The perils of failing to ask for a VAT invoice

There was a company that was making a good profit by sourcing desirable consumer items like tablet computers, smartphones, etc. that were in short supply. It was unable to get these products by buying from the suppliers because there was such high demand for them that supplies were limited. Most retailers were only allowing customers to buy two of these products each.

The company was sending its staff to the retailers to buy the items two at a time. Each item generally cost several hundred pounds. Buying two was certainly more than £250.00. What’s so important about £250.00? I’ll tell you in a moment. So, the company’s staff returned with their purchases and the company was able to meet the demands of overseas customers who were unable, at that time, able to buy the products in their home countries.

Are you still with me?

The sale of the items the company had bought was outside the scope of UK VAT because the goods were exported. The company had full evidence of the export so the VAT man was happy that there was no VAT to account for on the sale.

Remember that £250.00 I mentioned earlier? Well, there’s a VAT rule that says that where the amount paid is no more than £250.00 including VAT the retailer can issue a less detailed VAT invoice. Less detailed VAT invoices contain significantly less information than a full VAT invoice. In particular the name and address of the customer is one item that is missing from them. The VAT man noticed that the company had lots of these less detailed VAT invoices where the value of the supply was over the £250.00 limit. The VAT man has assessed the company for the VAT it had claimed against these invoices.

So the moral of this tale? Remember to get full VAT invoices for purchases where you are paying more than £250.00 if you want to be able to recover the VAT on your next VAT return.

Got a view on this? Leave a comment below.

Need help with a VAT issue? Give me a call on 01293 734545.

 

Related posts:

1. Notes for the newly registered business – Part 2
2. New Invoicing rules in the UK
3. What VAT can’t ever be claimed?

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HMRC pour cold water on hot take-away food?

I wrote about this in my article Good news for hot take-away food suppliers? a few days ago after the release of the European Court of Justice’s (ECJ) decision in Manfred Bog and others. HMRC has now published a Revenue & Customs Brief which almost makes clear HMRC’s position in relation to the impact of the decision. The case was referred to the ECJ by the German tax authorities. In Germany there is a reduced rate of VAT for foodstuffs.

The question considered by the ECJ was whether the supply by the vendors from places such as mobile snack bars was a supply of goods or a supply of services. In press articles HMRC was quoted as saying they treated all supplies of food as a supply of goods. There is no mention of that in the Revenue & Customs Brief. The brief is a lot of waffle with very little substance, although it does make clear that HMRC will entertain no claims for zero-rating.

The question has to be whether UK legislation is in line with the EU legislation. Is the supply of catering services, e.g. a restaurant, a supply of foodstuffs and thus a supply of goods? Or is it a supply of services?

One thing is clear, to get HMRC to change its stance on this will require someone to take the matter to Court. I think HMRC might be wrong about the application of the zero-rate to hot take-away food being impossible – would it be an extension of the zero-rate? Or just a redefining of hot take-away food so that it falls within the zero-rating?

Have a view on this? Leave a comment: let’s start a discussion.

 

Related posts:

1. Good news for hot take-away food suppliers?
2. Would HMRC have broken the law?
3. HMRC announce they have sought permission to appeal the Weald Leasing decision

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HMRC has withdrawn the Flat Rate Scheme ready reckoner that I referred to in The VAT Flat Rate Scheme for Small Businesses – a brief description.

This is sad news as it means that it is currently harder to work out whether using the Flat Rate Scheme is harder. You will have to do all the calculations yourself.

It is possible that a new version will be made available on another Government website. As soon as I become aware of this happening I’ll let you know.

 

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1. New Flat Rate Scheme percentages from 4 January 2011
2. Good News for users of the Flat Rate Scheme
3. Flat Rate Scheme percentages for 2010

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I have added the latest table, as published in the Budget 2011 papers, to the site.

Fuel Scale Charge from 1 May 2011

 

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The registration limits from 1 April 2011 are:

Past VAT registration and deregistration limits:

 

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1. VAT Registration limits – updated for 2009
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Good News for Flat Rate Scheme (FRS) users

One of the things that some businesses who are eligible to use the FRS find difficult to deal with is that the turnover to which they apply the flat rate percentage includes the following:

• standard rated turnover;
• reduced rate turnover;
• zero-rated turnover; and
• exempt turnover.

So if a business has a lot of the latter three types of turnover it is unlikely that it will join the FRS.

On the other hand, if these latter three form only a small part of the business’s turnover, it may still be worth joining the FRS to take advantage of the reduced administration that’s needed to be able to do the VAT return.

Every business that I know has at least one business bank account. Most have at least two; probably because their bank automatically sets up a savings account alongside the current account. The problem with this is that because of the rules about what has to be in the turnover for the FRS any interest earned on these accounts had to be included.

I used the word ‘had’ in the last sentence of the previous paragraph because it seems likely that HMRC is going to have to consider its policy on this issue after the decision of the First Tier Tax Tribunal was released recently in the case of Fanfield Limited and Thexton Training Limited. In this decision the taxpayers appealed against a decision of HMRC that the interest was within the scope of VAT. The Tribunal allowed their appeal on the grounds that the amount of interest earned was too small to be “in the course or furtherance” of a business.

The benefits to users of the FRS from this decision are going to be small. It does, however, mean that their profits will be marginally larger.

Let me have your thoughts on this by leaving a comment below.

 

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1. HMRC scrap Flat Rate Scheme ready reckoner
2. New Flat Rate Scheme percentages from 4 January 2011
3. Flat Rate Scheme percentages for 2010

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As the old table for the FRS may still be useful to businesses, I’ve added a new page with the tables for the period from 1 January 2010 to 3 January 2011.

 

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Now that the new rate of VAT is here I’m being asked: what is the new VAT fraction?

The new VAT fraction is 20/120 or 1/6.

Why is this important?

It’s an easy way to work out how much VAT there is in a VAT inclusive amount.

For example, you buy some note pads and box of pens from the stationers. You pay £24.00 and get a till receipt that shows just the two items, note pads and pens, how much they cost, the total charge, the rate of VAT (20%), and the stationer’s details. So, what’s the VAT?

24 ÷ 6 = 4

There you have it, the VAT in £24 is £4.00.

The VAT fraction for 17.5% rate of VAT is 7/47. So to work out the VAT at 17.5% the calculation looks like this:

24 x 7 ÷ 47 = 3.57

If you have any questions please leave a comment below – I’ll respond as soon as I can.

 

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Small businesses can be supported by the Government?

In an article in the Daily Telegraph they highlight the benefits of using the Flat Rate Scheme.

If your businesses turnover is below £150,000 you will be able to use the scheme. The question you need to consider is whether there are any benefits to you and your business in using the scheme? There are two obvious benefits that could be useful to you:

1. Working out how much VAT you have to pay is easy; and
   
2. You could pay less VAT on the Flat Rate Scheme.

The Flat Rate Scheme is only of use to you if you make mostly standard rated supplies, i.e. you charge VAT at 17.5% (20% from 4 January 2011) on most of your sales. This is because the Flat Rate you use is applied to all your ‘business income’ whether you have charged VAT at the standard rate, reduced rate, or zero rate. It even applies to those sales that are exempt from VAT.

The first thing you need to do is to check on which Flat Rate you need to apply. You can find the table for the rates that apply from 4 January 2011 here. After that you need to review how much VAT you would pay using the scheme and whether that would be less than if you use the ordinary VAT accounting methods.

You will probably benefit from seeking professional help, so ask your accountant or VAT adviser before you decide. They’ll know the potential problems or pitfalls that you are likely to face.

Got any questions? Leave a comment and ask – I’ll reply as soon as I can.

If you prefer call me on 01293 734545.

 

Related posts:

1. The VAT Flat Rate Scheme for Small Businesses – a brief description
2. Flat Rate Scheme percentages for 2010
3. Good News for users of the Flat Rate Scheme

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HMRC have published new percentages to be used by all businesses on the Flat Rate Scheme.

I’ve put a copy of the table on my website.

 

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2. HMRC scrap Flat Rate Scheme ready reckoner
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