Transport outside EU, Not VATABLE, VATABLE, NOT VATABLE... make up your mind!

Image this. You book a lorry to transport some goods for you from the UK to Greece. The driver plans a route across Europe to Italy, through the countries to the east of the Adriatic Sea and into Greece.

Before January 1 the supply was in the country where the activity physically took place, to the extent that it took place there. That meant that supplies physically performed outside the EU were outside the scope of VAT. No VAT.

Since January 1 you would be liable to calculate VAT on this service on the whole journey, even though some of this service was provided outside the EU. This is because the rule became that the service was provided where the customer was based. So now you had to self supply, i.e. charge yourself and claim it back. This means you may pay VAT on services provided outside the EU.

Now from March 15 if the transport is outside the EU, no VAT is due.

The change on 15th March was to correct an unintended cost to business. How is business intended to keep up with these changes, why can’t the people who make these regulations live in the real world of running a business... and what happens if the driver has a girlfriend in southern Italy and gets the ferry from Italy to Greece without telling you! Now the journey is wholly in the EU and you don't even know!

Just Change the law if you don't like it!

HMRC have lost most court cases in the self employment/employment debate. So they have taken the easy way out and they are changing the law so that they can win! They want to deem who is employed in the construction industry,

Maybe just new rules to understand?

What is the tax gap?

What is the tax gap? It is the difference btween what HMRC think they should collect and how much they do collect. £40 billion!

Hope they don't ask me for it!

Do it Now!

The press say that an incoming Conservative Government would reduce both the small company rate of Corporation tax to 20% and the main rate to 25%but would pay for it by abolishing the Annual Investment Allowance. Many business intending to invest in equipment over the next year or so are warned that now rather than later would be an excellent move, with the availability of the AIA under threat, and first year allowances of 40% also available for just one more month. A spend of £500,000 now would attract £230,000 in capital allowances, but later this could be as little as £100,000.

Sneeky new way to raise penalties?

From 1 April 2010 all cheque payments by post will be treated as being received by HM Revenue & Customs on the date when cleared funds reach HMRC's bank account. So if the cheque does not clear by the due date shown on your VAT return you may be liable to a surcharge for late payment.

Is this the "Minister for Change" just doing their job, or an encouragement to make electronic payments, or is the country so desperate for money that it has to find any method to raise extra cash?

Is HMRC a "fence"

“A fence is an individual who knowingly buys stolen property for later resale in a (usually) legitimate market”. (From Wikipedia),

According to the Financial Times HMRC are considering buying stolen information from Swiss banks. Receiving stolen goods is a criminal action in the UK, do readers think this is another case of double standards at HMRC?

Avoid 5% Penalty

Any income and national insurance that is due under the self aeeseement scheme and not paid by the end of February will attract a 5% penalty.

Claiming VAT Back on Entertaining?

There are some rules in tax that never seem to change, but... New comments on a European Tax case imply that the UK rules that ban reclaiming input tax on business entertaining might be illegal.

Those in the know are lodging claims already.

Avoiding tax charge for private fuel

If you are provided with a company car and your employer pays for your private fuel you may want to consider the options set out below which may reduce the overall tax cost of the arrangement.

At present if you receive any free private fuel for your company car you will be taxed as a benefit in kind according to a fixed rate calculation. For the tax year to 5 April 2010 this is £16,900 multiplied by a percentage based on CO2 emissions or in some cases the size of the engine. For CO2 emissions in excess of 220 g/km this can be as much as 35%. For a 40% rate tax payer this would add £2,366 (£16,900 x 35% x 40%) to their annual tax bill.

Unless your private motoring is exceptionally high this may be a tax cost that is entirely avoidable at much lower cash cost.

For instance HMRC allow you to reimburse your employer for your logged, personal mileage at an agreed rate - the details of current rates are added as a footnote to this article. If say your private mileage this tax year was 2,000 you would need to repay £400 (2,000 miles x 20p). Or you could pay the tax on the fuel benefit £2,366...

The key point is that it is worth crunching the numbers to see if you would be better off reimbursing your employer for private fuel rather than accepting the tax charge.

This type of arrangement also has benefits for the employer who will see a reduction in Class 1A National Insurance contributions due to the elimination of the car fuel benefit charges.

From the 1 December 2009 the advisory fuel rates are:(figures in brackets applied from 1 July 2009)

Up to and including 1,400 cc: petrol 11p (10p); diesel 11p (10p); LPG 7p (7p)

1,401 to 2,000 cc's: petrol 14p (12p); diesel 11p (11p; LPG 8p (8p)

Dentists Check your tax records

HMRC have confirmed that it has been decided to include Dentists in the THP disclosure opportunity, which started on the 11 January 2010

“amnesty” to medical healthcare professionals

HM Revenue & Customs are offering an “amnesty” to medical healthcare professionals with undisclosed tax liabilities to make a full declaration in exchange for a reduced penalty.

Since being granted sweeping new powers to obtain individuals’ personal data from a vast number of third parties, HMRC are now in a position to cross-reference a vast range of documents and records to detect discrepancies.

This new approach has already seen around 10,000 disclosures about offshore bank accounts come to light. It is now the turn of medical professionals to go under the spotlight under the “Tax Health Plan”.

Those wishing to submit a declaration have until 31 March 2010 to provide advance notification to HMRC. After this date, the Revenue will be actively pursuing any discrepancies discovered between their own data and that received from NHS trusts, private hospitals and medical insurers, with a view to raising as much cash as possible from penalties.

Individuals wishing to come forward will be expected to provide full details of any unpaid liabilities, including interest and penalties, and make an “offer to pay” to settle their account. HMRC will provide no assistance with the calculation of this information, so it is vital that medical professionals seek the help of a professional tax advisor.

Construction businesses face threat to Gross Payment Status

A significant number of businesses in the construction industry face losing their Gross Payment status as a result of deferring tax payments, despite often having discussed the issue with HM Revenue & Customs in advance.

Late payments agreed in advance with the Revenue’s Business Payment Support Service enable businesses registered under the Construction Industry Scheme (CIS) to continue to pay “on time”. However, in a number of cases where requests to make use of this facility have not been processed correctly, Gross Payment Status has come under threat.

The loss of Gross Payment Status must be declared to all existing clients of a business, and can have a damaging affect on customer relations, especially in tough economic times. For construction businesses that may already be suffering from cash flow issues, this can be particularly harmful.

CIS businesses should ensure they make arrangements with HM Revenue & Customs at the earliest possible opportunity, and ensure they take officers’ names and case reference numbers from all correspondence.