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Value Added Tax (VAT)

At The Stan Lee, our tailored service related to VAT includes……

  • Register your business for VAT with the suitable scheme
  • Set up your business with MTD compatible software
  • VAT return computation and submission to HMRC with MTD compliance
  • Advice and guidance about the VAT payment or repayment
  • Other ad hoc services related to VAT affairs

The VAT domestic reverse charge: what your construction business needs to know

The VAT domestic reverse charge: what your construction business needs to know

VAT is particularly complicated for the construction industry. Talk to us and we’ll explain the implications of the VAT reverse charge – and some of the other implications of industry-specific VAT rules.

 

 

The VAT domestic reverse charge came into operation in March 2021, introducing significant changes around how VAT is collected and paid within the construction industry.

So, how does the domestic reverse charge work?:

  • The domestic reverse charge applies to construction services in the UK, together with related materials, but not to materials supplied separately from any construction services.
  • It applies only to transactions that already fall under the Construction Industry Scheme (CIS), and only those where both the contractor and subcontractor are VAT-registered. Effectively, the VAT changes have extended the scope of the CIS scheme.
  • Accordingly, for services they supply to VAT-registered contractors, subcontractors require the contractor to handle and pay VAT over directly. This applies to both standard and reduced-rate supplies but not to zero-rated supplies.
  • The subcontractor will receive payment for the work and materials, less any CIS, but no VAT will be paid over. Contractors and subcontractors must be familiar with the new rules, and ensure that their accounting systems can handle this specific VAT process.
  • Subcontractors need their customers to disclose whether or not they are end users, as the domestic reverse charge will not then apply.

Effect on VAT Returns for contractors: Contractors need to enter the calculated output tax (sales times either the standard or reduced VAT percentage) in box 1 of the VAT Return but must not enter the value of these purchases in box 6. They may reclaim the input tax on their domestic reverse charge purchases in box 4 of the VAT Return and include the value of the purchases in box 7, in the normal way.

Effect on VAT Returns for Sub-contractors: Sub-contractors must not enter any output tax (VAT on sales) in box 1 of the VAT Return in respect of sales to which the domestic reverse charge applies, but must enter the value of the net sales in box 6.

The HMRC has created flowcharts that give you a good overview of how the VAT domestic reverse charges system works, depending on whether you’re a buyer or a supplier in the chain. You can view these here

Talk to us about the VAT reverse charge

As a subcontractor, you’re likely to experience cashflow pressures from the domestic reverse charge system, and that’s bad news for the financial health of your business.

You can no longer put the VAT you’ve collected into your business account and use that to aid your cashflow until it’s paid over as part of the normal VAT cycle. At the same time, affected contractors will no longer need to fund the VAT paid to subcontractors and then reclaim this through their VAT returns later.

As you can see, this is significantly different from the way most businesses deal with VAT, and your bookkeeping and invoicing systems will need to handle this new system. If you need assistance with this, please do contact us and we’ll walk you through the VAT reverse charge requirements.

Get in touch in you are unsure about any aspects of the VAT reverse charge and let’s find out how we can help you from here at The Stan Lee.

The VAT domestic reverse charge: what your construction business needs to know Read More »

Plain English guide to VAT for businesses

Plain English guide to VAT for businesses

Get up to speed with Value-Added Tax with our Plain English guide to VAT.

Getting to grips with the basics of accounting, financial management and business strategy can be a challenge. To make things easier, we’re starting a new Plain English guide to business.

This time, we’ll be looking at Value-Added Tax, or VAT as it’s generally known.

What is Value-Added Tax (VAT)?

Value-added tax (VAT) is a consumption tax. VAT is imposed on the value added at each stage of the production and distribution of many goods and services. Registered businesses charge VAT on their sales and can reclaim VAT paid on their purchases.

The standard VAT rate in the UK is currently 20%, with different reduced rates for certain goods and services that fall outside the standard rate.

How does VAT affect your business?

You can choose to register for VAT at any point. But registration does become mandatory once you hit the relevant threshold (see below). As a VAT-registered business, you’ll add a few tasks to your to-do list but will also benefit from claiming back any VAT expenses.

Here are your main VAT responsibilities:

  • Become VAT-registered – it’s mandatory to register for VAT once your company’s taxable turnover exceeds the rolling 12-months threshold (currently £85,000 per year)
  • File your VAT return – your business must file a VAT return (normally quarterly) that shows all VAT you’ve collected from customers, and all VAT expenses you’ve incurred.
  • Pay the collected VAT to HMRC – also every quarter, you’ll pay the VAT funds you’ve collected from your customers to HM Revenue & Customs (HMRC) less any reclaimable VAT you’ve paid to your suppliers.
  • Claim back VAT expenses – If there’s a refund – where the reclaimable VAT on your outgoings exceeds the VAT on your sales – you can claim that back from HMRC. This can be a helpful boost to your cashflow).

How can our firm help you with VAT?

Becoming a VAT-registered business brings a certain amount of professional kudos to your company – and it needn’t add too much to your financial workload.

As your adviser, we’ll let you know when you’re close to hitting the registration threshold and will be there to help you get VAT-registered. We’ll also make sure your VAT processes are as simple and streamlined as possible, and that you maximise your VAT expense claims. We can also help you decide whether one of the special VAT schemes might benefit you.

If you’d like to know more about registering for and managing VAT, we’ll be happy to explain from here at The Stan Lee.

Plain English guide to VAT for businesses Read More »

What should be on a VAT invoice?

What should be on a VAT invoice?

Are you VAT-registered? Are you complying with the regulations when sending out VAT invoices and claiming against supplier invoices? We’ll give your invoice process a review to make sure you’re ticking all the boxes

Whether you’re selling or buying, it’s important to make sure that any VAT invoices you issue or receive comply with the strict VAT regulations.

Failing to do so can cause problems both for you and for your customers.

If you reclaim VAT using a defective invoice, HM Revenue & Customs (HMRC) can disallow the claim. HMRC can also charge penalties and interest on any amounts you’ve incorrectly claimed. Equally, your business has an obligation to your customers to send out invoices that meet the regulations and include the right documentation to support their VAT claims.

The three different types of VAT invoice

There are three types of document that can be produced, so it’s important to understand the differences between these three and to use the right type for your business usage.

1. A simplified invoice

The simplified invoice is intended for sales under £250 and keeps the amount of information on the invoice to a minimum. The invoice must include:

  • The seller’s name, address and VAT registration number
  • A unique sequential invoice number
  • The tax-point (usually the date of supply)
  • A description of the goods or services supplied and the applicable VAT rate(s)
  • The total charge including VAT.
2. A full VAT invoice

A full VAT invoice is the standard invoice in most circumstances and is more comprehensive than the simplified invoice. It includes the same fields as the simplified invoice plus:

  • The invoice date (usually the same as the tax point)
  • The customer’s name and address.
  • Whereas the simplified version only requires a VAT-inclusive total, the full version needs to show the amount excluding VAT as well as the total VAT charged.
  • The unit price and quantity of goods must also be shown, together with details of any discounts.
3. A modified VAT invoice

A modified VAT invoice can be issued in respect of retail sales exceeding £250. They contain the same information as a full VAT invoice, and in addition must include the total charged including VAT. In practice, that will be on the full VAT invoice anyway.

Making sure you stick to the regulations

With the choice of three different types of VAT invoice, it’s vital to choose the right type of documentation and to also make sure you adhere exactly to the guidance and regulations.

  • You don’t need to issue a VAT invoice if your customer isn’t VAT-registered, or if all the items charged on the invoice are zero-rated or exempt.
  • You mustn’t issue VAT invoices for goods supplied under the VAT second-hand schemes, and there are special invoices required for supplies under the Margin Scheme, Global Accounting Scheme, Auctioneers Scheme and the Tour Operators Margin Scheme.
  • Invoices should be issued within 30 days of the time of supply, and you must keep copies (electronic copies are acceptable) of all invoices issued, including spoiled ones.
  • Although invoice numbers must be sequential, you can have multiple series in use at the same time.
  • NOTE: quotes and pro-forma invoices are NOT acceptable for claiming VAT.

Helping you keep your VAT procedures in order

As you can see, it’s important to have your own VAT invoices in order and to have proper VAT invoices for any purchases where you are reclaiming VAT charged.

As your adviser, we can check that the invoices you produce comply with VAT regulations, and check more-generally that your VAT procedures are robust.

Get in touch for a review of your VAT procedures and let’s find out how The Stan Lee can help on your VAT affairs

What should be on a VAT invoice? Read More »

Spreading your tax costs with Time To Pay

Spreading your tax costs with Time To Pay

Have you been hit with an unexpectedly large tax bill? One way to manage this is to apply for a Time to Pay arrangement with HMRC. We’ve got the lowdown on how to do this.

HM Revenue & Customs (HMRC) expects you to pay your taxes on time. But if you’re finding it difficult to pay in full, HMRC can be approached to allow a Time to Pay arrangement.

A Time to Pay arrangement will allow you to pay your debt off in pre-agreed instalments, reducing the impact of a large tax bill – and helping you manage your debt and cashflow.

How does Time to Pay work?

If you need to request a Time to Pay arrangement for self-assessment tax, Employer’s PAYE and VAT, these can often be made online using a ‘self-service’ system.

Where you owe other types of tax, or where the conditions for online applications are not met, you’ll need to contact HMRC to discuss your situation.

  • The easiest (although not always the quickest) way to discuss your Time to Pay request is by telephone to 0300 200 3835.
  • HMRC agents will want to know about all taxes you owe, not just the one(s) where you want to spread payment. They will also ask for details of your income and outgoings, and any savings or assets that may be able to be used to reduce the amount owed.
  • Presuming that you agree to a payment plan with HMRC during the call, they will usually want to set up a Direct Debit straight away.

Making use of the self-serve Time to Pay system

If you don’t have any existing payment plans or debts with HMRC, the ‘self-serve’ system may be more straightforward, provided that the applicable tax returns have already been filed. The conditions and amounts vary depending on the particular tax.

For example:

  • Self-Assessment: You must apply no more than 60 days after the payment deadline and owe no more than £30,000.
  • Employer’s PAYE: You must be within 35 days of the deadline, owe no more than £15,000 and have no outstanding penalties. The maximum period over which the amount due can be spread is six months.
  • VAT: For VAT, you need to apply within 28 days of the due date and owe no more than £20,000. You can’t apply for a Time to Pay arrangement through the self-serve scheme if you use either the cash accounting or annual accounting schemes.

The self-serve option for Time to Pay does make the process easier, but remember that HMRC isn’t obliged to offer you the option of settling your taxes owed via instalments.

If you fail to pay your taxes, HMRC can take recovery action in the County Court, and apply for the taxpayer to be put into liquidation or made bankrupt where appropriate.

Talk to us about making Time to Pay work for you

One of the best ways to avoid getting into difficulties with your tax liabilities is to work more closely with your accountant. As your tax adviser, we’ll produce regular forecasts so that any financial stresses can be foreseen well in advance.

Where unexpected circumstances do arise, putting a suitable payment plan in place with HMRC is the most sensible way to manage this situation. Ignoring your tax problems won’t make them go away and burying your head in the sand can lead to serious penalties and legal action.

Get in touch to talk about Time to Pay and let’s find out how we can help from The Stan Lee.

Spreading your tax costs with Time To Pay Read More »

When should I register my company for VAT?

When should I register my company for VAT?

Wondering if your business should be registered for VAT? We’ve got the lowdown on when (and how) to get VAT registered, and the key reasons for doing so.

Sorting out your tax registrations is one of the first things to tick off your to-do list as a new business owner. But knowing when (and how) to register for things like value-added tax (VAT) can be a confusing process for new entrepreneurs.

Here’s a straightforward breakdown of the VAT registration process.

Why does my business need to collect and pay VAT?

Value-added tax (VAT) is a consumption tax. It’s imposed on the value added at each stage of production and distribution of goods and services. By registering for VAT you become liable to collect the VAT charged on your invoices, and to then pay this tax to HMRC on a quarterly basis. You’ll also be able to claim back some of the VAT you’ve spent on eligible expenses.

What’s the threshold for VAT registration?

It’s not mandatory for every limited company or sole trader to register for VAT. Generally speaking, you will only register for VAT once your turnover reaches HMRC’s threshold, or if there’s a tax advantage of being VAT registered to claim certain operational expenses.

You must register for VAT if:

  • your total VAT taxable turnover for the last 12 months was over £85,000 (HMRC’s current VAT threshold).
  • you expect your turnover to go over £85,000 in the next 30 days.
Who else must register for VAT?

Regardless of whether you meet the threshold test, you must also register for VAT if all of the following condition are true for your business:

  • you’re based outside the UK
  • your business is based outside the UK
  • you supply any goods or services to the UK (or expect to in the next 30 days).
How to start the VAT registration process

To register for VAT with HMRC, you have two basic options:

  1. Register your business online, via your Government Gateway account. This will create a VAT online account to manage your VAT payments and claims etc.
  2. Ask your accountant to register you on your behalf. If we’re your tax agent, we can register your business for VAT and help you manage your VAT affairs.
Talk to us about getting registered for VAT

If you’re a new business that’s starting out, or an existing business that’s getting close to the £85k VAT threshold, please do contact us to talk through getting registered.

We’ll help you work out your turnover for the preceding 12 months and can advise you about the most tax-efficient reasons for making your business VAT-registered.

Get in touch to talk about VAT registration and let’s find out how we can help you from the The Stan Lee.

When should I register my company for VAT? Read More »

What business taxes will your company need to pay?

What business taxes will your company need to pay?

Are you in the dark when it comes to business taxes? We’ve got the lowdown on the key taxes your new business will need to pay – so you’re on top of your tax liabilities.

Once you’ve registered your business as a limited company, you become liable for paying taxes on the profits you make. But what business taxes are there? And how do you know which of these taxes to pay?

To answer this, we’ve created a short ‘Back to Tax Basics’ email series, to give you the full lowdown on your tax responsibilities as a company director.

Understanding the main business taxes

Despite HMRC’s motto of ‘tax doesn’t have to be taxing’, the UK tax code can be a complex thing to get your head around.

If you’re not a trained accountant and have limited experience in financial management, understanding the rules around business taxes can be confusing. So, to start with, let’s look at the main business taxes you’re likely to register for.

Key business taxes include:

  • Corporation tax (CT) – corporation tax is a tax that’s levied on your profits as a limited company. At the end of your accounting period, you must submit a corporation tax return, and pay the CT that’s due. The rate from 1st April 2023 will be up to 25%, although companies with profits not exceeding £50,000 will pay 19%, with the full 25% rate applying to companies earning over £250,000.
  • Value-added tax (VAT) – VAT is a consumption tax that’s levied on goods that have had value added at each stage of the supply chain. When you buy these goods, you’ll pay VAT. And when you sell these goods, you will collect VAT. At the end of each quarter, the VAT funds that you’ve collected must be paid to HMRC. You can also claim back the VAT you’ve spent on certain qualifying goods and services too. The standard rate of VAT is 20%, the reduced rate is 5% and certain goods can also be zero-rated.
  • Pay-as-you-earn (PAYE) – PAYE is a way to collect income tax and National Insurance Contributions (NICs) from your employees. If you have employees and run a payroll, then you’ll need to collect the required amounts of income tax and NICs from your employees’ wages as part of your payroll process. Then you must report on these deductions and pay the tax and NICs to HMRC, either monthly or quarterly after the pay period, depending on the amount involved. In addition to the income tax and NICs you deduct from your employees, the company may also have to pay Employer’s NICs as a business expense.

Learn more about the basics of business tax

So, there you have it. That’s the basics of the key business taxes you’ll need to think about as a new business owner. In the next part of this series, we’ll look at the taxes you’ll be liable for as a director, and how these personal taxes tie in with the profits you take out of your business.

Get in touch if you have any questions about tax and let’s find out how we can help from The Stan Lee.

What business taxes will your company need to pay? Read More »

HMRC’s VAT registration helpline closed

HMRC’s VAT registration helpline closed

HMRC’s VAT Registration Helpline has closed. So, how do you get an answer to your VAT application query? We’ve summarised the main ways to contact HMRC’s VAT specialists.

We were dismayed to see that HM Revenue & Customs (HMRC) shut down their VAT Registration Hotline as of 22 May 2023. This leaves businesses that have a VAT registration query without a direct HMRC team to communicate with.

Don’t worry, though, there are ways for you to get your VAT queries to HMRC, as we’ll see.

Why close the VAT Registration Helpline?

HMRC has a severe backlog of work at present. Applications are taking a long time to process, queries are not being answered and taxpayers are getting understandably frustrated.

Closing down the VAT Registration Helpline is part of HMRC’s ongoing mission to redress these delays. According to a recent email seen by AccountingWEB, closing down the helpline is intended as a way to free up HMRC staff and process more applications.

HMRC is quoted as saying:

“We recognise that performance across our core service lines still needs some improvement. We’re confident that this approach will help improve our customer service levels by allowing our colleagues to prioritise processing of these applications.”

How can you chase up a VAT registration?

With the VAT Registration Helpline now unavailable to you, how do you chase up a registration or get an answer to your VAT-related queries?

HMRC has suggested using their ‘Where’s my reply’ online tool to check on the status of your application. This online tool allows you to chase up an ongoing VAT application, as well as applications for corporation tax, employers PAYE and other taxes and government subsidies.

The length of time you wait for a response to your query will vary, but HMRC is suggesting that responses could take up to 40 working days. Not exactly an instant response!

How can you ask general VAT questions?

HMRC does have a facility for general VAT-related queries, but to get the best from these options, it’s sensible to have a VAT online account that’s already set up for your business.

To contact HMRC re a VAT query:

  • Log in to your VAT online account. Your online account lets you:
    • view your payments and outstanding liabilities
    • submit your VAT return and view previous returns
    • get a duplicate VAT registration certificate
  • Talk to HMRC’s Digital Assistant. HMRC has a digital chatbot that can answer basic questions and FAQs relating to your VAT affairs.
  • Call HMRC on the phone. Call the HMRC team on 0300 200 3700 (or +44 2920 501 261 if you’re outside the UK). HMRC advises that you should only phone them if the query is urgent. You’ll need to have your postcode, Fulfilment House Due Diligence Scheme (FHDDS) number and VAT registration number if you need to call. HMRC’s phone line opening hours are:
    • Monday to Friday: 8am to 6pm
    • Closed weekends and bank holidays
  • Use the HMRC app. HMRC’s official mobile app allows you to look up general information and basic FAQs etc, but won’t be able to answer specific questions.

Talk to us about your VAT queries

As your tax agent at The Stan Lee, we can answer most of your general VAT queries for you. We can also act on your behalf and contact HMRC to request more specific information.

If you’ve got a VAT-related question or an application query, just drop us a line and we’ll do our best to get you an answer as quickly as possible.

Get in touch to ask your VAT questions.

HMRC’s VAT registration helpline closed Read More »

Making Tax Digital (MTD) for VAT Registered Businesses

Making Tax Digital (MTD) for VAT Registered Businesses

Making Tax Digital (MTD) for VAT Registered Businesses

Making Tax Digital (MTD) for VAT Registered Businesses

We understand that the UK tax system is going to be mostly digitalized and you may be already familiar with Making Tax Digital (MTD) for your business ventures. However, this blog will give a brief about this.

What is MTD?

Making Tax Digital (MTD) is the key part of the UK government’s plans to transform the UK tax system into most digitally advanced in the world. The aspiration of HMRC is to the following by executing the MTD:

  • More effective
  • More efficient
  • Easier for taxpayers to get their tax right

MTD affairs for VAT registered businesses

The transformation with Making Tax Digital (MTD) started (as mandatory) from April 2019 for VAT registered businesses those having taxable turnover above the VAT threshold of £85,000. However, the MTD is extended to all VAT registered businesses and organizations (including voluntarily registered), regardless of their turnover from April 2022.

Therefore, you should use MTD “compatible software” so that you can comply with MTD requirements. The best way is to check with your software provider or get advice from your accountants who can help on this.

Using software means it is extra costs to your business and requires technical knowledge for using the software. However, you will be benefited from fewer errors,  better financial planning, and time to increase productivity from this.

Failure to comply with the MTD compliance, HMRC may issue a penalty notice.      

How can The Stan Lee help on your MTD requirements?

At The Stan Lee, we have good hand to help you on your MTD compliance for your VAT registered business. We are Xero certified advisor and pleased to support you as a Silver Partner of this software. We offer for our clients on:

  • Register for the MTD without charging any fee
  • Set up your business in Xero as complimentary
  • Have own access in Xero so that you can see your financial information from anywhere

For further information and advice about the MTD for VAT, please ring a bell with one of the friendly team here at The Stan Lee and let’s find out how we can work together.

Making Tax Digital (MTD) for VAT Registered Businesses Read More »

Making Tax Digital (MTD) compliance for your VAT

Making Tax Digital (MTD) compliance for your VAT

Making Tax Digital (MTD) compliance for your VAT

If you’ve not heard about Making Tax Digital (MTD) then this article will help explain what it is, the important dates and how it is going to work for businesses and individuals alike.

What is Making Tax Digital?

MTD is all about giving you and your business better time to prepare by creating a seamless link between your financial records and the tax calculation system. Doing so will give you a clear indication as to how much money you need to set aside to pay your tax bill.

MTD will be more accurate and will allow fewer errors or miscalculations as well as being able to crack down and monitor any fraudulent activity – it is seen as a big-time saver and a way to streamline the taxation process between businesses and HMRC.

When is it happening?

The MTD initiative is currently being rolled out in stages, the first of which was MTD for VAT on April 1st, 2019.

After this date, all VAT-registered businesses must comply with all MTD regulations if they have a taxable turnover above £85,000 which is the current VAT threshold, and whose tax quarter begins April 1st needs to use compatible HMRC software to keep a digital record of accounts.

Check your software is compliant

With the introduction of MTD you will need to ensure that your accounting software is compatible going forward.

The best way to check is with your software provider and if you require further advice then one of The Stan Lee team will be happy to help you.

Most of the ERP and accounting software providers will have been preparing for these changes long in advance so if you need to update yours it should be a simple process.

Payment dates

Currently there have been no plans to change the payment dates for the taxes filed and reported under MTD this includes VAT, which is paid quarterly and income tax, which is paid in three instalments January, July and following January. It is always a good idea to check and make a note of these dates so you don’t forget.

Make sure you comply

While this is a big change to the taxation industry it is seen as the best way to make record keeping and paying your VAT bill much smoother.

However, you need to make sure that you comply as if you fail to submit more than once in 12 months you will receive a penalty notice. Once several points have been accrued then HMRC will issue a fine of £200.

Speak to the experts

If you would like any information or advice about Making Tax Digital then get in touch with one of the friendly team here.

At The Stan Lee, our team of highly trained accountants, bookkeepers and business consultants can help you with all aspects of your small business finances. 

Making Tax Digital (MTD) compliance for your VAT Read More »

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The Stan Lee has the experience and expertise available to assist you as and when required. So what makes us different when compare to our competitors? The key difference is our team of highly qualified professionals go the extra mile for their clients.

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The Stan Lee is our trading name of two separate entities as follows:
  • Stan Lee Accountancy Ltd; an ACCA Accountancy firm (Reg No: 4607747 that offers accountancy, taxation, estate administration, ATOL and other business support services that are authorised by the ACCA.
  • Stan Lee Probate Limited; a CILEX-ACCA Probate firm, “Authorised and Regulated as a CILEX – ACCA Probate Entity, Authorisation number 3001291” that offers non-contentious Probate service only.

We are required by our professional bodies to have separate entity and therefore, there are two firms involved. Both firms are required to have Professional Indemnity Insurance (details of the PII available in our office upon request).

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