Category Archives: VAT Planning

VAT: Disclosed and undisclosed agents

By Marcus Ward 20 July 2022

There has been substantial case law on whether a business acts as agent or principal, the most recent being:

All Answers Limited

Adecco

Lowcost Holidays Ltd

Hotels4U.com Limited

In this brief article I consider the distinction between disclosed and undisclosed agents and the VAT position of each.

Agent

An agent is a person who has been legally empowered to act on behalf of another entity (a principal). An agent may be employed to represent a client in negotiations and other dealings with third parties under his direction. The agent may be given decision-making authority. The relationship between a principal and agent can be disclosed or undisclosed to a third party. A disclosed agent acts in the name of the principal, whereas an undisclosed agent acts in his own name.

VAT Treatment

Disclosed Agents

A disclosed agent acts in the name of the principal and the client is aware that they are dealing with an agent of the principal. The relevant supply is made by the principal to the client. The agent does not make the supply to the client, but rather, to (usually) the principal in respect of commission for its services of acting as the “middle-man” in the transaction.

Output tax is due on the full selling price of the goods or services supplied by the principal. The value is not reduced by any amount paid to the agent. The agent will invoice the principal for his services and in most cases the principal will recover this as input tax (subject to the usual rules).

Undisclosed Agents

The buyer of goods or services will not (usually) know the name of the principal and will deal with the agent in the agent’s own name. The legislation states that ‘where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself’.

This means that the supply of goods or services by an undisclosed agent is treated as a simultaneous supply to, and by, the agent. The agent is treated as both the purchaser (from the principal) and seller (to the client/customer).

The agent treats the goods as its own purchase – incurring VAT charged by the principal and then declares output tax on the onward sale to the client. The input tax charged by the principal is usually recoverable by the undisclosed agent. In some circumstances, the purchase and sale will have different VAT liabilities, eg; the sale of goods may be a VATable UK supply, but the onward sale could be a zero rated export. Generally, the principal is not put in a less advantageous position by operating through an agent.

Summary

It is sometimes difficult to establish whether an entity acts as agent or principal, and if agent, whether it is in a disclosed or undisclosed capacity. Not only is the VAT treatment different, but the distinction effects where goods or services are deemed to be supplied for VAT purposes. The place of supply rules dictates such matters as VAT registration (UK and overseas) whether (and where) VAT is chargeable and the compliance obligations of the principal and agent.

It is important to analyse the terms of the relevant contracts/agreements between the agent and principal to establish the nature of the relationship. However, it also necessary to consider the commercial reality of transactions between the parties as this may differ from the contract.

VAT treatment of deposits and advance payments

By Marcus Ward 19 July 2022

One query that constantly reappears is that of the VAT treatment of deposits.

This may be because there are different types of deposits with different VAT rules for each. I thought that it would be helpful for all the rules to be set out in one place, and some comments on how certain transactions are structured, so…

Broadly, we are looking at the tax point rules. The tax point is the time at which output tax is due and input tax recoverable. More on tax points here

A business may have various commercial arrangements for payments such as:

receiving advance payments
being paid in instalments
credit sales
periodic payments for continuous supplies
security deposits for goods hired

I consider these below, as well as some specific arrangements:

Advance payments and deposits

An advance payment, or deposit, is a proportion of the total selling price that a customer pays a business before it supplies them with goods or services.

The tax point if an advance payment is made is whichever of the following happens first:

the date a VAT invoice for the advance payment is issued
the date you the advance payment is received

The VAT due on the value of the advance payment (only, not the full value of the overall supply) is included on the VAT return for the period when the tax point occurs.

If the customer pays the remaining balance before the goods are delivered or the services are performed, a further tax point is created when whichever of the following happens first:

the date a VAT invoice for the balance is issued
payment of the balance is received

So VAT is due on the balance on the return for when the further tax point occurs.

Returnable deposits

A business may ask its customers to pay a deposit when they hire goods. No VAT is due if the deposit is either:

refunded in full to the customer when they return the goods safely
kept by you to compensate you for loss or damage

Forfeit deposits

If a customer is asked for a deposit against goods or services but they then don’t buy them or use the services, it may be decided to retain the deposit. Usually the arrangement is that the customer is told/agrees in advance and it is part of the conditions for the sale. This arrangement is known as forfeit deposit. It often occurs when, for example, an hotel business makes a charge for reserving a room.

VAT should be declared on receipt of the deposit or when a VAT invoice is issued, whichever happens first.

HMRC has confirmed a new policy that output tax remains due on a deposit, even if the customer does not use the goods or services for which it was paid. This came into force with effect from 1 March 2019, cancelling HMRC’s previous rules which permitted non-refundable deposits to be treated as VAT free compensation.

Continuous supplies

If you supply services on a continuous basis and you receive regular or occasional payments, a tax point is created every time a VAT invoice is issued or a payment received, whichever happens first. An article on tax planning for continuous supplies here

If payments are due regularly a business may issue a VAT invoice at the beginning of any period of up to a year for all the payments due in that period (as long as there’s more than one payment due). If it is decided to issue an invoice at the start of a period, no VAT is declared on any payment until either the date the payment is due or the date it is received, whichever happens first.

Credit and conditional sales

This is where the rules can get rather more complex.

A credit sale means the sale of goods which immediately become the property of the customer but where the price is paid in instalments.
A conditional sale is where goods are supplied to a customer but the goods remain the seller’s property until they are paid for in full.

The tax point for a credit sale or a conditional sale is created at the time you supply the goods or services to your customer. This is the basic tax point and is when you should account for the VAT on the full value of the goods.

This basic tax point may be over-ridden and an actual tax point created if a business:

issues a VAT invoice or receives payment before supplying the goods or services
issues a VAT invoice up to 14 days after the basic tax point

Credit sales where finance is provided to the customer

If goods are offered on credit to a customer and a finance company is not involved, the supplier is financing the credit itself. If the credit charge is shown separately on an invoice issued to the customer, it will be exempt from VAT. Other fees relating to the credit charge such as; administration, documentation or acceptance fees will also be exempt. VAT is declared on the full value of the goods that have been supplied on the VAT Return for that period.

If goods or services are supplied on interest free credit by arranging with a customer for them to pay over a set period without charging them interest then VAT is declared on the full selling price when you make the supplies.

Credit sales involving a finance company

When a business makes credit sales involving a finance company, the finance company either:

becomes the owner of the goods, eg; when a purchase is financed by a hire-purchase agreement
does not become the owner of the goods, eg; when a purchase is financed by a loan agreement

Hire purchase agreements

If the finance company becomes the owner of goods, the business is supplying the goods to the finance company and not the customer. There is no charge for providing the credit, so the seller accounts for VAT on the value of the goods at the time they are supplied to the finance company. Any commission received from the finance company for introducing them to the customer is usually subject to VAT.

Loan agreements

If the finance company does not become owner of the goods, the supplier is selling the goods directly to its customer. The business is not supplying the goods to the finance company, even though the finance company may pay the seller direct. VAT is due on the selling price to the customer, even if the seller receives a lower amount from the finance company. The contract between the customer and the finance company for credit is a completely separate transaction to the sale of the goods.

Specific areas

The following are areas where the rules on the treatment may differ

Cash Accounting Scheme

If a business uses the cash accounting scheme here it accounts for output tax when it receives payment from its customers unless it is a returnable deposit

Property

Care should be taken with deposits in property transactions. This is especially important if property is purchased at auction.

These comments only apply to the purchase of property on which VAT is due (commercial property less than three years old or subject to the option to tax). If a deposit is paid into a stakeholder, solicitor’s or escrow account (usually on exchange) and the vendor has no access to this money before completion no tax point is created. Otherwise, any advance payment is treated as above and creates a tax point on which output tax is due to the extent of the deposit amount. Vendors at auction can fall foul of these rules. If no other tax point has been created, output tax is due on completion.

Tour Operators’ Margin Scheme (TOMS)

TOMS has distinct rules on deposits. Under normal VAT rules, the tax point is usually when an invoice is issued or payment received (as above). Under TOMS, the normal time of supply is the departure date of the holiday or the first occupation of accommodation. However, in some cases this is overridden. If the tour operator receives more than one payment, it may have more than one tax point. Each time a payment is received exceeding 20% of the selling price, a tax point for that amount is created. A tax point is also created each time the payments received to date (and not already accounted for) exceed 20% when added together. There are options available for deposits received when operating TOMS, so specific advice should be sought.

VAT Registration

In calculating turnover for registration, deposits must be included which create a tax point in the “historic” test. Care should also be taken that a large deposit does not trigger immediate VAT registration by virtue of the “future” test. This is; if it is foreseeable at any time that receipts in the next 30 days on their own would exceed the turnover limit, currently £85,000, then the registration date would be the beginning of that 30-day period.

Flat Rate Scheme

A business applies the appropriate flat rate percentage to the value of the deposit received (unless it is a returnable deposit). In most cases the issue of an invoice may be ignored if the option to use a version of cash accounting in the Flat Rate Scheme is taken. More on the FRS here and here

Please contact us if you have any queries on this article or would like your treatment of deposits reviewed to:

Ensure treatment is correct to avoid penalties, and/or;
Establish whether planning is available to properly defer payments of output tax under the tax point rules.

VAT: Financial Services – Flowchart

By Marcus Ward 30 June 2022

FS Intermediary – flowchart Download

Financial Services (FS) is a complex area of VAT and the legislation and case law add to that complexity. For ease, I have made a flowchart which I hope may help.

The supply of FS intermediary services may be exempt from VAT, but other types of supplies relating to FS are standard rated (advice, marketing, providing information etc).

With new technology advancing all the time, this adds more difficulties in establishing the correct VAT treatment.

VAT: The Reverse Charge

By Marcus Ward 24 June 2022

Normally, the supplier is the person who must account to the tax authorities for any VAT due on the supply. However, in certain situations, the position is reversed, and it is the customer who must account for any VAT due. Don’t get caught out!

Purchasing services from abroad

These will be obtained free of VAT from an overseas supplier. What is known as the ‘reverse charge’ (RC) procedure must be applied. Where the RC applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must account for output tax, calculated on the full value of the supply received, and (subject to partial exemption and non-business rules) include the VAT charged as input tax.

The effect of these provisions is that the reverse charge has no net cost to the recipient if he can attribute the input tax to taxable supplies and can therefore reclaim it in full. If he cannot, the effect is to put him in the same position as if had received the supply from a UK supplier rather than from one outside the UK. Thus, creating a level playing field between purchasing from the UK and overseas.

Accounting for VAT and recovery of input tax.

Where the RC procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must

account for output tax, calculated on the full value of the supply received, in Box 1
(subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4
include the full value of the supply in both Boxes 6 and 7

Value of supply

The value of the deemed supply is to be taken to be the consideration in money for which the services were in fact supplied or, where the consideration did not consist or not wholly consist of money, such amount in money as is equivalent to that consideration. The consideration payable to the overseas supplier for the services excludes UK VAT but includes any taxes levied abroad.

VAT: The importance of Transfer of a Going Concern rules. The Haymarket case

By Marcus Ward 6 June 2022

Latest from the courts

In the First Tier Tribunal (FTT) case of Haymarket Media Group Limited (Haymarket) the issue was whether the sale of Teddington TV Studios qualified as a VAT free Transfer of a Going Concern (TOGC).

Background

The site in question was subjected to an Option To Tax (OTT) by the supplier. The sale of the property was with the benefit of planning consent for the development of flats and houses on the site after demolition of the TV studios.

Subject of the appeal

The transferor/vendor had previously let a small building on the site to the purchaser’s advisers and, on this basis, the sale was structured to be a TOGC as a property rental business. HMRC raised an assessment as it considered that neither a property rental business, nor a property development business had been transferred.

Decision

The appeal was dismissed. The FTT found that, despite the short lived and minor letting, this did not constitute a business. Further, that even if this had been a business, the contract required vacant possession so a business could not have been continued.

The contention that a property development business was being carried on was also rejected. Despite significant costs being incurred by Haymarket in obtaining the planning permission, the intention* was always to sell the site to a developer, rather than the appellant carrying out the development itself (there was no meaningful work being carried out on the site). The fact that planning permission was obtained did not mean that there was an ongoing property development business which could be transferred.

* The importance of “intention” in VAT is considered here and here.

Technical

In order for a transaction to qualify for a VAT free TOGC, ALL of the following conditions must be met:

the assets must be sold as a business, or part of a business, as a going concern
the assets must be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business, as that carried on by the transferor in relation to that part (HMRC guidance uses the words “intend to use…” which, in some cases may provide additional comfort)
there must be no break in trading
where the seller is a taxable person (VAT registered) the purchaser must be a taxable person already or immediately become, as a result of the transfer, a taxable person
where only part of a business is sold it must be capable of separate operation
there must not be a series of immediately consecutive transfers

In this case, the first, second and third tests was failed leaving the supply to be VAT-able as a result of the OTT.

More on the complex subject of TOGCs including case law here, here, here, and here.

Commentary

TOGCs are often a minefield for taxpayers and their advisers, especially if property is involved. Not only is land law and the relevant VAT legislation complex, but property transactions are usually high value, with a lot of VAT at stake (the VAT in this case was £17 million). Additionally, they are often “one-offs” and frequently outside the usual commercial expertise of people running the business. We strongly advise that comprehensive technical advice is always obtained when TOGC is mooted by one side or the other, particularly when the relevant asset is involved in property letting or development.

New VAT penalties and interest charges

By Marcus Ward 18 May 2022

Further to my article explaining the changes to late returns and payment penalties, HMRC has now published further guidance on new regime.

These changes, originally intended to be introduced on I April 2022 have been delayed until 1 January 2023 (for VAT periods starting on, or after, this date).

From 1 January 2023, HMRC will charge late-payment interest from the day a VAT payment is overdue to the day the VAT is paid, calculated at the Bank of England base rate plus 2.5%.

Period of familiarisation

HMRC say that to give businesses time to get used to the changes, it will not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, if the tax is paid in full within 30 days of the payment due date.

More on late returns here and on late payments here.

VAT treatment of deposits and advance payments

By Marcus Ward 16 May 2022

One query that constantly reappears is that of the VAT treatment of deposits.

Broadly, we are looking at the tax point rules. The tax point is the time at which output tax is due and input tax recoverable. More on tax points here

A business may have various commercial arrangements for payments such as:

receiving advance payments
being paid in instalments
credit sales
periodic payments for continuous supplies
security deposits for goods hired

I consider these below, as well as some specific arrangements:

Advance payments and deposits

An advance payment, or deposit, is a proportion of the total selling price that a customer pays a business before it supplies them with goods or services.

The tax point if an advance payment is made is whichever of the following happens first:

the date a VAT invoice for the advance payment is issued
the date you the advance payment is received

The VAT due on the value of the advance payment (only, not the full value of the overall supply) is included on the VAT return for the period when the tax point occurs.

If the customer pays the remaining balance before the goods are delivered or the services are performed, a further tax point is created when whichever of the following happens first:

the date a VAT invoice for the balance is issued
payment of the balance is received

So VAT is due on the balance on the return for when the further tax point occurs.

Returnable deposits

A business may ask its customers to pay a deposit when they hire goods. No VAT is due if the deposit is either:

refunded in full to the customer when they return the goods safely
kept by you to compensate you for loss or damage

Forfeit deposits

VAT should be declared on receipt of the deposit or when a VAT invoice is issued, whichever happens first.

HMRC announced via its Policy Paper Customs Brief 13 (2018) that the VAT treatment of forfeit, or “no-show” deposits changed from 1 March 2019.

The changes affect businesses that receive payments for services and part payments for goods and the customer does not:

use the service
collect the goods

Typically, this could be a hotel which reserves a room for a deposit which is retained if the customer is a no-show.

Previous treatment

Prior to 1 March 2019, charges for unfulfilled supplies and the retention of customer deposits are treated as outside the scope of VAT (and consequently VAT free). This is on the basis that either no supply had been made or, in the alternative, the retention of the deposit represents compensation for a loss, or the costs necessarily incurred.

Practically, this means that output tax is payable on the initial deposit, but this is adjusted if subsequently there is a no-show or goods are not collected.

Current treatment

From 1 March 2019, HMRC’s policy is that output tax is due on all retained payments for unused services and uncollected goods. Where businesses become aware that a customer has decided not to take up goods or services after paying, the transaction will remain subject to VAT. No adjustments or refunds of VAT will be allowed for those retained payments.

This means that when a non-repayable deposit is taken, VAT will always be due on the payment, regardless of subsequent events. However, if a deposit is returned, there will be no VAT due on it.

The rationale for the new treatment, according to HMRC is that; “because when a customer makes or commits to make a payment, it is for a supply. It cannot be reclassified as a payment to compensate the supplier for a loss once it is known the customer will not use the goods or services”

Continuous supplies

If a business supplies services on a continuous basis and it receives regular or occasional payments, a tax point is created every time a VAT invoice is issued or a payment received, whichever happens first. An article on tax planning for continuous supplies here

Credit and conditional sales

This is where the rules can get rather more complex.

A credit sale means the sale of goods which immediately become the property of the customer but where the price is paid in instalments.
A conditional sale is where goods are supplied to a customer but the goods remain the seller’s property until they are paid for in full.

This basic tax point may be over-ridden and an actual tax point created if a business:

issues a VAT invoice or receives payment before supplying the goods or services
issues a VAT invoice up to 14 days after the basic tax point

Credit sales where finance is provided to the customer

Credit sales involving a finance company

When a business makes credit sales involving a finance company, the finance company either:

becomes the owner of the goods, eg; when a purchase is financed by a hire-purchase agreement
does not become the owner of the goods, eg; when a purchase is financed by a loan agreement

Hire purchase agreements

Loan agreements

Specific areas

The following are areas where the rules on the treatment may differ

Cash Accounting Scheme

If a business uses the cash accounting scheme here it accounts for output tax when it receives payment from its customers unless it is a returnable deposit

Property

Care should be taken with deposits in property transactions. This is especially important if property is purchased at auction.

Tour Operators’ Margin Scheme (TOMS)

VAT Registration

Flat Rate Scheme

Please contact us if you have any queries on this article or would like your treatment of deposits reviewed to:

Ensure treatment is correct to avoid penalties, and/or;
Establish whether planning is available to properly defer payments of output tax under the tax point rules.

VAT: The importance of due diligence. The 50 Five (UK) Limited case

By Marcus Ward 10 May 2022

Latest from the courts

In the First Tier Tribunal (FTT) case of 50 Five (UK) Limited the issue was the VAT rate applicable to energy saving materials. An additional twist was that there was a sale of the business between the tax point of the relevant supplies and HMRC’s assessment.

Background

The appeal was brought in the name of the Appellant in respect of assessments raised by HMRC against the company prior to the date on which it was purchased by the present owners. The present owners were not made aware of the assessment at the time of purchase. It had not been disclosed to them as part of the due diligence which was undertaken.

The Appellant’s business was that of supply and installation of heating and hot water systems. The customers were supplied with fully installed systems. The Appellant did not ask the customers to separately source the parts for such systems and then simply fit them. These supplies were treated as those of energy saving materials and the reduced rate of 5% was applied.

HMRC raised an assessment after taking the view that the supply should have properly been standard rated at 20%.

Decision

The FTT decided that legislation which permits the sale of energy saving materials at the reduced rate of VAT apply only where the supply of those materials is independent of an installation service. In this case, as the Appellant was the provider of the goods, and also the installer, the supply to the end customer was standard rated (a composite supply).

It was noted that this outcome was counter intuitive and the result does indeed seem unfair to the taxpayer, but as there was no reasonable prospect of the appeal succeeding, it was struck out. The assessment and interest was now payable by the new owners.

Commentary

An unfortunate outcome for the new owners, but it highlights three VAT issues:

always carry out appropriate due diligence when buying a business. VAT is often an issue and if the buyer had discovered the assessment, it could have either abandoned the purchase, or negotiated on the price
never assume that a lesser rate of VAT applies without carrying out appropriate research or seeking advice
always consider whether a supply is separate or composite. This is a difficult area of the tax as the amount of case law testifies

The only recourse the new owners have now is taking action against the sellers of the business.

VAT: Global Accounting simplification

By Marcus Ward 10 May 2022

VAT: Second Hand Scheme – Global Accounting simplification

Overview

The problem with the VAT Second-Hand Goods Scheme is that details of each individual item purchased, and then later sold, has to be recorded. This requirement can lead to a lot of paperwork and an awful lot of administration which, obviously, many businesses are not too keen to comply with.

Global Accounting is an optional, simplified variation of the Second Hand Margin Scheme (MS).

It differs from the standard MS because rather than accounting for the margin achieved on the sale of individual items VAT is calculated on the margin achieved between the total purchases and total sales in a particular accounting period without the requirement to establish the mark up on each individual item. It is beneficial if a business buys and sells bulk volume, low value eligible goods, and is unable to maintain the detailed records required of businesses who use the standard MS.

There two significant differences in respect of Global Accounting compared to the standard MS. The first difference is that losses on an item are automatically offset against profits on items. Thus losses and profits are offset together in the period. In the standard MS no VAT is due if a loss is made on an item, but that loss cannot be offset against any other profit. There is also a timing advantage with Global Accounting because all purchases made in the period are included, even if those goods are not actually sold in the same period.

Goods which may be included in Global Accounting

Global Accounting can be used for all items which are eligible under the standard MS. However, the following goods cannot be included in Global Accounting:

individual items costing more than £500 (although these can be accounted for via the standard MS)
aircraft, boats and outboard motors,
caravans and motor caravans,
horses and ponies, and
motor vehicles, including motorcycles; except those broken up for scrap.

Starting to use the scheme

When a business starts using Global Accounting, it may find that it already has eligible stock on hand. It may include the value of this stock when it calculates the total purchases at the end of the first period. If a business does not take its stock on hand into account, it will have to pay VAT on the full price, rather than on the margin achieved, when it is sold.

Note: any goods bought on an invoice which shows a separate VAT figure are not eligible for resale under the scheme.

The calculation

VAT is calculated at the end of each tax period. Because you can take account of opening stock in your scheme calculations, you may find that you produce a negative margin at the end of several periods. In other words, your total purchases may exceed your total sales. In such cases, no VAT is due. But you must carry the negative margin forward to the next period as in the following example:

Period One

a) Total purchase value of stock on hand 10,000
b) Total purchases 2,000
c) Total sales 8,000

Margin = c – (a+b) = (4,000)

Because this is a negative margin there is no VAT to pay. However, negative margin must be carried forward into the next period as follows:

Period Two

a) Negative margin from previous period 4,000
b) Total purchases 1,000
c) Total sales 7,000
d) Margin = c – (a + b), sales minus (purchases plus negative margin), £7,000 – (£1,000 + £4,000) 2,000
e) VAT due = margin (£2,000) × VAT fraction (1/6) 333.33

There is no negative margin to carry forward this time. Therefore, in the third period, the margin is calculated solely by reference to sales less purchases.

The negative margin may only be offset against the next Global Accounting margin. It cannot be offset against any other figure or record.

Global Accounting Records and Accounts

A business does not need to keep all the detailed records which are required under the normal MS – for instance, you do not have to maintain a detailed stock book.

Global Accounting records do not have to be kept in any set way but they must be complete, up to date and clearly distinguishable from any other records. A business must keep records of purchases and sales as set out below, together with the workings used to calculate the VAT due.

If HMRC cannot check the margins declared from the records, VAT will be due on the full selling price of the goods sold, even if they were otherwise eligible for the scheme.

Buying goods under Global Accounting

When a business buys goods which it intends to sell under Global Accounting it must:

check that the goods are eligible for Global Accounting
obtain a purchase invoice. If a business buys from a private individual or an unregistered entity, the purchaser should make out the invoice at the time the goods are purchased. If purchased from another VAT-registered dealer, the dealer must make out the invoice at the time of sale, and
enter the purchase details of the goods in your Global Accounting purchase records. The purchase price must be the price on the invoice which has been agreed between you and the seller.

You cannot use the scheme if VAT is shown separately on the invoice.

If you are buying from a private individual or an unregistered business, you must make out the purchase invoice yourself.

When selling goods under Global Accounting

If the purchase conditions above apply, Global Accounting may be used when the goods are sold by:

recording the sale in the usual way
issuing a sales invoice for sales to other VAT-registered dealers and keeping a copy of the invoice, and
transferring totals of copy invoices to the Global Accounting sales record or summary
you must be able to distinguish at the point of sale between sales made under Global Accounting and other types of transaction

Leaving the scheme

If a business stops using Global Accounting for any reason, it must make a closing adjustment to take account of purchases for which it has taken credit, but which have not been sold (closing stock on hand). The adjustment required does not apply if the total VAT due on stock on hand is £1,000 or less. In the final period for which the business uses the scheme, it must add the purchase value of its closing stock to the sales figure for that period. In this way VAT will be paid (at cost price) on the stock for which the business previously had credit under the scheme.

Items sold outside the scheme

If goods are sold which had been included in a business’ Global Accounting purchase (for example, they are exported), a business must adjust its records accordingly. This is done by subtracting the purchase value of the goods sold outside the scheme from the total purchases at the end of the period.

Stolen or destroyed goods

If a business loses any goods through breakage, theft or destruction, it must subtract their purchase price from your Global Accounting purchase record.

Repairs and restoration costs

A business may reclaim the VAT it is charged on any business overheads, repairs, restoration costs, etc. But it must not add any of these costs to the purchase price of the goods sold under the scheme.

For further advice on any global accounting, used goods schemes, or any other special VAT schemes please contact me.

VAT: Updated Road Fuel Scale Charges from 1 May 2022

By Marcus Ward 25 April 2022

Access the updated VAT Fuel Scale Charges to apply from the 1 May 2022 here They will apply VAT periods starting on or after that date.

HMRC has published new VAT Road Fuel Scale Charges (RFSC) which apply from 1 May 2022 to 30 April 2023.

RFSC

If a business reclaims VAT incurred on road fuel, it will be required recognise the private use element of the fuel.

The RFSC simplifies accounting for VAT on the private use of fuel by motorists. The RFSC is calculated according to a car’s CO2 emissions and the fixed charge is added to output VAT, on the VAT return (in effect, the business supplies to fuel to the individual). The use of this charge is optional, the alternative is to keep detailed mileage records.

Details of these, and other motoring expenses here.

A quick RFSC calculator/ready-reckoner here.