VAT Archives - Page 8 of 8

News,May 2018

Things You Need to Know While Buying a Car Through Limited Company

George30/04/2021Limited Company , VAT

New rules have been introduced from 6 April 2020 for buying a car through a limited company. If you buy a car through a limited company, you need to pay personal tax on it and your company will pay national insurance. This is done because HMRC believes that you’re using the car for your private use as a benefit in kind that other employees are not eligible for. Let’s dive into the details. How Much Tax and National Insurance is Payable? Tax and NI are crucial as their calculation depends on the list price of the car (even if it’s second-hand). These rules are quite difficult, but you can visit HMRC online company Car Tax Calculator or contact us to find out your tax and NICs. For example, VW Beetle will cost you around £1,326 in personal tax (£2,652 for higher rate taxpayer) £915 in employers’ NIC. (A total of £2,241 or £3,567 as a higher rate taxpayer). If your company is paying for car fuel, then you need to pay more tax and NIC. For instance, your company provides you the fuel, an extra amount of £1,542 is payable as a personal tax (£3,085 as a higher rate taxpayer), and an additional £1,064 in the employer’s National Insurance contributions. As a basic rate taxpayer, you pay a great amount of £4,847 as tax and NIC for car and fuel, and £7,716 if you’re a higher rate taxpayer. Need an accountant for expert advice, leave your query here! Here the question arises that why you are using the company’s fund to buy your own car and then be taxed on using your personal car? Legitimate Ways around Tax and NICs: Instead of buying a car through a limited company, buy the car with your own money and pay the company 45p per mile for your business miles (25p over 10,000 miles). Go for a commercial vehicle instead of a car. You may ask it from a showroom to know the classification of the vehicle. To get rid of employer NIC and tax, make sure that the car purchased by a company is a pool car. It should be for all employees and should not be parked at any individual’s address. Can you Claim VAT On Car? You can claim VAT on the commercial vehicle but not on the car. CruseBurke can reduce your taxes and NICs, contact now! Saving Corporation Tax: The corporation tax claim on the purchase is very small. You have the choice to deduct 8% of the cost of the car from your profit and save only 19% of corporation tax. It means on a car that is costing £15K, you can save up to £228 tax. However, the full cost can be deducted from your profit of the commercial vehicle (after claiming back the VAT). That’s a tax saving of £2,850 on a £15k commercial vehicle (instead of £228 on a car). Wrapping Up: It is better to buy a commercial vehicle instead of a car through a limited company. You’d be charged a heavy personal tax and NIC on buying a car through a limited company, but you can’t claim VAT and you’ll save a small amount of corporation tax. On the other hand, if you buy a commercial vehicle through a company, you pay a little personal tax and NIC and can save a great amount of corporation tax and claim the VAT back. Hope this information would be useful if you want to buy a car through a limited company. For professional support, contact Cruseburke! Disclaimer: This blog provides general guidance about the topic and shouldn’t be considered expert tax advice. The figures may change with time.

VAT: What You Need to Know When Running a Small Business?

George09/04/2021VAT

It’s something normal to see VAT (value-added tax) with your daily used items. But do you know the importance of VAT to small businesses? Do you need to charge it? You might be wondering – should I register for VAT or not? We have the answer for all in this short blog. Find the best VAT accountant with us! What is VAT? VAT (value-added tax) is a percentage charged to you while buying items or services. It is also called consumption tax or tax on goods and services. Since 2011, the VAT rate is 20% for most goods and services. Though there are some exceptions too. It’s a common myth that VAT is charged by all businesses, but that’s not true. If you’re a small business, you might not need to register for VAT or charge it. Should I Register for VAT? If you’re a small business owner, you only need to register for VAT if your annual turnover is more than the VAT threshold. Currently, the present VAT threshold is £85,000 that will remain the same until April 2022. But you have the choice, as you can voluntarily register for VAT if you wish. So the decision is totally yours. Curious to know the benefits of voluntarily registering for VAT. Let’s see why your business needs it. Why Should I Register for VAT If I Don’t have to? Wondering should I register for VAT if I don’t have to. If you register for VAT, it implies that you have to send VAT returns to HMRC. VAT also puts an extra burden on your customers. Though it’d be good if you don’t register for VAT to keep your paperwork simple but it can also be beneficial for your business. VAT makes your business authoritative and consistent. And if your customers are VAT-registered then they can reclaim it. So they’re not worried about paying it to you as they can take back a certain portion of it. Hence, there’s no harm from them to pay VAT. You should also consider that in the business world, your reputation is everything. If you register for VAT, even when you’re earning below the VAT threshold, it is favorable as there are many businesses that prefer VAT registered business instead of others. And by doing it, your competitor wouldn’t know about your earning. On the other hand, if you don’t register for it, it’d be suggestive to declaring your business income with your competitor. Certainly, you don’t want to do it. Another reason for voluntarily registering for VAT is to get back the VAT payments spend on your small business. You need to submit VAT returns to HMRC every quarter. If you’ve crossed the VAT threshold, you’re legally bound to register for it. Unable to draw a conclusion, let us know what to do next! How can I Register for VAT: You can register it on the VAT registration page of the government website. While registering, you should make sure whether you’re registering for it voluntarily or you are legally bound for its registration. Quick Wrap Up: Still pondering, should I register for VAT or not. Now, it’s up to you to decide whether you need the benefits of being a VAT registered business or not. If you need help, we can suggest whether it’s good for your business or not. Let us know about your business first then we will decide, whether it’ll be beneficial for your business or not. We have a team of skilled accountants, who know how your business can grow. Don’t hesitate to get in touch with CruseBurke Accountants in Croydon! Disclaimer: This blog provides general information about the suitability of VAT for small businesses.

The Comprehensive Guide to UK Tax Compliance

George11/02/2021Tax Saving Tips , VAT

Just imagine you are enjoying a sweet sleep at home. Suddenly, a door knock woke you up. You have been given a letter written to you by HMRC. The envelope is too thick, and the words like ‘penalties’ and ‘back taxes’ made you sink. Because your tax compliance failure regarding delays, some casual reporting, etc, has turned your sweet sleep into a nightmare. Here is a complete guide to tax compliance that will enable you to understand the system with accuracy. This guide will give you knowledge about tax culture, not only to avoid penalties but to give you back your sweet sleep. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help with tax compliance. What is Tax Compliance? It has been defined as compliance with tax laws and regulations. The objective is to ensure that the companies and the individuals pay their tax without delays, errors, and omissions. It is your safety against late filing and payment penalties. In the UK, this means: Reporting true revenues and expenditures. Filing tax returns on time. Properly paying the correct amount of tax. Keeping prompt financial records. Respond to HMRC inquiries or audits. In a nutshell, tax compliance refers to compliance with the rules that are enforced by HMRC to declare, calculate, and pay your tax appropriately and at the specified time. It is not only the payment of taxes but also keeping records and filing returns, besides demonstrating that you are a responsible citizen. Understanding Tax Penalties To avoid costly issues with HMRC, it’s vital to understand the penalties for non-compliance. These primarily include: Late Filing Penalties: An initial £100 penalty for missing deadlines, escalating with daily £10 charges after three months (to a maximum of £900), and further charges if still outstanding at 6 and 12 months. Late Payment Penalties: Charged as 5% of the unpaid tax at 30 days, 6 months, and 12 months overdue, plus late payment interest. Inaccuracy Penalties: Applied for errors in returns leading to underpaid tax or overstated claims. Penalties range from 0% to 100% of the potential lost revenue, depending on the behaviour (careless, deliberate, or deliberate and concealed) and the quality of disclosure. Serious record-keeping failures can incur penalties of up to £3,000. Evolution of Tax Compliance in the UK UK tax compliance has evolved. The cornerstone legislation in the Tax Management Act 1970 has been made. Now, to a large extent influenced by more recent regulations like MTD and Finance Acts. This applies to all the workers in the gig economy, and even multinational corporations in the UK. It apparently appears to be the dull but compulsory thing that finances our NHS, the roads, and the schools. With the ongoing implementation of digital tools and applications like the Making Tax Digital (MTD), tax compliance will become real-time and paperless. From April 2026, self-employed people earning above £50,000 will have to abide by MTD on their income tax returns, which will further boost the use of digital compliance. When it comes to individuals, it is mandatory to report income, which is the salary, rental or side income. Corporate tax and VAT are some of the taxes that businesses pay. You took a wrong step or missed a step, and you can be on the verge of HMRC scrutiny. Tax Compliance and HMRC – An Oversight The tax collection organisation of the UK is “Her Majesty’s Revenue and Customs” (HMRC). They manage compliance by: Checks: The HMRC can inspect your company records, returns, and payments to ensure that all is correct. Investigations: HMRC has the power to call formal investigations where it has a suspicion of fraud or tax evasion. Guidance and Support: HMRC offers guidance and support, WebExs, and helplines, to facilitate taxpayers to be compliant. In the case of large businesses, HMRC has a Large Business Directorate, which has senior compliance managers to manage and support tax requirements. Why Tax Compliance Matters in The UK? Firms are at risk of losing their reputable status. A tax scandal has the power to sack your brand overnight in the world of trust currency. Conversely, timely payment of taxes comes in handy. Get the legal reliefs, e.g., the trading allowance of £1000 on side jobs, and your pay after tax will go up. It also forms an effective rapport with HMRC, which makes it easier for future queries. This is not just about avoiding fines, but this is also a question of stability as well as trust building. Here’s why it matters: Fines: Filing after the deadline or underpayment can lead to fines and interest. Reputation: This is especially the case with business, as tax compliance is a sign of professionalism and trust. Support Public Services: The taxes are used to fund healthcare, education, infrastructure, etc. Foster Growth: The firms that comply will be better placed to invest and develop. Breaking tax laws is not a victimless crime. Firstly, there are severe penalties. A late Self Assessment return attracts a fine of £100 at the first instance, and then there are further penalties of £10 per day up to £900 in case of 3 months. If the return remains unfiled after six months, a further penalty of £300 or 5% of the tax due (whichever is greater) is applied, and another similar penalty of £300 or 5% of the tax due (whichever is greater) is applied if the return is still outstanding after 12 months. Tips for Prompt Tax Compliance Effective tax compliance is mainly achieved through good practices. First of all, store and keep records in electronic devices, use apps, e.g., FreeAgent, and integrate them there. Second, there will be known reliefs such as the Marriage Allowance, which will save the couple a sum of £252 a year. Always stay ahead. Some of the methods to ensure compliance are as follows: Maintain Records: Maintain the records of income, expenses, invoices, and receipts in proper order. Deadlines: Enter in your calendar the due dates of VAT …

Here’s All you Need to Know About Cross Border VAT

George22/01/2021Tax Issues , VAT

With the end of 2020 period in Brexit that ends on 31 December 2020. Apparently, there will be a lot of changes in how VAT treatment is done for international goods and services. The entire process of VAT will become cumbersome and manual as all the applications are paper-based. These will be sent to individual member states related to VAT. Cross border VAT is one thing everyone is so concerned about. Let’s dig into more details you might be interested in. UK exited EU VAT regime, custom union, and single market from 1st January 2021. This means the compliance specifications are completely different. This also makes sure all the customs declarations, goods regulations, services, and import VAT are different. So what were the important points of the cooperation agreement deal and Cross Border VAT? Let’s find out: Know More About Cross Border VAT Changes Here’s a major list of changes for UK and EU businesses. EU is completely separate from UK as of now. So the VAT directives for the EU are completely different. For Example, there’s no longer an obligation to maintain a minimum VAT rate of 15% When you say that the VAT rate is already 20% and consumption tax accounts for almost a third of tax revenues, there are likely no chances of reduction. UK is seen to have complete control of its reduced VAT rates. These are currently restricted due to the EU VAT directive. However, there’s a conflict between the two countries over the subject matter. EU believes that it needs to have full power for setting the rates. All movements are now imports or exports subject to UK and EU import VAT. Businesses need to have two EORI numbers to move their goods between UK and EU. By way of compensation, UK introduced a postponed VAT accounting import deferral scheme. This makes sure no cash payments are made by business importers to UK customs. But many UK businesses do not offer the same compensation for other EU countries that are importing their goods. There’s a loss of distance selling thresholds for UK e-commerce sellers of goods and EU sellers. These are completely subject to UK or EU VAT imports. Please note that the EU e-commerce sellers need to register for UK if the purchase takes place under the £90,000 threshold. If you’re a UK business with foreign VAT registration in EU, you’ve got to make sure that you appoint a special VAT fiscal representative. This is highly applicable in 19 out of 27 EU states. All these agents hold liability for any unpaid VAT. We hope you’ve found all the information useful. All these cross border VAT directories for the UK apply specifically for the year 2021. Disclaimer: The information about the cross-border VAT provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

VAT Accounting Schemes: Determine the Best Scheme for Your Business

George13/01/2021Accountants , Accounting Issues , Making Tax Digital , VAT

If you are running a business, then you have to keep track of the taxes that you pay to HMRC. VAT is an indirect tax that is collected by HMRC because it is charged by the businesses for the HMRC. There are different VAT schemes to report VAT with HMRC. In the UK, VAT is the third-largest source of income for the government after Income tax and National Insurance. The Value Added Tax VAT is the most widely paid tax to HMRC on the selling of goods and services. Businesses collect this tax on the items they sell and it applies to every sale. Do I have to Register for VAT? Yes, you have to register for VAT. But your earnings have to pass a certain threshold. The threshold does not remain the same; the rate may change every year. If you are passing the threshold, you have to register in 30 days. You can do it online. Can I Reclaim VAT? If you are a business owner and selling goods or services to other customers or businesses, you can reclaim VAT. You can also reclaim the VAT that you pay on your business-related expenses. But you have to register for VAT first. Is there any Benefit for VAT Registration? You must be thinking about what you get in return for paying VAT. You can simply claim it back. Utility businesses have to pay VAT on the goods they purchase but they can claim them back at the time of filing their returns. If your business is VAT registered, it improves its credibility. It kind of makes you look more authentic. Your business will look more professional, even if your turnover is lower. What is the VAT Scheme? A vat scheme is a system to tell HMRC about VAT. Once you register for VAT, it doesn’t end there. Charging VAT from customers bounds you to tell HMRC about it. You need a proper mechanism for this. It also includes how much VAT you are charging. HMRC is providing this mechanism in the form of a VAT scheme. How Many VAT Schemes are there? HMRC is providing three different VAT accounting methods which are called VAT accounting schemes. The days of manual methods are over and people now prefer to use automatic accounting software. The software can acquire data automatically which then you can use to complete a quarterly VAT return. HMRC is pretty flexible in providing different methods. Depending on your business nature and turnover you can choose the right accounting method. To tell the HMRC about VAT you have to know: How much VAT you have deducted or charged How much VAT you have paid Annual Accounting VAT Scheme This is the same as the standard VAT accounting method. You don’t have to file a quarterly return if you are going with this scheme. You have to keep up with an annual deadline for payment and reporting. Most people keep it the same with their tax filing date. It is much simpler. If your business has a turnover of more than £1.35 million, you cannot go with this scheme. Flat Rate Scheme A flat rate scheme is a VAT accounting scheme for small businesses. if you own an SME. You must know your total turnover. You have to pay VAT on the percentage of your turnover. Flat VAT accounting rates depend on what kind of business you do. You have to look for flat rates for different industries. Some key features of this scheme are: If you own a small business You have to charge VAT on your invoices. But this saves you from the trouble of accounting for VAT on every sale and purchase Business with a turnover of up to £150,000 can avail of this scheme Cash accounting scheme You account for VAT on the same day you receive your payment with this scheme. You don’t have to account for it when you send the invoice. This scheme is beneficial for you if you face delays in receiving payments from your vendors. In this scheme, you don’t have to pay VAT until you receive your due payments. Is the cash accounting scheme well suited for you? You don’t have to go with this scheme if you buy a lot of things on credit. Because you cannot reclaim VAT until you receive your payments. If your business’s annual turnover is above £1.35 million, you cannot go with this scheme.

Get your Way Around Common VAT Problems

George06/01/2021Accountants , Accountants for Contractors , Accounting Issues , Tax Issues , VAT

As an accountant, we have to do a lot of problem-solving each day. Let’s take a look at the top ten VAT problems, and identify solutions for each one of these too. Businesses want to end up paying as little as possible, and getting your VAT right is one way to make sure you’re not overspending. Having the right accountant by your side is all you need to get everything right and avoid VAT payment problems. Know that VAT can go wrong in limitless ways. It’s a self-assessed tax being handled by ten other people. What are the chances that there might be zero chances of a human error? Then the team of accountants ends up saying ‘if only’ multiple times when they get themselves into serious VAT payment problems. If only a business owner would have ended up checking the VAT position before signing a contract or checking up on the VAT position before letting out a property, things would’ve been different. Most business owners even agree on a transaction without working out its VAT. Normally, people don’t consider VAT while carrying out the transactions and it’s troubling for them when they’re issuing their invoices or submitting VAT returns. As tax advisors, the accountants at Cruse and Burke always encourage you to keep all these situations in mind to make sure you don’t end up in a mess. It’s been seen in prior situations too that businesses that have problems with paying VAT in their minds before carrying out transactions see their commercial outputs improve significantly. You’ll not only improve profits but also make sure that you’re avoiding losses to the maximum. So let’s take a look at some of the common issues faced while getting your VAT done and help you overcome major VAT problems down the road: Having a lead in time always helps out in keeping VAT problems at bay. Enough time helps you carefully prepare for regulations, return forms, and systems for registering taxpayers and processing VAT returns and payments. Plus having prior experience is a benefit, and it always helps out. Sometimes small enterprises or companies are responsible for doing new invoices and working on the bookkeeping requirements. The problem arises especially among people going for VAT upon imports. Small enterprises have vigorously opposed the idea since the department in charge of internal taxes has been given the job primarily. Another major problem encountered by people of developing countries is that the staff number is not specified for resolving all the VAT issues. This is one problem of high concern for these countries. As VAT is something completely different from a general sales tax. VAT is considered as a modern tax of nature. So many countries demand that it must be dealt with in separate organizations. According to many developing countries, VAT should be dealt in a completely separate organization apart from general income tax, let’s say. We’ve not only identified potential problems that can get you into serious trouble but also identified solutions for all of them. VAT issues are common and you’ll try your best to avoid them to the maximum keeping in view the solutions above. We wish you good luck in getting everything right and pressing on the long-term measures to sort out everything the perfect way.

How Postponed VAT Accounting Will Work After the UK Brexit?

George31/12/2020Brexit , VAT

You will observe some changes after December 31st. Britain leaving the EU will bring some big-time changes. One of the biggest changes you may observe is the VAT changes which the government is adjusting by introducing a postponed VAT accounting scheme. What is Postponed VAT Accounting? After the Brexit, the goods coming from the EU countries will be classified as imports. That means that VAT will be applicable after it arrives in the UK. Right now, VAT is payable on imports coming anywhere in the world except the EU. VAT is applicable to imported goods over £135. The UK government has devised a New VAT accounting system to mitigate the effect of additional VAT on businesses to control the negative cash flow impact. Under this scheme, businesses will avoid the seizure of their goods at customs. How Does Postponed VAT Accounting Work? The facility under the PVA scheme is optional. You can pay VAT on your goods upfront if you wish to. Also, the payment can be made when goods are circulated; for example, at the port of entry or after customs’ release. You will have to get C79 reports from HMRC, the same as the imports from non-EU countries. The PVA is mandatory if you defer the customs declarations. Who can Use Postponed VAT Accounting? All registered businesses in the UK can use this facility. But the businesses in Northern Ireland will continue to be considered as part of the EU. So, the goods coming from the EU will not be considered imports for Northern Ireland. But they can use PVA for non-EU imports. How Does the PVA Process Work? The processes will change after Brexit. This means some boxes that you fill might be out of date. Some changes confirmed by HMRC include: Box 1 For VAT due on sales and other outputs – Fill this box with the information about VAT that we due during this period on imports accounted for through PVA. Box 4 Reclaimed VAT on purchases and other inputs – You have to put reclaimed VAT details during this period on imports accounted for through PVA. Box 7 The total value of purchases and all other inputs excluding any VAT – Fill it with the total worth of all your imported goods. You also have to include your online monthly statement without VAT. What if I Don’t Use PVA? If you want to pay VAT immediately on imported goods when they get in circulation, you only have to fill boxes several and four. Online monthly statements play a vital role in managing PVA. The new report will only show the import VAT postponed during the time period of the previous month. This PVA report is extremely important for your VAT accounting records. Just download and store the copies for the records.

Here’s All You Need to Know About Making Tax Digital Signup (MTD)

George22/12/2020Making Tax Digital , Tax Issues , VAT

You’re looking forward to finding out more about the abbreviation MTD. So basically, what is MTD? MTD stands for making tax digital. This blog further guides you about all you need to know about making tax digital signup, and debunks common myths HMRC has eased up the manual accounting and VAT process and made everything digital. The system has been in place since 1st April 2019. Since that date, HMRC has made sure all the digital records are kept digitally. There are no laws enforcing the system. Still, a lot of businesses have manual records too. So what’s the hype about Making VAT Digital? How does it work out? Making VAT digital requires VAT registered businesses to use compatible software to sort out transactions and report HMRC VAT. MVD commences for the first VAT accounting period commencing after 1st April 2019. It applies to VAT-registered business with a turnover above the VAT threshold (currently £85,000) Certain businesses are deemed as complex for VAT, their MVD start date is deferred and commences on the first VAT accounting periods on or after 1 October 2019. Your business might end up getting labelled as complex by HMRC. What are the Common Myths About Making Tax Digital Signup(MTD)? Most people are inferring that MTD won’t reduce errors. Most of the people end up losing their receipts, and when their accountants have to file their taxes, they don’t have any. MTD might end up reducing the errors as no manual transportation of data is involved. It’s also a common misperception that once a business is part of the Making Tax Digital Campaign, they can’t use spreadsheets. There are no restrictions to use spreadsheets. Business can use them for record-keeping and calculations. There are plenty of bridging software available, which help out businesses transport the data to HMRC. So that’s what works out in this case. It’s also a common misperception that HMRC doesn’t encourage small businesses to use the tools. That’s also not true. According to HMRC, there are already 11 products completely free to use. You’ve just got to take care of the conditions. What if you get wrong with the entire process? It’s a common misperception that HMRC may penalize you for it. That’s also not true. HMRC completely understands that when a business is adopting a new idea, it might take some time for the staff to understand it. As of now, HMRC is taking all the errors lightly.