VAT is deductible on assets used prior to registration
The fact that HMRC allows businesses to recover VAT on goods and services used before registration isn’t new (if you didn’t realise then now is your opportunity).
What’s different now is that HMRC has clarified the rules because of inconsistencies in the way businesses have been treated.
The clarification goes as follows:
- VAT on services received within six months of EDR and used in the business at EDR is recoverable in full
- VAT on stock is deductible to the extent that the goods are still on hand at EDR (for example apportionment may be required)
- VAT on fixed assets purchased within four years of EDR is recoverable in full, providing the assets are still in use by the business at EDR.
Full recovery only applies if the business is fully-taxable. Businesses who are partly-exempt, have non-business activities, or need to restrict VAT deduction for any other reason, will need to take that into account when calculating deductible VAT.
HMRC will accept corrections for overpayment of VAT in the following circumstances:
- the business has reduced the VAT it deducted on fixed assets, to account for pre-EDR use
- HMRC have raised an assessment of tax to account for pre-EDR use of fixed assets
- HMRC have reduced a repayment claim to account for pre-EDR use of fixed assets
HMRC will consider claims for repayment of penalties and interest charged as a result of assessments.
If you want to recover VAT on assets used by your business prior to registration or you are unsure whether or not you can, then Lewis Smith & Co. can help.
Get in contact for a free, no-obligation discussion today. Call 01384 235549 or email firstname.lastname@example.org.
Lewis Smith & Co. – Accountants for Brierley Hill businesses for over 30 years.
New body to maintain standards for charitable fundraising
Our charity clients will be interested in the introduction of the Fundraising Regulator, a body established following concern about the way in which charities contact potential donors.
The regulator is tasked with developing a register of organisations who have signed up to its code of practice, investigating poor practice, working with the Charities Commission and Information Commissioner’s Office to act upon wrongdoing, and implementing a Fundraising Preference Service (FPS) to allow opt-outs from communication.
Signing up to the FR register is voluntary but a levy will be made on registrants that spend £100,000 or more each year on generating voluntary income. The levy is based on spending bands – the charge for £100,00 to £100,499 spending is £150, for example. Smaller charities that fall below the £100k threshold can still register with the FR for an annual £50 fee (although the registration system is not yet open).
The FR code of practice was formulated after an investigation into the death of Olive Cooke, whose name appeared on numerous charity databases and who was pressured into making donations that she couldn’t not afford.
The code (available in full at the FR website) sets out a set of general principles and specific behaviours that fundraisers should adhere to. Most people reading the code will be dismayed that any charitable organisation would have acted against the principles it lays out. Two examples from the code are “organisations MUST NOT exaggerate facts relating to the potential beneficiary” and “organisations MUST NOT take advantage of mistakes made by the donor”.
Hopefully the main impact for the small charity sector is a levelling of the playing field where the curbing of the most aggressive fundraising tactics of the larger organisations allows their voice to be heard.
Lewis Smith & Co. provides specialist accountancy services for charities and and not-for-profit organisations.
Talk to us today to set-up a free, confidential discussion about your accountancy needs. Call 01384 235549 or email email@example.com.
Lewis Smith & Co. – Tax accountants for Kingswinford businesses.
What documentation do you need?
Filling in the tax return forms might be straightforward. Having the right information is the challenge.
The deadline for online submission of your self assessment returns is coming up fast. If you haven’t completed your return (and there are some clear benefits for submitting your tax return early) then remember that while filling in the form is usually simple, you need to have lots of information to hand to get it right.
Why not check the following list to make sure you have the relevant documentation or records available before you start.
- P60, P45 and P11D from your employer
- Pension records (state and private)
- State benefits such as sick pay and maternity pay
- Interest payments from bank and building society accounts
- Dividends and annuities
- Capital gains
- Asset disposal
- Property income
- Foreign income
- Capital gains
- Employment expenses
- Pension contributions
- Employee share schemes
- Student loans
Sole traders will need to pull together:
- Mileage logs
- Expenses receipts
- Bank statements showing transactions, charges and interest
- Transaction details
- VAT returns
If your tax affairs are a little more complicated than the norm then Lewis Smith & Co. offers a complete tax return service to make sure you pay no more than required.
For more details contact us today. Call 01384 235549 or email firstname.lastname@example.org
Lewis Smith & Co. – Accountants for businesses in Wombourne, Wall Heath and Himley
Image source: Flickr courtesy of Dave Crosby
Small Business Highlights
New Chancellor, Phillip Hammond, has made his first formal statement of intent for the country’s finances after the EU referendum.
At a strategic level the government has promised greater investment in both infrastructure (e.g. £1.1bn extra investment in local transport networks in England and £220m to reduce traffic pinch points) and housing (e.g. £2.3bn housing infrastructure fund for new builds in high-demand areas and £1.4bn to help build 40,000 affordable homes).
There were also plenty of points of specific interest for Black Country businesses. Here’s Lewis Smith & Co.’s selection of the highlights:
- Confirmation that the National Living Wage will rise from £7.20 to £7.50 from April 2017.
- Fuel duty rise to be postponed because of an increase in the price of oil.
- Income tax threshold to be raised to £11,000 to £11,500 in April 2017
- Higher rate income tax threshold will increase to rise to £50,000 by 2020
- Commitment to a cut in the CT rate to 17% by 2020.
- As mentioned in our “HMRC targets salary sacrifice” article in August, tax savings on salary sacrifice schemes will be widely curtailed – pensions, childcare and cycling schemes excepted.
- Employee and employer NI thresholds will be equalised at £157 per week from April.
The Chancellor also announced a particular area of VAT will be subject to review to cut down on, as the government sees it, an unfair tax loophole.
HMRC is keen to stop “limited cost” businesses (ones where VAT inclusive expenditure is below certain thresholds) unduly benefiting from flat rate VAT scheme. From 1 April 2017 businesses operating flat rate schemes will have to check whether they fall in to the status of a limited cost trader. If they do then their flat rate scheme percentage increases to 16.5%.
Anti-forestalling (forestalling is the practice of paying or invoicing in advance to avoid tax increases) legislation has been published to stop limited cost traders using lower flat rates after 1st April 2017.
Clearly this introduces an extra level of compliance for many of our small businesses customers. You will need to check your status as a limited cost trader and apply the higher percentage if necessary. This could be an annual check for some of you if you are close to the threshold.
If you are concerned about the impact of any of these changes on you business talk to us today. Call 01384 235549 or email email@example.com to set-up a free discussion today.
Lewis Smith & Co. – Accountants for businesses in Halesowen
HMRC spreads some Xmas cheer
As of 6th April 2016 employers can provide staff with some “trivial” benefits in kind, tax free. The rules were designed to allow companies to give small gifts at Christmas or for birthdays. They save employees from having to report the benefit on their P11D, or employers dealing with tax and NI.
The benefits need to meet the following conditions:
- The cost must be £50 or less and not given as cash or a voucher.
- The benefit shouldn’t be something an employer was already entitled to.
- The benefit is not given in recognition of normal employment duties.
This is in addition to £150 per employee tax free allowance for Christmas party expenditure.
Happy Christmas HMRC.
If you want any help sorting out the implication of this benefit then please get in touch today.
Call 01384 235549 or email firstname.lastname@example.org to set-up an appointment.
Lewis Smith & Co. – Accountants for businesses in Brierley Hill
There have been some important changes recently in payroll-related subjects that you need to know about.
Auto Enrolment Pension
You are probably aware that Auto Enrolment applies to all employers however large or small. If you haven’t started the process of setting up a workplace pension yet, remember that Lewis Smith & Co. can help. We are able to give any information you need and get you up and running really quickly.
Check the Pensions Regulator website (http://www.thepensionsregulator.gov.uk/en/employers) for more details on what Auto Enrolment means for you.
National Minimum Wage
This has risen from the 1st October 2016 (notification previously sent) with a headline rate of £7.20 for over 25s.
Check the government National Minimum Wage rates page (https://www.gov.uk/national-minimum-wage-rates) for the rates for all wage groups.
Construction Industry Scheme (CIS)
If you are a contractor you must follow a number of CIS rules. These include checking with HMRC that your sub-contractors are registered with the scheme and providing them with a deduction of tax certificate.
If you aren’t sure of your obligations visit the government’s CIS webpages (https://www.gov.uk/what-you-must-do-as-a-cis-contractor/overview).
Lewis Smith & Co. can now offer online payslips to its payroll customers. It’s another step forward in the digitisation of your business.
Find out more in our Online Payslips news item.
Holiday Pay and Annual Leave
The rules on the amount of leave and how much pay employees should receive are complicated and frequently change.
Find out more about what you need to do in our Holiday Pay and Annual Leave news item.
If you would like to discuss any of the topics detailed above then please call us today on 01384 235549 or email email@example.com.
Lewis Smith & Co. – Management accountants for Midlands business
Are you up to speed on the rules?
This is an area that has caused concerns for many employers and is something that is constantly changing as tribunal rulings and new legislation are updated.
Currently the statutory holiday leave for a full-time employee is 28 days, while part-time employees’ entitlement is adjusted pro-rata.
By law employers cannot pay for untaken holiday, it is at the employers discretion if any untaken holiday can be carried forward. Additional care required when considering holiday pay for staff members working overtime and commission, and where there are accrued entitlements from maternity, paternity, adoption and sick leave.
Further guidance on holiday entitlements can be found on both the government website (https://www.gov.uk/holiday-entitlement-rights/entitlement) and the ACAS website (http://www.acas.org.uk/index.aspx?articleid=4109).
If you want to discuss the issues of holiday pay and annual leave on your business please call 01384 235549 or email firstname.lastname@example.org today.
Lewis Smith & Co. – HMRC investigations are on the increase. Do you need our fee protection service?
Another step forward in business digitisation
This is a new, digitally secure way of sending payslips to your employees.
By law you have to give your employees a payslip. By using the online payslips system, your employees will all receive their weekly/monthly pay information directly (by electronic means).
Should they lose copies, all previous payslips are stored securely in their own private online space ready to download. It also saves time distributing paper payslips or printing emailed group payslips.
To add an extra professional edge, we can also customise payslips with your company logo and information if required.
To find out more setting up online payslips for your business please call 01384 235549 or email email@example.com today.
Lewis Smith & Co. – Need help with tax planning?