The VAT act 1994 and The VAT regulations 1995 will need updating after the referendum. One key issue raised by the leave campaign during the referendum is the possibility of changing the VAT rate for domestic fuel and power from 5% to 0%. This hasn’t been decided upon yet and is unlikely to happen but the UK will now have the right to apply the reduced and zero rates.
This year for Small Business Saturday we will be offering all small businesses the opportunity to get our Cloud Bookkeeper service for a reduced rate for 6months. The offer will last 24hours so be quick to snap up the offer by emailing us at firstname.lastname@example.org
There are a number of reliefs available to owners or tenants of smaller business premises. This article lists a number that can be claimed.
Small business rate relief:
You’ll get 100% relief (doubled from the usual rate of 50%) until 31 March 2015 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.
The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
Some local councils will give you up to £1,000 off your business rates if you occupy a retail property with a rateable value of £50,000 or less. To be eligible the property must mainly be used as a shop, restaurant, cafe or drinking establishment.
You’re usually not eligible if your business provides financial services, medical services or professional services like legal advice or accounting.
Empty properties re-occupation relief
You may get 50% off your business rates if you start occupying a retail premises that’s been empty for one year or more.
Rural rate relief:
You may qualify for the rural rate relief if your business is in a rural area with a population below 3,000. The relief is between 50% and 100% off your business rates.
You can get rural rate relief if your business is:
Local councils can also:
The availability of the various reliefs will depend where you business is based. If you think you may qualify for any of the rates relief discuss your options with your local council.
- Replacement of items that are integral to the building, and
- Replacement of items that are not integral to the building.
- Immersion heaters
- Fitted kitchens and fitted white goods.
- movable furniture or furnishings, such as beds or suites,
- fridges and freezers,
- carpets and floor-coverings,
- crockery or cutlery,
- beds and other furniture
In January 2014 R3 released a business distress index which has highlighted positive figures in UK business growth for 2014. It states that 63% of UK businesses are showing at least one key indicator of growth which suggests that the recovery is bedding in and gaining ground.
There are 5 key indicators of business growth
– Investment in equipment
– Increased sales volume
– Business expansion
– Increased profits
– Growing market shares
By businesses showing positive signs on the above list, it should be the beginning of businesses increasing in confidence which will hopefully aid in their longevity
It needs to be noted however that 37% of businesses are still showing signs of distress. While this means a third of businesses may still be struggling, it is not something to panic over. Carefully and proactively looking after these businesses is the best way to proceed. Keeping a close eye on their management accounts, cash flow forecast and balance sheet is something that bookkeepers, accountants and directors themselves should be concentrating on while signs of distress are still visible.
Some key indicators to look out for within distressed businesses are:
– Creditors being more confident in pursuing their debts
– Under Investment during recession may cause for concern.
– Increase demand on products and goods can put pressure on a company’s cash flow, supply chains and business models
If businesses are prepared to fight through their struggles then their professional advisors should be prepared to support and encourage them with useful information and help along the way.
The flat rate VAT scheme for small businesses is designed to reduce administration hassle for the businesses that use it, not to reduce the amount of VAT the business pays over to HMRC, but that is often a side effect of using the scheme.
You can use the flat rate VAT scheme if you have an annual turnover up to £150,000 (net of VAT). Once registered to use the scheme, you must apply VAT to your sales at the rates required for the particular product or service (20%, 5% or zero). However, when completing the quarterly VAT returns you ignore any VAT paid on purchases, apart from large assets costing over £2000. You calculate the VAT to be paid over to HMRC as a flat percentage of your gross sales, with the percentage used determined by the trade sector which most of your sales fall into.
For example a hairdresser which is registered for the flat rate scheme must use a flat rate of 13%. On sales of £3,000 in the quarter she charges VAT at 20%: £600. She will pay VAT to HMRC of: 13% x £3,600 = £468.
You must choose to register for the flat rate VAT scheme, it will not be offered to you, even if you would be better off using the scheme. When you register you must choose which of 55 trade categories best fits the majority of sales made by your business. This is important as the flat rate percentages vary from 4% to 14.5% for different trade sectors, so an incorrect choice of trade sector can be very expensive.
You can change the trade sector you opt to use, but HMRC generally only permit a change to be made from the beginning of the current VAT quarter. You must also review the trade sector chosen on the anniversary of starting to use the flat rate VAT scheme. If your sales mix has altered so most of the sales are in a different trade sector, you must switch to using the flat rate percentage relevant to the majority of your sales.
If a company is making a profit it can make charitable donations and get relief against corporation tax. It should claim the total donations made in the accounting period on the corporation tax return for that period. However, the deduction of donations cannot change a taxable profit into a loss, or increase a taxable loss. In those cases there is no tax relief for the donations. Although, if the company is part of a group of companies, the relief for the excess donations may be passed to another member of the group.
The recipient charity cannot claim gift aid relief on the company’s donation
HMRC beat its target for tax investigation work by £2 billion in the past year, bringing the total revenue it raised through compliance work to an all-time high, according to new research.
Analysis by UHY Hacker Young shows a record £20.7billion in additional revenue was collected by HMRC through compliance work focused on tax avoidance and evasion in 2012/13 – up 11% from the £18.6billion taken in the previous year.
Roy Maugham, tax partner at the firm, said: “HMRC’s target for the amount of extra revenue it wants to claw back from compliance investigations has become massively ambitious. But it has managed to smash through that target.
“Not all of the extra tax take is from clear cut tax evasion – it is often from HMRC imposing its view of how the tax system works on SMEs and individual taxpayers through the use of an army of tax inspectors and lawyers. Businesses and taxpayers that can’t afford professional advice to deal with a HMRC investigation don’t stand a very good chance. Many feel they have no choice but to just pay up otherwise they risk being dragged into expensive litigation.”
1. Reason for the journey
Before you can claim for travel or accommodation, you need to consider why you made the journey in the first place. Was it just for business, such as to visit a client, or to pick up your new business cards?
Or was there a private element to your travel? For example, did you stop on your way home from a client meeting to do your weekly shop or another non-work-related chore?
Before you can work out if you can claim for your travel, you need to establish what the primary purpose of the journey was. If it was mixed (i.e. for both business and private), then you need to look at whether you can split the business element from the private part of the journey.
Let’s look at some examples.
Business journey: incidental private use
If your journey was primarily for business, and any private use of the journey was incidental, you can put the full cost of this travel into your business accounts.
Simon is a web designer. He travels by train from his home in Birmingham to visit a client in Brighton. While he is there, he has a walk by the sea.
The purpose of Simon’s journey to Brighton was for business. The private element, his walk by the sea, was purely incidental. Simon therefore claims the full cost of his train ticket in his accounts.
Mixed journey: different uses separable
If your journey included both business and private elements, but you can split out the private element, then you would include only the business cost in your accounts.
Jessica is a business consultant. She lives in Glasgow but has several clients who are based in Manchester. She travels to Manchester and stays there for two nights in order to attend meetings with her clients. She then decides to extend her stay to three nights so that she can attend a Premiership football match. Doing this costs her one night’s extra hotel bill and £50 in fees to change her train ticket.
The purpose of Jessica’s journey was to visit clients. She can claim the full cost of her train ticket but she cannot claim the £50 in fees to change the ticket, because she only had to do that in order to see the show, which is not a business expense.
She can also only claim two nights’ worth of hotel accommodation, not three, because the third night’s stay was for a personal purpose.
Mixed journey: no separation possible
If your journey is for mixed purposes, and you can’t split out the business and personal elements, then you can’t claim any of the cost of that journey.
Tom runs a microbrewery. He travels to his local town to bank his business takings and to do the weekly supermarket shop for his family. Because that journey was for mixed purposes, and because he can’t split the cost into business and private, Tom must not include any costs for this journey in her business’s accounts.
2. Use of your own car
When you’re self-employed you will often travel in your own car on business.
The simpler way to do this is to include your business mileage in your accounts, at HM Revenue’s approved rates. If you’ve already been doing this for some years, you must continue to use this method until you change your car. If your business is new, then as from 6th April 2013 you can use this method if your annual sales are under the current VAT limit, which is £79,000 at the moment.
Otherwise you’ll need to work out your car running costs and claim a percentage of them in your accounts, based on how much you used your car for business and how much was private. This means you have to track the mileage you travelled for all your journeys, so that you can work out the business use percentage of your car.
This second method will take longer but may save you tax if you have a car that’s comparatively expensive to run.
3. Method of transport
HM Revenue don’t require you to use the cheapest available method of transport – or even to claim only the amount that the cheapest method would have cost you. You can claim the full amount you spent on the journey.
Let’s take an example.
Elizabeth is a self-employed PR consultant working in London. She travels to Edinburgh to visit a client.
To make this journey by overnight coach would cost her £35, to go by train would be £90 standard class or £160 first class, and to fly would cost her £80.
Elizabeth decides to save time and fly.
She can claim the full £80. She’s not restricted to claiming only £35 because there would have been a cheaper way she could have reached Edinburgh.
The main issue with travel and accommodation is to make sure you’re certain that the only costs you’re including in your accounts are for business travel. And remember – if you are in any doubt about what you can and can’t claim, you should seek professional advice from an accountant who will be able to advise you.