VAT

02 September 2016

All businesses in the UK are required to register for VAT when their turnover reaches certain limits set by the government. For the tax year 2016/17 this threshold is set at £83,000.

The current rate of VAT charged on most services and goods is set at 20%, although certain supplies are “zero rated” or “exempt”.

In the case of “zero rated” supplies you don’t charge output VAT but you can reclaim your input VAT suffered on both services and goods received, however if the supply is “exempt” then you don’t charge or claim back any VAT.

​It may be advantageous to register for VAT if you sell mainly to VAT registered businesses even if you haven’t reached the VAT registration threshold.

To register for VAT you, or your accountant, would have to complete and sign a VAT 1 form and send to HMRC. The process usually takes between 6 – 8 weeks to complete, however you could speed up the process if you register online.

All businesses must register for VAT once they reach the threshold in a rolling 12 month period.

When you are registered for VAT you need to show your VAT registration number on all your invoices, you should always ask for a VAT invoice from your suppliers to claim back the VAT suffered on services or goods purchased.

Good record keeping is a must to complete your VAT return correctly. This is done once every quarter for as long as you are VAT registered.

There is one more thing that needs to be considered before registering for VAT and that’s what VAT scheme would suit your business most. When you register for VAT you will either be on “Standard Accounting” or “Cash Accounting”.
 
“Standard Accounting” or sometimes referred to as “Invoice Accounting” is when you have to pay VAT when you raise an invoice. The advantage here is that you also can reclaim input VAT at soon as you receive an invoice form your suppliers even if you haven’t yet paid that supplier.
 
“Cash Accounting” is when you pay VAT to HMRC on output vat and claim back on input vat at the point in which an invoice is paid.

This could provide your business with a cash low advantage.
 
Example
 
John is a bookkeeper. He issues an invoice on the 30th March for £100 + VAT which means £120 sales invoice.
 
Assuming John’s quarterly VAT deadlines are 31st March, 30th June, 30th September and 31st December.
 
The client pays John on the 1st April so the invoice falls into the quarter ending 31st March but the payment fall into the quarter ending 30th June.
 
He would have to pay £20 to HMRC by the 30 April or the 7th May if he file’s and pays online.
But if he was on cash accounting he would only have to pay the £20 by 31st July or the 7th August if he was filing online.
 
This would give him the advantage of keeping the cash for four months before having to pay HMRC.
 
Also if say the client doesn’t pay John at all then if john was on “Cash Accounting” he wouldn’t have paid HMRC and no harm was done, however if he was on “Invoice Accounting” then he would have to wait 6 months before he can write off the bad debt even if say the client has gone out of business due to bankruptcy and John knows the client won't pay.

Finally, things can be simplified further by using a Flat Rate Scheme. Industry specific rates are set by HMRC and you simply pay that percentage of your invoices over to HMRC, this may result in a lower or higher VAT payment than if you were not on the Flat Rate scheme.

If you require any assistance with VAT or any other tax matter please contact us or get in touch today by calling 0203 039 3993. 

Tax Rates for 2016-17

06 May 2016

Changes to Income Tax 

The basic rate threshold is now set at £32,000 which means earnings in excess of the personal allowance up to this threshold are taxed at 20%.

Personal allowance is now set at £11,000.

The higher tax rate bracket is at 40% on earnings between £32,001 and £150,000.

Income over £150,000 would fall into the additional tax rate which is taxed at 45%.

Personal allowance will be reduce on income over £100.000 at rate of £1 for every £2 on income, which means at £120,000 personal allowance is wiped out. The £20,000 earned over £100,000 is effectively taxed at 60%.

Dividends

The new dividends regime is now implemented. Under the new regime the first £5,000 is tax free, after that the basic rate tax is set at 7.5%. Dividends at higher rate are taxed at 32.5% and 38.1% at additional rate tax.

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Capital Gains Tax (CGT)

Capital gains tax was reduced from 18% to 10% at the basic rate and from 28% to 20% above basic rate of earning, although this reduction does not apply to residential property which will continue to be taxed at the previous higher rates.

VAT

VAT compulsory registration threshold is set at £83,000 in any 12 months period.

If you receive goods worth more than £83,000 from the EU in the UK then you must register for VAT.

You must register within 30 days of your business turnover exceeding the threshold however you may wish to register voluntarily if your turnover is below the threshold of £83,000 or if its advantageous to your business, perhaps you sell mostly to UK vat registered businesses?

To see how any of the information above affect you or your business please contact us or get in touch today by calling 0203 039 3993.

 

Personal Savings Allowance (PSA)

29 April 2016

From April 2016, everyone will get a personal allowance for interest earned on savings.The tax free allowance for basic tax rate payers is set at £1000, higher rate tax payers will only receive £500 and additional rate tax payers will not receive an allowance.Personal-Savings-Allowance-PSA-Table.JPG

Savings earning beyond the allowance is taxed at 20% for the basic rate tax payers and at 40% for the higher rate tax payers.

The introduction of personal savings allowance has caused confusions with some tax payers as it’s mistaken for the £5,000 starting savings rate where the tax rate is 0%.

There has also been confusion as to when should a taxpayer declare the savings income for tax. Interest on most fixed term savings account or bonds are paid annually but not withdrawn until the end of the fixed term or maturity of the bond.

HMRC’s deciding factor is when the interest is earned or available to the tax payer. In other words if the tax payer cannot access the interest earned then it does not count towards the PSA for that year and the taxpayer would potentially lose that allowance and be taxed at the end of the fixed term or maturity of the bonds on the whole amount earned should that amount be over the personal savings allowance.

In effect individuals could earn up to £17,000 without paying any tax if it is earned in the order of £11,000 from employment or self-employment income and up to £6,000 of income in savings where they utilise their £1,000 free allowance and the remaining is taxed at 0%.

However any employment related earnings over the personal income allowance limit of £11,000 would reduce from the £5,000 starting savings rate. If an individual for example earns £13,000 then they are £2,000 above the standard personal income allowance which means their savings allowance would reduce by the same amount (the starting saving allowance plus the personal savings allowance), giving them up to £4,000 of tax free earning from their savings.

If you require further information on how the new PSA can affect your tax position please contact us or get in touch today by calling 0203 039 3993.

Inheritance TAX – BPR

23 February 2016

Inheritance TAX – BPR

Business property relief (BPR) could reduce or even remove the inheritance tax payable on business assets.

BPR was introduced by the Labour government in 1976 to enable family business to continue and be passed down generations.

BPR is given at 100% on the following assets:

·         Shares in an Unquoted Trading Company (not traded on a stock exchange)

·         A sole trader business or interest in a business such a Partnership

BPR is given at 50% on the following assets:

·         Quoted shares controlling more than 50% of the voting rights.

·         Land, building, plant and machinery mainly used for a business carried on by a partnership or company (of the deceased) but not a sole trader

However to qualify for BPR the deceased must have owned the business or asset for minimum of two years before he or she died.

If the property or asset is given away before death BPR may be available so long as they remain a going concern until he or she dies.

If the donor survives more than seven years after the date of the gift then the property or asset will fall out of the charges so BPR becomes redundant.

If you require any assistance with any aspect of your tax affairs please contact us or get in touch today by calling 0203 039 3993.

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