2012 Budget facts and figures Newsletter
We have today published a round up of the relevant facts and figures from yesterdays budget for you to take a look at.
The newsletter lays out the changes that will happen over the next twelve months that will basically effect everyone who is liable to pay tax.
We have shown a comparison for some of the changes to the figures for the current year (2012/13) so that you can see how the budgetary changes may affect you.
Take a look at the newsletter; and if you have any questions or queries about any of the topics covered then you can contact us at anytime, we would be pleased to answer your question(s) and help you in any way we can.
Intrastat, Commodity Codes & a BIG Fat Headache!
- Anna Perry
(Anna asked if she could contribute an article on Intrastat because she feels that many businesses don’t understand the reporting requirements – so welcome Anna, our newest contributor)
I for one am quite impressed with the online filing system for Intrastat. After getting off to a slow start I now find myself happily searching for correct commodity codes and tracking CPT’s & EXW’s.
I do know however, some of you are having great difficulty coming to terms with the new reporting regulations and the endless paperwork HMRC is asking us to compile on a monthly basis to ensure we are compliant.
After learning recently that as from April 2012, the deadline is now 10 days shorter, I quite honestly cringed. My current clients, along with over half of the VAT registered business in the UK currently compile their VAT returns on a quarterly basis! Monthly Intrastat reports you say? Just to make our jobs easier and to give us more time concentrating on running our businesses – no, I disagree, my personal experience is that clients find the whole process a headache & they can’t seem to understand why the information is needed in the first place!
So why should we report our Dispatches and Arrivals? Well put it this way, if we didn’t, not only would the Intrastat department slap you with a VERY big fine, we would send this country into a financial downspin. All the information we report (regardless of how small) is used to help set interest rates by the Bank of England each month. Trade statistic information is vitally important; it helps set trade policies & initiatives on new trade areas. So, in a nutshell it’s unavoidable, and if you make the mistake of thinking it’s unimportant & a waste of time – it will hit your pocket hard!
The current fines in place for failing to submit your Intrastat reports are pretty hefty, one-off fines for £1000 for late submissions, missing information or incorrect reporting are not to be sniffed at.
So what should you do? Firstly, check your thresholds, Intrastat works on rolling totals, you may hit the threshold mid way through your accounting period/year and you will be expected to submit returns from the month you reach that threshold. The current arrivals threshold is £600,000 and the dispatches are £260,000. For each sale or purchase made from the EU you will need to match your item to a commodity code, the database online is actually quite good and allows you to carry out a simple search to find the correct code. You also need to track the amount of your dispatch (minus the transport costs) and record which different method you have used to dispatch or receive goods to/from the EU. These are only a few of the requirements, and already you are scratching your head! From experience, record keeping (as always) is key, ensuring your have tracked your items from sale or purchase, from freight to payment really is vital, and go back to basics, if you are VAT registered you would have had to perhaps make changes to the way you file and keep on top of your books. Intrastat is no different, if anything, having to compile this information on a monthly basis may actually help you to finish your VAT returns earlier!
Most of my clients that fall into the Intrastat category ask I do the reporting on their behalf, now the system is online, its much user friendly and reliable to do this. Reports can be completed on a transaction basis, so as a client, you could email information on a transaction by transaction basis or on a summary at the end of the month. I also try and encourage clients to pass over information at the month end, the knock on effect to VAT, Payroll & Year End is always a positive one, work goes through the system quicker and it’s so much nicer facing the VAT quarter with only one months work to enter!. From a client perspective it’s sometimes nice to know how much money they own HMRC at the start of the month rather than mid way through, or worse, right at the very end!
I’d like to think Intrastat is one of my specialities, helping clients to keep a track of their imports and exports and supporting them to ensure they are compliant is something I take great pleasure in. Like most things Intrastat is one of the many things HMRC like to try and baffle us with, a pro active approach and the right support, this shouldn’t be a headache. If you’d like to speak to me to talk about your current methods for Intrastat reporting to see if there is anything I could support you with, hit the contact me button. I always like a challenge, and endeavour to help your business run better!
Anna Perry
December 2011 Newsletter
This months Newsletter has recently been published and this month contains articles covering several interesting subjects.
In Decembers issue the main points from the Chancellors Autumn statement are covered along with how the announcements may affect you.
You can read the December newsletter by clicking here.
Also featured are articles on the low value consignment charge is changing on some imports, and, details of how using a VAT group may be of benefit to you if you have more than one company in operation, plus many other articles which may be of interest to you and your business.
You can send a question to our question and answer service by following the link on the Newsletter or if you would like to talk to someone face to face then you can contact us at anytime for a free initial chat and to meet the team.
VAT-separating your business.
Now that the standard rate of VAT has been raised to 20%, some business owners are increasingly tempted to split their businesses into different entities, so the part with non-business customers or both parts falls under the compulsory VAT registration threshold when split. This enables them not to register to have to charge VAT to those customers. The Taxman is watchful of this type of tax planning and where he believes they have been artificially separated to avoid VAT, he will direct that the businesses should be re-aggregated.
A frequent target of the Taxman on business-splitting grounds are VAT-registered farms, where a member of the family runs a bed & breakfast business which is not VAT registered, from the same location. He will argue that because some buildings have both a farm use and a B&B function, the two businesses are part of a whole and should come under one VAT registration.
Although the use of the same building can be a factor that indicates two businesses are connected, the Taxman is required to consider a range of factors to determine whether the businesses are genuine separate entities. He must judge whether each factor points towards one business, two separate businesses, or is neutral. If the majority of the factors are either neutral or point towards separate businesses, the Taxman should not direct that the businesses be combined for VAT purposes. If you are not happy with the Taxman’s decision you can appeal to the Tax Tribunal.
Where you operate two or more businesses within your family, the following questions can help you decide whether the Taxman will challenge your businesses as being artificially split:
1. Is the business designed to operate as an individual business, despite utilising central resources, for example a franchised business?
2. Is the business so intrinsically linked with other ‘connected’ businesses that it can only be considered to be one indivisible business, for example wet sales and catering in public houses and restaurants?
3. Is the business carried on in separate departments or divisions, but is in reality one legal entity, for example a quasi partnership?
4. How much independence does the business have from any other ‘connected’ businesses by way of legal and technical resources?
5. Does the business owner have autonomy in the way he/she operates the business, for example access to premises, opening times, recording sales, purchase of stock and materials, bank accounts and annual accounts?
6. What would happen if the business owner was unable to operate their business personally?
7. Has the business owner registered the business with HMRC for corporation tax or income tax separately from those businesses that are ‘connected’?
8. Is the business owner working together with their partner/spouse in his/her business as a quasi co-owner or just assisting them as a family member in their business?
There are some businesses which may look like a potential separation of entities which if the proper contactual procedures have been followed will be accepted by the HMRC as individual businesses. An example of this would be a “rent a chair” hairdressing business and self employed taxi drivers.
The Taxman has the power to direct that two or more businesses should be treated as one business for VAT purposes, even where those businesses are contained within separate legal entities, such as limited companies. Please discuss your business structure with us if you think it could be challenged by the Taxman.
VAT – Happy New Year
VAT returns to 17.5% on 1st January 2010 so will the hostelry you are frequenting on New Year’s Eve suddenly increase their prices at midnight? The answer is “No”.
As a concession HMRC are allowing pubs, hotels and other establishments which are open at midnight to continue accounting for VAT at the 15% rate until 6.00am on New Year’s day.
If you need more information on the changes, contact us.
September 2009 Tax Tips newsletter published
Our September 2009 Tax Tips newsletter has been published and is available to view.
It contains articles on the recently announced amnesty for taxpayers with overseas bank accounts, paying dividends, correcting VAT errors and giving shares to employees.
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Free Newsletter
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It’s FREE. We won’t bombard you with loads of unwanted mail – just the Newsletter about once a month. You can unsubscribe at any time. You should find some interesting comments and information in the Newsletter. Is there a reason you can think of why you shouldn’t subscribe?
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Godkin & Co – sad to see them go
We’ve been advised that Godkin & Co, a firm of accountants with offices in Loughborough – close to us, are going into liquidation. Godkins have been well respected in the Loughborough area for many years and have a solid reputation. In all of our dealings with them we have found them to be professional and helpful. It is a shame that the recession seems to have had such an effect on them. It’s particularly sad that fourteen members of staff have also lost their jobs. Hopefully they will all find new employment soon.
The Liquidators are taking steps to sell the client base and clients should soon find that they have a new accountant but, with all members of staff being made redundant, there will be a break in continuity and long established relationships will be broken.
Most other accountants in the area, including ourselves, will certainly try to help if asked to do so by clients. We don’t like to see clients struggling through no fault of their own.
The VAT Trap – Disincentive for business
The VAT trap occurs when a business exceeds the VAT turnover threshold (currently £68,000 pa) but the turnover will not increase much above this level. The result is that, although sales have increased, profits actually go down – sometimes quite dramatically. The effect is worst for small businesses in service industries (hairdressers, beauticians, cleaning firms, consultants,accountants[!!] etc) because the major cost is their own labour.
Consider a small business with a turnover of £67,000 using no materials but employing one member of staff at £15,000 pa and paying rent of £10,000 with incidental costs (telephone, stationery etc) of £5,000 and selling to consumers, rather than businesses. At £67,000 the net profit is £37,000.
If the business turnover increases to £69,000, because they can’t put up prices otherwise they would cease to be competitive, this figure has to include VAT. So the VAT payable on the turnover is £9,000. They can offset VAT on the incidental costs. The maximum this could be is £652. The net profit therefore falls to £30,652.
A £2,000 increase in sales has resulted in a £6,448 fall in profit. In this particular example, turnover has to increase to nearly £80,000 before the business actually returns to the same level of profitability as it had with a turnover of £67,000.
This problem has reared its head this week with three different clients. Two are already registered for VAT but are struggling to increase sales sufficiently. One of these has decided to close their retail business for one day a week to reduce turnover and allow them to deregister. The other is cutting its least profitable clients to get back below the threshold. The third business is approaching the threshold and has decided to close an extra day per week to stay below the threshold – making a part time employee redundant in the process.
It seems ludicrous that the tax system should operate as a disincentive to businesses to expand. The argument could be that those businesses under the VAT threshold have an advantage which compensates them for the economy of scale enjoyed by larger businesses. This is probably true, but, for those businesses caught in the middle – just over the threshold, problems can be caused. I wonder how many small businesses with turnovers just over the VAT threshold go broke when compared to businesses at other turnover levels.
VAT Online Filing – Compulsory! Did you know?
From 1st April 2010 it will become compulsory for all VAT registered businesses with a turnover in excess of £100,000 pa, and all businesses which register for VAT after that date, to file their VAT Returns online. Some accounting software (eg KashFlow and Sage) already include a facility to file VAT online. Many businesses using older software will not have the facility built in and will have to find another method of filing.
Filing can be done via the HMRC website but I am surprised at how little software seems to be currently available to assist in filing VAT online. We are currently trying to decide how best to incorporate the facility into our service for those clients which don’t use online filing ready software. The primary software package which we use within the practice doesn’t have the facility so we are evaluating the options for ourselves too.
I understand that filing using an XML file should be pretty simple – but, not being completely au fait with all things technical, I don’t quite understand how this is likely to work. I understand that XML can be generated from an Excel file so, I guess that we will have to export the info from our accounting software to an Excel spreadsheet then, somehow, convert it to XML and send it to HMRC. If there’s someone who’s more technically competent than me out there who can explain the process in simple terms, I’d love to hear from them.
The change is only about three VAT returns away, yet most businesses aren’t even aware of the proposal. We still have clients with turnovers in excess of £100,000 who don’t have access to the internet. It’s going to be a major shock for them.
Unless there is some publicity, I can envisage a major panic next February/March. Now, that comes just after the 31st January deadline for tax returns and around about the time we are preparing to submit PAYE returns so my staff are not going to be very happy if we are inundated with queries then.
Did I mention that April 2010 is also the deadline for filing end of year PAYE returns on line for all companies? There are quite a few businesses still doing manual payroll. Haven’t seen a lot of publicity about this either.
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