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An overview of some of the VAT issues facing SMEs including partial exemption; golf clubs; mileage, subsistence and entertainment; and VAT accounting when trading with Europe.
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VAT SEMINARFOR GORINGE ACCOUNTANTS
.
22 January 2014
AGENDA
• How VAT normally works
• Partial exemption
• Mileage, subsistence and entertainment
• VAT accounting when you trade with
Europe
“NORMAL” VAT ACCOUNTING
• Box 6 - supplies made by you
• Box 7 - supplies made to you
• Box 1 - VAT on your supplies “Output tax”
• Box 4 - VAT on supplies to you “Input tax”
• Box 5 – Amount due to/from HMRC
SUPPLIES
• Your supplies include sales, services,
proceeds of capital assets
• Supplies to you include purchases,
overheads and capital expenditure
• VAT recovery depends on making taxable
supplies
• Taxable includes zero-, reduced- and
standard-rated supplies
ZERO & REDUCED -
EXAMPLES
• Zero: food (not catering), books, new
housing, passenger transport and
children’s clothing
• Reduced: children’s car seats, domestic
fuel and power, some caravans
EXEMPT SUPPLIES
• Exempt input tax irrecoverable unless de
minimis
• Partial exemption
• Exempt supplies include
– Land and buildings (option to tax)
– Finance (intermediary not advisory)
– Bookmakers, undertakers
– Health and most welfare
– Sports facilities by non-profit-distributing bodies
MEMBERS’ GOLF CLUBS
• Subscriptions £400K (exempt)
• Green fees £75K (Bridport)
• Bar sales £200K (taxable)
• Drinks purchased £100K plus VAT
• Course expenses £300K plus VAT
• VAT returns assuming standard method?
GOLF CLUB VAT RETURN
• Before Bridport:– Box 1 £55K
– Box 4 £29K
– Box 5 £26K
• After Bridport– Box 1 £40K
– Box 4 £20K
– Box 5 £20K
• Four years?
• Capital goods scheme
MILEAGE
• How to limit claims to VAT on business mileage?
• Claim all VAT on road fuel and account for VAT on fuel scale charge on each vehicle; or
• Don’t claim any VAT on mileage; or
• Keep detailed record of mileage and business/private split and
• Claim only VAT on business mileage with no fuel scale charge
• Claim VAT on employees’ business mileage: 1/6 x fuel element of amount paid (invoices needed)
SUBSISTENCE – WHAT VAT
CAN YOU CLAIM?
• Claim no VAT on flat rate allowances
• VAT paid on meals for employees
• If only proportion of cost paid, claim 1/6 of amount paid
• VAT on cost of canteen facilities for staff
• VAT on meals taken by owner or director when away from normal place of work on business trip
• VAT on hotels or similar where employees or owner away from normal place of work on business
BUSINESS ENTERTAINMENT
• No claims allowed
• Any free provision of hospitality to a person other than an employee
• Entertainment includes any non-reciprocal provision for no charge of– Food or drink
– Accommodation
– Theatre and concert tickets
– Sporting events and facilities
– Entry to clubs and nightclubs
– Using yachts or aircraft to entertain
STAFF ENTERTAINMENT
• Can claim VAT
• Includes temporary staff, casuals, helpers or stewards at events
• Excludes former employees (including pensioners), job applicants and partners, relatives and friends of employees
• Christmas party for staff only (or staff and directors) – claim all the VAT
• Just directors – claim no VAT
• Staff and their guests for no charge – restrict claim to staff element
OVERSEAS CUSTOMERS
• Can claim VAT
• Must be reasonable in scale and
character
• Output tax charge unless “strict
business purpose”
INTRA-EU TRADE – WHAT MUST YOU
DO?
B2C and non-EU
What do you do ?
What returns must you make ?
What entries are needed ?
(£100)
How often must you
make these returns?
What are the deadlines ?
EU cross-border B2B transactions
BUYING GOODS – WHAT’S NEEDED
What do you do?
• Provide your UK VAT number so VAT not charged
What returns
must you
make?
• VAT return
• Intrastat “arrivals” supplementary declaration
• Electronic
BUYING GOODS – VAT RETURNS
• Box 2 - £20 (“acquisitions”)
• Box 4 - £20 (assumes you can claim all your input tax)
• Box 7 - £100
• Box 9 - £100
What entries are needed?
(£100)
• Monthly or quarterlyHow often must you make these
returns?
• Month + 7 days to submitWhat are the deadlines?
BUYING GOODS – INTRASTAT
ARRIVALSWhat returns must
you make? • EU “imports” > £1,200,000 a year
What entries are needed?
(£100)
• Movements of goods only (but not just purchases)
• Commodity codes
• Monthly
• 21st day of the following calendar month (e.g. return covering import today must be done by 21 February 2014)
What are the
deadlines?
How often must you make these
returns ?
• Used to measure intra-EU trade• Criminal regime
BUYING SERVICES - WHAT’S NEEDED
• Assume within “general B2B rule”
• Provide your UK VAT number so
VAT not chargedWhat do you do?
• VAT return onlyWhat
returns must you make?
GENERAL B2B RULE
• Land-related services , e.g. estate agent re specific
property
• Hiring means of transport
• Admissions to events
• Cross-border services supplied by one
business to another
• No VAT charged by supplier
• Purchaser applies “reverse charge”
• Covers all services except:
BUYING SERVICES – VAT
RETURNS
• Box 6 - £100
• Box 7 - £100
• Box 1 - £20 (=reverse charge)
• Box 4 - £20 (assumes you can claim all your input tax)
• NB – not Box 9
What entries
are needed? (£100)
SELLING GOODS – WHAT’S NEEDED
• UK vendor does not charge VAT provided:
• Customer provides VAT number
with country prefix
• Commercial evidence goods have left UK is obtained
within 3 months of the transaction
• Invoice must state why VAT is not charged
What do
you do?
• VAT return
• EC Sales List
• Intrastat “dispatches”
supplementary declaration
What
returns
must you
make?
SELLING GOODS – VAT RETURNS
• Box 6 - £100
• Box 8 - £100
What
entries
are
needed?
(£100)
SELLING GOODS – EC SALES LISTS
• Penalties for late or non-submission
• Name, VAT number and amount sold to each EU VAT-
registered customer
• Scope for smaller exporters to make less detailed ESL
What entries are needed?
• Monthly if annual sales of goods to
EU businesses > £35k
• Otherwise calendar quarterly
How often must you make these returns?
• Due within 14 days (paper) or 21
days (electronic)
What are the deadlines?
SELLING GOODS – INTRASTAT
DISPATCHES
• Criminal regime
What returns
must you make?
• EU “exports” > £250k in calendar year
• Must be electronic
What entries are needed?
• Movements of goods only (but not just sales)
• Commodity codes
• 21st day of the following calendar month (e.g. return
covering export today must be done by 21 February
2014)
What are the deadlines?
SELLING SERVICES – WHAT’S
NEEDED
What do you do?
• UK supplier does not charge VAT provided satisfied
customer is in business outside UK (VAT number best
evidence)
• Invoice must state why VAT is not
charged
• VAT return
• EC Sales List
What returns
must you make?
SELLING SERVICES – VAT RETURNS
What entries
are needed? (£100)
• Box 6 - £100
• NB – not Box 8
SELLING SERVICES – EC SALES
LISTS
What entries are needed? • Same information as for goods
How often must you
make these returns?
• Calendar quarterly
• If doing monthly returns for goods can do
services monthly too
What are the
deadlines?
• Due within 14 days (paper) or
21 days (electronic)
• Penalties for late or non-
submission
INTRODUCTION TO VAT
These slides are intended for use in connection with the
presentation given on 22 January 2014. No action
should be taken on the basis of information contained in
these slides or in the presentation without obtaining
professional advice specific to the circumstances.
No responsibility for loss occasioned to any person
acting or refraining from action as a result of the material
in these slides or presentation can be accepted by the
speaker or by Terry Dockley & Co Ltd
Copyright 2014, Terry Dockley & Co Ltd