Financial Update Oct Nov 2019 Newsletter

Company Name Street name Town name City name AB1 2CD t: 01234 567 890 e: info@yourlogohere.co.uk w: www.yourlogohere.co.uk Partners Mr J Brown FCA Mrs F Spencer FCA Mr J Smith FCA Directors Mrs A Jones FCA Mr J Tall FCA Mrs N Stevens FCA Registered to carry out audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Printed on paper produced using wood fibre and manufactured at a mill that has been awarded the ISO14001 and EMAS certificates for environmental management. @yourlogohere /yourlogohere /yourlogohere Very awkward tax: getting it right on VAT VAT is regularly in the news, whether it’s planning for Brexit or postponing the reverse charge for construction services just weeks before its start date. Businesses are responsible for ensuring their returns are accurate, but regular tribunal cases prove how difficult this can be. Getting VAT wrong can be very expensive. Even if you are not currently VAT registered, the freezing of the registration threshold of £85,000 until April 2022 means that you must keep a careful check on your turnover. You need to do this monthly, not annually, and, if you register late, you will have to back-date VAT to when you should have registered. TYPE OF SUPPLY Tribunal decisions on whether a supply is standard rated, zero-rated or exempt can be confusing, Food is especially contentious. For example, VAT is not charged on plain biscuits or cakes, as determined in the Ja a cake case, but a chocolate- covered biscuit is standard-rated. Building materials can be similarly di cult. A recent tribunal case, for example, decided that mirrored cabinets did not qualify as building materials, so the self-employed builder involved could not recover the VAT on the £3,415 cost. The cabinets could easily be removed from the wall, so they were not considered to be fixed to the building. Even the 5% reduced rate of VAT can cause di culties, with changes introduced from 1 October. There is now a complicated definition of when the supply of energy-saving materials can qualify for the reduced rate. NO SPLITTING HMRC also does not look kindly on schemes aimed at avoiding VAT by splitting a business into separate parts – known as disaggregation – so that some, or all, of the parts are below the registration threshold. A tribunal decision from 2018 decided that there was only one business where a husband was a self- employed plasterer, but was also running a floor- screeding business in partnership with his wife. It didn’t help that both businesses had originally been run together and were just separated into two parts to avoid charging VAT on the plastering work. REVERSE CHARGE The reverse charge for construction services was supposed to start on 1 October, but has been put o for a year. Businesses that had changed their systems to meet the new requirements now need to revert to the existing system for the next 12 months. The penalties for getting VAT wrong can be onerous, so make sure you seek guidance through the complexities if you have any questions. New advisory fuel rates In HMRC’s update on advisory fuel rates on 1 September three of the petrol and diesel rates reduced by 1p, but the 1401cc to 2000cc liquefied petroleum gas (LPG) rate was increased by 1p. The advisory electricity rate for fully electric cars remains at 4p a mile. Hybrid cars are treated as either petrol or diesel models, depending on the fuel they use. Any amounts paid above HMRC’s rates will give rise to tax liabilities. However, you can use your own rates if, for example, your cars are more fuel e cient or if the cost of business travel is higher than the advisory rates. HMRC will review the rates again from 1 December, although the current rates can be used for a further month. The current rates are: 8 VAT TAX Credit: ThePowerPlant/Shutterstock.com 1,400cc or less 12p 10p 8p 1,401cc to 1,600cc 14p 10p 10p 1,601cc to 2,000cc 14p 11p 10p Over 2,000cc 21p 14p 14p C r e d i t: E t i A m m o s / S h u tt e r s t o c k .c o m