Budget 2011
The VAT registration threshold will be £73,000 with effect from 1 April 2011. It was £5,000 when VAT was introduced to the UK!

The de-registration threshold becomes £71,000.

Fuel Scale charges are revalued with effect from the start of the next VAT accounting period beginning on or after 1 May 2011. The rates have been published. I note that HMRC has used the word ‘revalorised’; however, in my dictionary (albeit printed in circa 1966), revalorise means to restore or re-establish a value whereas revalue means to set a new value. They don’t teach English like what they used to!

With effect from Royal Assent, measures will be put in place to prevent the treating of printed matter as a separate zero-rated supply when supplied with other items at a different rate in situations where, if the supplies had been made by a single supplier, the overall supply would be treated as one. This is an anti-avoidance measure to prevent the artificial splitting of supplies to benefit from zero-rating of component items.

Hot take-away food
I have happy memories of caravan holidays spent in and around the Black Forest and one such memory is of German Schnell-Imbiβ outlets selling hot ‘Wurste’ or sausages. Anyway, it seems that from now on these treats will be even more attractive as in a recent ECJ ruling on four conjoined cases, referred to popularly in the name of one, ‘Manfred Bog’, it has been decided that such take-away food may be zero-rated. This principle is based on the fact that the ’service’ element in such supplies is minimal compared with that in a restaurant, for example.

Naturally, many UK accountancy firms are encouraging clients to submit protective claims in the hope that someday the UK Tax Authority will come to the same conclusion. I would take this idea with a pinch of salt!

However, it is understood that in the UK there is a different structure with regard to hot take-aways and it will be no surprise to learn that HMRC has already stated that this case does not change its view.

If one does submit a protective claim, presumably in the hope that some large and well-financed body will take a test-case in the UK, then it is likely that one would have to pursue the likely rejection to appeal stage (on the back of the hoped-for test case).

We will be pleased to assist any clients who wish to make a protective claim on the basis of ‘nothing ventured, nothing gained’.

Education issues
From 1 April, Academy schools will be able to recover VAT on non-business activities (non-fee-paying education). This will put in place a ‘level playing field’ in relation to Local Authority schools.

Low Value Consignment Relief (LVCR)
Currently, one can import items not exceeding £18 without paying VAT. However, it has become apparent that this relief is being abused by some businesses. The Finance Bill will introduce a reduction in the threshold to £15 and there will be an on-going review of the relief to seek to prevent inappropriate application.

Inter-charity cost sharing
Consultation is in progress to address the VAT costs that can arise where charities or educational bodies seek to work together for purposes of efficiency. An exemption in certain circumstances may be the outcome of the review.

HMRC online services
You may wish to know that HMRC online services including CT/PAYE/self-assessment and VAT will be ‘offline’ from 2 April to the 6 April for IT upgrading work. Perhaps they are carrying out a spell check?

All businesses that register for VAT on or after 1 April 2010 must file electronic returns and will not have the option of paper returns.

In addition, a business that is already VAT registered and has a turnover of £100,000 or more must file electronically after this date.

If VAT returns are filed electronically, then any VAT due must also be paid electronically.

So, what do you need to do?

• Talk to your accountant if they will be submitting your VAT return online on your behalf and discuss what you both need to do, to ensure you meet the deadline for your first online return.
• Register and enrol for the VAT online service.
• Consider whether you need to change any of your business processes for checking and signing off your VAT return.
• Identify your preferred form of electronic payment (e.g. direct debit, internet banking etc.) and set up the necessary arrangements.
• If your business has to pay your VAT by cheque, make sure you order from HMRC the necessary Bank Giro paying-in slips.

For more information, see the HMRC website or speak to your usual contact at K&H or contact Susan Kemish.

More importantly, if you run a business you must update your accounting systems and invoicing procedures to make sure you charge the correct rate of VAT on 1 January 2010. The VAT rate on 1 January 2010 returns to 17.5%. Can a business use the change in VAT rate to its advantage?

Yes, you can if you sell goods and services to customers who cannot recover the VAT. In other words, sales to the public. In our own situation, we will be encouraging our personal tax clients to let us have the information to prepare their tax return well before Christmas so that the return is completed and billed before 1 January and the 15% VAT rate applies. If you run a landscaping business and the client, say, spends a couple of thousand pounds with you each January, asking them to bring forward the work into December will save them money and – more importantly – help your cash flow.

One final word of warning. Before previous VAT changes, customers have been able to pay in advance for goods and services and pay the lower rate of VAT. This cannot be done now because the Revenue has introduced anti-avoidance provisions to prevent this happening.

Simplifying the VAT Flat Rate Scheme
From 1 April 2009, only the turnover test will apply for eligibility to use the VAT Flat Rate scheme

If you are a Sage user click here for instructions on adding a VAT code.

Instructions for changing Sage VAT codes

1. Log on to Sage.
2. Select the settings tab at the top of the screen.
3.Select configuration (If a message box appears click ‘Yes’).
4. The configuration editor box will appear.

5. Select the tax code tab at the top of the screen.

6. Double click on T3. The box below will appear.

7. Change the rate box to 15%.
8. Tick the include in VAT return box.

9. Click OK in the edit tax code box.
10. It will then take you back to the tax code screen.
11. Press the apply button.

12. Then press save & close.

Please call you usual K&H contact if you need any more information

Cash Accounting Scheme: Note that the CAS only delays the time when VAT is paid to Customs and does not change the ‘tax point’. This means that if the supply had a pre-1.12.08 tax point then VAT will be at 17.5%.

Flat Rate Scheme: New rates are now published and in most cases have been reduced. Although a quick calculation shows that the ‘benefit’ may have been reduced, of course the business will suffer less VAT on costs so overall the position should be neutral. The new rates apply from 1 December.

Motor Fuel Charges: New scales have been published to recognise the new VAT rate.

Credit Notes: Credit notes reflect changes to an invoice and so should carry the same VAT rate as the invoice did.

Sales spanning rate change: There are special rules which allow for adjustment to be made if goods or services are not actually supplied until after 1 December 2008 but where any VAT has been accounted for on invoices or payments received prior.

Tax Points: Be aware that if goods or services were supplied more than 14 days pre 1 December then where the 14 day rule applies VAT will be due at 17.5%.

Coin-op machines: These should be accounted for using the new rate from 1 December so will need to be totalled up to that date (or otherwise apportioned).

If you would like further advice please call Andy Scott us on 0118 923 5807.