values.
Rebecca Taylor ACMA
Are your businesses really separate for VAT purposes?
HMRC have been updating their manuals (21/10/13).
The purpose of VATDSAG01050 Single Entity and Disaggregation Manual is to help you to determine
- whether two (or more) apparently separate businesses are, in reality, a single entity
- whether, where two (or more) separate entities exist, they have been separated artificially.
Schedule 1,1A (2) of the VAT Act 1994 requires that, in determining whether any separation is artificial, due regard is had to the extent to which the different persons concerned are closely bound to one another by
- financial
- economic, and
- organisational links.
Schedule 1, 2(2) of the VAT Act 1994 lays down three conditions which must be met before we can issue a Notice of Direction to any person. These are:
- he is making or has made taxable supplies
- those taxable supplies form part of wider activities carried on concurrently or previously (or both) with one or more other persons
- the totality of the disaggregated activities gives rise to a liability to be VAT registered.
Here is a link to the updates http://www.hmrc.gov.uk/manuals/vatdsagmanual/index.htm
HMRC have some interesting cases, here is an example:
The case of Stephen and Angela Trippitt (MAN/00/0249) VTD 17340 addressed the question of whether a husband and wife could operate two businesses from the same premises.
In this case, the Tribunal decided that
- the traders had successfully separated the activities of public house and bed and breakfast into two separate entities
- we were incorrect in issuing a Notice of Direction.
The facts showed the extent of the commercial relationship between the entities, in addition to which Mrs Trippitt gave 35% of her takings to her husband.
The Tribunal was satisfied that this amount constituted a realistic, commercial, arm’s length contribution towards the value of the shared premises and telephone and utilities.
This decision means that where one entity argues that it pays a fixed percentage of its takings to the other, you need to establish:
- what would happen if there were no takings?
- would a minimal amount still have to be paid?
- if not, how does that entity see these arrangements as constituting a normal commercial relationship, given that it is at no financial risk?
- is there a real monetary transaction (as opposed to just the appearance of one in the books)? Can they provide evidence of this?
For more cases follow this link http://www.hmrc.gov.uk/manuals/vatdsagmanual/VATDSAG08100.htm
steve@bicknells.net
Tax Break for Racehorses
There are around 8,215 racehorse owners in the UK, ranging from gentry to plumbers united in their love of the sport.
But this is not an investment for the faint-hearted. You are unlikely to make a fortune and could end up losing a huge amount of money. The Racehorse Owners Association says that for every £100 of annual outlay (not including the purchase cost of the horse), a racehorse owner is likely to see a return of just £21.
As reported in the Telegraph (12th February 2013)
Some times it can pay off….
Rugby star Mike Tindall was branded an “idiot” by his wife Zara Phillips when he splashed out £12,000 on a racehorse.
But Mr Tindall is now looking far from stupid as his impulse purchase won last month’s Welsh National. Monbeg Dude, which Mr Tindall owns with four others, is now said to be worth more than £200,000.
VAT Tax Break for Racehorses
Following an agreement with the Thoroughbred Horseracing and Breeding Industry a scheme known as the VAT registration scheme for racehorse owners was introduced on 16 March 1993. If you meet the conditions of the scheme HMRC will accept that racehorse ownership is a business activity. You can therefore register for VAT and recover some of the VAT you are charged on your expenses as input tax.
Owners may include:
- breeders;
- dealers;
- trainers; and
- racing clubs.
You can apply for VAT registration under the scheme if you are registered as an owner at Weatherbys and you:
(a) own a horse or horses covered by a sponsorship agreement registered at Weatherbys; or
(b) own a horse or horses covered by a trainer’s sponsorship agreement registered at Weatherbys; or
(c) can show you have received, and will continue to receive, business income for example from appearance money or sponsored number cloths (SNC’s) from your horseracing activities.
You can recover as input tax the VAT you are charged on the purchase, training and upkeep of a racehorse and any overhead expenses used for the purpose of your business.
steve@bicknells.net
EU VAT B2C – e services to be vatable where they are consumed
At the moment all businesses supplying telecommunications, broadcasting and e-services such as downloaded ‘apps’, music, gaming, e-books and similar services to private consumers located in other EU Member States (referred to as ‘B2C’ supplies) are taxed where the business supplier is established, which is simple to understand and implement.
In the Finance Bill 2014 this will be changed and from 1st January 2015 VAT will be charged in the country where the customer has ‘use and enjoyment’ of the services.
So lets say you are an American (normally zero rated) on holiday in France, even though you pay with an American credit card and buy from a UK supplier because you are reading your ebook in France, French VAT will apply. Sounds like a nightmare, doesn’t it.
To help with this HMRC are introducing the VAT MOSS (Mini One Stop Shop) and businesses can register from October 2014.
Unless businesses opt to register for MOSS, businesses that make intra EU B2C supplies of telecommunications, broadcasting and e-services will be required to register and account for VAT in every Member State in which they have customers. MOSS will give these businesses the option of registering in just the UK and accounting for VAT on supplies to their customers in other Member States using a single online MOSS VAT return submitted to HMRC. This will significantly reduce their administrative burdens.
- Examples of telecommunications services include: fixed and mobile telephone services; videophone services; paging services; facsimile, telegraph and telex services; access to the internet and worldwide web.
- Examples of broadcasting services include: radio and television programmes transmitted over a radio or television network, and live broadcasts over the internet.
- Examples of e-services include: video on demand, downloaded applications (or “apps”), music downloads, gaming, e-books, anti-virus software and online auctions.
HMRC VAT Place of Supply Link
If you supply e services its worth considering the accounting and pricing changes that you will need to implement and how you will incorporate the ‘use and enjoyment’ rules.
steve@bicknells.net
VAT Return Box 2 EU Aquisitions? This is what you need to enter
Personally I have always found this box a little odd as its not taken from invoices its calculated by you.
Box 2 Acquisition Tax is calculated as UK VAT due on VAT free purchase of goods from other Member States, i.e. 20% x Box 9 figure, the same amount is then entered in Box 4 (as noted below by HMRC) so the net effect is Zero.
Box 9 Total EU Purchases are the value of goods bought from other EU Member States on a VAT free basis.
The following are HMRC’s instructions:
Box 2: VAT due from you (but not paid) on acquisitions from other EU countries
You need to work out the VAT due – but not yet paid by you – on goods that you buy from other EU countries, and any services directly related to those goods (such as delivery charges). Put the figure in Box 2. You may be able to reclaim this amount, and if so remember to include this figure in your total in Box 4.
Box 4: VAT reclaimable on your purchases
This is the VAT you have been charged on your purchases for use in your business. You should also include:
- VAT due (but not paid) on goods from other EU countries and services directly related to those goods (such as delivery charges) – this is the figure you put in Box 2
http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm#4
If you trade regularly with the EU you may be required to do Intrastat Returns, here is a chart that explains the basics
steve@bicknells.net
The tax advantages of Troncmasters
If your employees receive tips directly from your customers and are allowed to keep them, then you do not need to do anything for PAYE tax or NICs. There are no NICs due on the money, and the tax due is the employee’s responsibility. Your employees should declare the money to HMRC, who will usually adjust their tax code to collect any tax due.
A tronc is an arrangement for pooling and distributing tips and service charges and the person who operates the tronc is known as a troncmaster. If your employees use a tronc you must tell HMRC who the troncmaster is so that they can set up a PAYE scheme for the tronc.
http://www.hmrc.gov.uk/helpsheets/e24.pdf
Tips are outside the scope of VAT when genuinely freely given. This is so regardless of whether:
• the customer requires the amount to be included on the bill
• payment is made by cheque or credit/debit card
• or not the amount is passed to employees.
Restaurant service charges are part of the consideration for the underlying supply of the meals if customers are required to pay them and are therefore standard rated.
If customers have a genuine option as to whether to pay the service charges, it is accepted that they are not consideration (even if the amounts appear on the invoice) and therefore fall outside the scope of VAT.
Further information is available from: Notices 700 The VAT guide and 709/1 Catering and takeaway food
steve@bicknells.net
Odd VAT rules for Hotels
Tax is made up of bizarre and complicated rules and for accountants that’s a good thing, keeps us in work, but why tax can’t be simplified is beyond me, its a crazy tax world out there.
Here are some VAT examples for Hotels – HMRC Reference:Notice 709/3 (October 2011) :
The Long Stay Rule
If a guest stays in your establishment for a continuous period of more than 28 days, then from the 29th day of the stay you should charge VAT only on that part of the payment that is not for accommodation.
A guest’s stay must be continuous to qualify for the reduced value rule. For example, if a guest stays for three weeks every month, you must always charge them VAT in full. If another guest stays for five weeks, leaves for a week, and returns to stay for five more weeks, the reduced value rule applies only to the fifth week of each separate stay.
However, a guest’s departure is not seen to end their stay provided the guest:
- is a long-term resident and leaves for an occasional weekend or holiday,
- is a student who leaves during the vacation but returns to the same accommodation for the following term, or
- pays a retaining fee
In these cases the time away is ignored and you only have to charge VAT in full for the first 28 days of the overall stay.
It does not matter whether the guest returns to the same room or not.
VAT Exempt Meeting Rooms and Refreshments
Hiring a room for a meeting, or letting of shops and display cases are generally exempt, but you may choose to standard-rate them by opting to tax, see Notice 742A Opting to tax land and buildings.
If you make an exempt supply such as providing a room for a meeting or a conference and you provide minimal refreshments such as tea, coffee and biscuits, the room and the incidental catering will be treated as a single exempt supply. But, if you serve substantial refreshments such as a meal or buffet, the catering should be treated as a separate supply and you must account for VAT based on the normal charges you would make for such catering.
VAT on Deposits
Most deposits serve as advanced payments, and you must account for VAT in the return period in which you receive the payment. If you have to refund a deposit, you can reclaim any VAT you have accounted for in your next return.
Normally, if you make a cancellation charge to a guest who cancels a booking, VAT is not due, because it is compensation. This includes amounts debited from credit cards using details provided at the time of the booking. Where the cancellation charge takes the form of a retained deposit, you can reclaim any VAT already accounted for as an adjustment to your next return.
Reclaim Overpaid VAT
If you have overpaid VAT you can now go back up to 4 years and reclaim it.
steve@bicknells.net
Business Accountant 