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Monthly Archives: March 2024
HMRC plans to make permanent cuts to VAT helpline now reversed.
The VAT helpline will be open for five days every month ahead of the deadline for filing VAT returns – outside of this time, customers will again be directed to use HMRC’s online services.
CIOT stated that:
“We are deeply dismayed that, so soon after the criticisms levelled at them by the Public Accounts Committee, and in the light of an inconclusive evaluation, HMRC have decided to make these big, permanent cuts to the help they provide to taxpayers”.
This again illustrates that HMRC cannot cope and that the service provided to businesses is truly awful.
Update! One-day later…
HMRC has now reversed the above planned cuts less than 24 hours after they were announced!
After strong criticism from many sources HMRC said that while “making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity”, the pace of this change “needs to match the public appetite for managing their tax affairs online”.
“We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.”
A statement on behalf of the Treasury Committee noted it was “extremely pleased to see that common sense has prevailed”, called the planned cuts “mismanaged from the beginning” and commented that the announcement was “ill-advised”.
“We welcome the decision to reverse yesterday’s announcement. While we do not oppose expansion of digital services for those who want to use them, we remain entirely unconvinced that HMRC is adequately prepared to impose such a significant change in how it serves taxpayers. It further pondered over the extent to which the department is prioritising its own needs over those of law-abiding and vulnerable taxpayers.
Customs: Example declarations for exports from GB updated
This Guidance provides examples to help with the completion of declarations on the Customs Declarations Service for exports. It has been updated with the addition of a standard pre-lodged export declaration document.
HMRC videos and seminars for new businesses on VAT basics
HMRC has updated its guidance to businesses on VAT. The helpful instruction includes: email updates, videos and seminars which cover such subjects as:
- VAT basics
- registration
- registering and joining webinars
- accounting Schemes
- late submission and payment penalties and interest changes
- error corrections
- the reverse charge for construction services
- accounting for VAT on the sale of cars on finance
- HMRC community forums
VAT and influencers
A Warning
There has been a great deal of debate on the subject of VAT and influencers, with HMRC issuing assessments for underdeclared output tax on “gifts” received by them.
What is an influencer?
An influencer is someone who has certain power to affect the purchasing decisions of others because of their; authority, knowledge, position, or relationship with their audience. These individuals are social relationship assets with which brands can collaborate to achieve their marketing objectives.
In recent years the growth of social media means that influencers have grown in importance. According to recent statistics, the projected number of global social media users in 2023 was 4.89 billion. This is a 6.5% rise from the previous year.
What is the VAT issue?
Business gifts to influencers
A business is not required to account for VAT on certain dealings if they meet certain conditions. For free gifts, the condition is that the total cost of all gifts to the same person is less than £50 in a 12-month period. Further, if the goods are “free samples” – used for marketing purposes and provided in a quantity that lets potential customers test the product, then the £50 rule does not apply. If an influencer receives free gifts or samples, there are no VAT implications for them.
HMRC Action
However, we understand that HMRC has decided that, in the majority of cases, the supply of goods to influencers were not ‘free gifts” but rather consideration for a taxable supply of marketing or advertising. They were also not considered free samples as, generally, influencers would not be in the position to test the goods, having no expertise in the field. It is also concluded that influencers, in most cases were “in business“.
The payment for the marketing, promotion or advertising services (the VAT treatment is similar, regardless of how the services are categorised) is by way of the supply of goods, rather than monetary consideration. That is; consideration is flowing in both directions. Consequently, output tax is due on this amount if the influencer is, or should be, VAT registered.
What is the value of the supply?
Non-monetary consideration
Non-monetary consideration includes goods or services supplied as payment, for example in a “barter” (including part exchange) agreement. If the supply is for a consideration not consisting or not wholly consisting of money, its value shall be taken to be such amount in money as, with the addition of the VAT chargeable, is equivalent to the consideration. Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply is deemed to be for such part of the consideration as is properly attributable to it.
In determining the taxable amount, the only advantages received by a supplier that are relevant are those obtained in return for making the supply should be recognised. Non-monetary consideration has the value of the alternative monetary payment that would normally have been given for the supply.
VAT Registration
If an influencer receives gifts valued at over £90,000 in any 12-month period, or these gifts plus other monetary consideration, VAT registration is mandatory.
More on business promotions here.
VAT: Top 10 Tips for small businesses and start-ups
- Should you be registered for VAT?
If your income is above £90,000 pa of taxable supplies, you have no choice. But you can voluntarily register if below this threshold. There are significant penalties for failure to register at the correct time.
- Advantages of VAT registration: VAT recovery on expenses plus, perhaps; gravitas for a business
- Disadvantages: administration costs plus a potential additional cost to customers if they are unable to recover VAT charged to them (eg; they are private individuals) which could affect your competitiveness Potential for penalties and interest for getting it wrong.
More on voluntary registration here
- Even non-registered businesses can save VAT
- Look to use non-VAT registered suppliers, or non-EU suppliers (however, the reverse charge may count towards your registration turnover)
- If you are purchasing or leasing commercial property, consider looking for non-opted property or raise the issue of your inability to recover VAT in negotiations on the rent
- Take advantage of all zero, exempt and reduced rates of VAT reliefs available
- Challenge suppliers if you consider that a higher rate of VAT has been charged than necessary
- Consider using the appropriate simplification scheme
- Flat Rate Scheme
- Cash Accounting (helps avoid VAT issues on bad debts)
- Annual Accounting (can generate real, cash flow and/or administrative savings)
- Margin and Global schemes for second-hand goods
Further details here
- Make sure you recover all pre-registration and/or pre-incorporation VAT
VAT incurred on goods on hand (purchased four years ago or less) and services up to six months before VAT registration is normally recoverable.
- Are your VAT liabilities correct?
Many businesses have complex VAT liabilities (eg; financial services, charities, food outlets, insurance, cross border suppliers of goods or services, health, welfare and education service providers, and any business involved in land and property). A review of the VAT treatment may avoid assessments and penalties and may also identify VAT overcharges made which could give rise to reclaims. Additionally, these types of business are often restricted on what input tax they can reclaim. Check business/non-business apportionment and partial exemption restrictions.
More on charities here
- Have you incurred VAT elsewhere in the EU?
You may be able to claim this from overseas tax authorities. Details here
- Do you recover VAT on road fuel or other motoring costs?
Options for VAT on fuel: keep detailed records of business use or use road fuel scale charges (based on CO2 emissions)
If you need a car; consider leasing rather than buying. 50% of VAT on lease charge is potentially recoverable, plus 100% of maintenance if split out on invoice. VAT on the purchase of a car is usually wholly irrecoverable.
More here
- Remember: VAT on business entertainment is usually not recoverable but VAT on subsistence and staff entertainment is.
More here
- Pay proper attention to VAT
- keep up to date records
- submit VAT returns and pay VAT due on time (will avoid interest, potential penalties and hassle from the VAT man)
- claim Bad Debt Relief (BDR) on any bad debts over six months old
- contact HMRC as soon as possible if there are VAT payment problems or if there are difficulties submitting returns on time
- ensure that the business is paying the right amount of tax at the right time – too little (or too late) may give rise to penalties and interest – too much is just throwing money away
- check the VAT treatment of ALL property transactions
- Challenge any unhelpful rulings or assessments made by HMRC
HMRC is not always right. There is usually more than one interpretation of a position and professional help more often than not can result in a ruling being changed, or the removal or mitigation of an assessment and/or penalty.
We can assist with any aspect of VAT. You don’t need to be a tax expert; you just need to know one… We look after your VAT so you can look after your business.
VAT: Forthcoming changes to HMRC services: GOV.UK One Login
HMRC has published guidance on changes to logging into its services. GOV.UK One Login is a new way of signing in to government services. It is said to provide a simple way for you to sign in and prove the user’s identity using an email address and password.
Over time it will replace all other sign in routes including Government Gateway that many businesses currently use.
A user will automatically be asked to create a GOV.UK One Login. It will not happen for everyone at the same time, and you do not need to do anything unless HMRC ask you to.
When you are asked to create a GOV.UK One Login you may need to go through a new authorisation and identity verification process, so will need to have some identification documents ready such as a passport or driving licence.
If you are a tax agent, or an organisation with a business tax account, you will continue to use Government Gateway until you’re asked to create a GOV.UK One Login.
At the moment, you can only use GOV.UK One Login to access some government services, which currently does not include VAT. In the future, you will be able to use it to access all services on GOV.UK.