Should I Voluntarily Register for VAT?
There are benefits to a voluntary VAT registration. You are able to charge VAT on your sales and claim back the VAT on your expenses. This is beneficial if you operate in a business to business environment and all your customers are VAT registered. They recover the VAT you charge (outputs) and you can recover the VAT (inputs) on your expenses. If you deal with consumers who are not VAT registered this can make you more expensive than your non-VAT registered competitor. If you sell zero-rated items and buy standard-rated items you would receive a VAT refund from HMRC if you have not yet sold anything or don’t sell anything during a VAT accounting period, you may still be able to claim VAT back on your purchases If you’re thinking about registering voluntarily, you might want to check the rules for reclaiming VAT on purchases made before registration since it is often possible to reclaim some of the VAT you are charged on goods or services that you use to set up your business. Can I backdate my VAT registration? You can apply to backdate your voluntary VAT registration by up to four years. You will have to account for VAT on any VAT taxable supplies you’ve made after your chosen date, and you won’t be able to reclaim any VAT on your purchases unless you have the right evidence, and meet the other conditions for reclaiming VAT. Responsibilities of voluntary registration If you decide to voluntarily register for VAT, you have exactly the same responsibilities as someone who must register. You must keep all required VAT records and issue VAT invoices. You also have to complete and submit a VAT Return at regular intervals, along with your payment if one is due. Do you want to know more? If you think anything covered in this blog may be relevant to you please get in touch. We’d love to help you....
read morePersonal Expenses and Tax
This crops up time and time again and so we thought we’d write up a little article to let you know where you stand with the taxman and how it works. The basic rule for work-related expenses is that they are tax deductible where they are incurred wholly and exclusively for the purpose of your job. This means that if you personally pay for something that is related to (for example) business travel and then the company reimburses you, the company can claim a tax deduction and there is no income tax charge on you. However if the company pays you for a something of personal benefit to you, then you will be taxed on it. (Unless you have an exemption.) Overnight accommodation Let’s take overnight accommodation and related expenses as an example. The bill for stopping in a hotel and the meals when you stay away on business won’t result in a tax bill (the wholly and exclusively rule). However if the company pays for extras deemed for your personal benefit, for example use of the hotel gym or a pay-per-view movie then these are taxable. If the extras are included in the room bill and not itemised separately then you won’t be taxed. But what if they are shown separately? Your company can take advantage of a little tax break where these personal expenses are exempt where on average they don’t exceed £5 per night (or £10 if you’re travelling outside the UK). It’s based on an average, so if you spend £10 on the first night, then you’re still okay provided you don’t spend anything on the second night etc. A word of warning to employers though. If they opt to pay more than the exempt amount i.e. £7 per night, the whole lot becomes taxable and not just the excess over the £5. Making best use of the rules 1. You don’t actually need to incur the expenses in order to be paid by the company, therefore the company could make the payments and you get an extra £5 tax free in your pocket. 2. Make it a company policy that where any personal expenses exceed the limit, then the excess is reimbursed to the company. If you find the above interesting and would like some further assistance, please get in touch. Courtley West...
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