Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into the them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
VAT That You Cannot Reclaim
If you are VAT registered, you can reclaim the VAT that you incur on business expenses.
The main types of VAT that cannot be reclaimed are:
- VAT incurred overseas
- “blocked” Input tax e.g. cars
- VAT on private or non-business expenditure
- VAT that relates to exempt supplies.
VAT incurred overseas
VAT can only be reclaimed if it is incurred in the UK. However, you may be able to reclaim the VAT incurred in an overseas jurisdiction from the tax authority in that overseas country. HMRC has issued guidance in respect of making claims for VAT incurred in the EU.
Blocked input tax
- cars unless the business is a car dealer, taxi business or driving school.
- certain building materials
- items sold under a margin or other scheme
- business entertainment
- domestic accommodation.
It is possible to reclaim the VAT (if charged) on a car used exclusively in the business and unavailable for private but this is an impossibly high bar to get over. Don’t stop to buy a paper on your way.
In addition 50% of the VAT incurred on a car that is leased or hired is reclaimable, but not on lease purchase or hire purchase agreements.
But the VAT incurred on repairs and maintenance of a car used in business can be reclaimed in full.
VAT incurred on petrol or diesel costs can be reclaimed in certain circumstances such as when the VAT fuel scale charge is applied or when VSAT is only reclaimed on business mileage (but you need good mileage records).
This includes finished or prefabricated furniture other than furniture designed to be fitted in a kitchen or materials to construct fitted furniture, electrical or gas appliances other than those that provide space or water heating, as well as carpets or carpeting materials.
Margin and other schemes
These schemes include margin schemes for second hand goods, the flat rate scheme and the Tour Operators scheme as these all have their own specific rules for VAT.
Where hospitality is provided to guests, who are not employees, the VAT cannot be reclaimed. This includes product launches, presentations, and other guest entertainments but where there is a business purposes, such as advertising, VAT can be reclaimed.
You can however reclaim VAT on the entertainment of overseas customers and generally also members of staff (but not their spouses or partners).
This is regarded as non-business expenditure and cannot be reclaimed. VAT can be reclaimed where the domestic accommodation is provided to employees and this accommodation is necessary for their employment duties.
Private or non-business expenditure
Where there is a mixed business and non-business (or private) element the VAT must be apportioned.
There is a useful de minimums which permits VAT to be reclaimed on inputs for exempt supplies which can permit, for example, VAT to be reclaimed on long lets where say a company has a small property portfolio but where this is not the main business. Otherwise VAT claims are blocked.
Where a business makes exempt supplies, it cannot reclaim all of its input tax (subject to a de minimis
Where a business makes exempt and standard rated supplies, and the de minimus does not apply, the total input tax has to be apportioned and only the proportion relating to taxable supplies can be reclaimed. This is done initially for the quarter but then has to be repeated at the end of the year. And include 4 quarters.
Capital goods scheme
Where capital assets ate partly or wholly used for exempt supplies, this scheme applies. Broadly the proportion of VAT reclaimed has to be reviewed over a period od years in case that proportion is no longer relevant.
Assets included in the scheme are:
- land, buildings and civil engineering work costing more than £250,000
- computers and computer equipment costing more than £50,000
- aircraft, ships, boats or other vessels costing more than £50,000.
The VAT is adjusted over five years for computers, aircraft, ships and boats and ten years for real property.
Tax Credits App.
33,600 tax credit claimants have used the HMRC app to renew their tax credits claim so far this year, a 39% increase on last year, according to HMRC.
HMRC is encouraging more people to use the app as it is a quick and easy way to get this vital job done.
The HMRC app can be used to:
- renew their tax credits;
- make changes to their claim;
- check their tax credits payments schedule; and
- find out how much they have earned for the year.
There are nearly 259,000 tax credits app users, who have used the app more than 10 million times in the last year to do things like check their payment dates and amount.
The app can be downloaded at the App Store or Google Play.
Can You Get Staff?
A recent report has highlighted that a shortage of candidates has led to unfilled posts which is having a knock on effect on business productivity.
Uncertainty and the need to reduce outgoings is also affecting businesses appetite to take on new staff.
There also seems to be a continuing decrease in suitable candidates leading to a marked increase is wage levels as businesses compete for a diminishing pool of labour.
The lack of available candidates can be attributed to a generally low unemployment rate, fewer foreign workers, robust demand for staff and hesitancy to switch roles in the increasingly uncertain economic climate.
This is the scandal of the faulty Post Office Software that led to so many false convictions for fraud and a number of bankruptcies as a result.
The Official Receiver, acting as the trustee/trustee ex-officio in bankruptcy, is now undertaking enquiries to identify these cases, in order to investigate whether these bankruptcy orders should be reviewed and possibly overturned.
In some instances, postmasters were made bankrupt by the Post Office Limited, while others may have petitioned for their own bankruptcy.
The Post Office has contacted postmasters it has previously prosecuted to assist them in potentially appealing their convictions.
Anyone subject to a bankruptcy/adjudicator or sequestration order since 2000, resided in England, Wales, Scotland or Northern Ireland, and was impacted by the Horizon scandal should contact the Insolvency Service via email at Horizoncases@insolvency.gov.uk.
Recovery Loan Scheme Mark II
The government is being urged by accountancy bodies and business groups to consider a revised version of the Recovery Loan Scheme due to the present uncertain business outlook and its consequences such as the present high rate of inflation.
The RLS opened to applications on 6 April 2021 and closed on 30 June 2022. It was to help businesses cope with the large amount of trade lost to the pandemic, with the government promising lenders it would guarantee 80% of loans in the case of a default on payments.
While it seemed to be difficult to access for our clients, figures from the British Business Bank, which administered the scheme, show that the scheme offered £1.06bn to businesses through almost 6,200 facilities.
Apparently lenders report that loan books are holding up well and the rates of default on the emergency loans – CBILS loans and Bounce Back loans – were lower than expected.
While the Recovery Loan Scheme was extended by six months to the end of June this year, concerns about the impact of shutting off the emergency measures as businesses face a difficult economic environment are prompting a rethink.
The new scheme being considered would likely be similar to the original Recovery Loan Scheme, but with some revisions to the terms and conditions, in an attempt to bolster those businesses requiring additional capital for growth.
Tax – What Next
Future tax policy is going to have to take into account the changes in our working practices brought about by working during the pandemic
The pandemic has accelerated trends that had already been present, such as the technological developments that have made virtual working possible. While a few office-based firms are insisting on a full return to the office, a hybrid model that combines office and homeworking appears to be emerging as the most common. Business travel is unlikely to return to pre-pandemic levels and online shopping is likely to continue to increase.
The government is looking at how to fund and operate public transport systems with fewer daily commuters, how to tax online sales, how to accelerate the roll-out of faster internet connections to rural communities, and how to address levels of inflation not seen for decades.
How will the government stimulate investment and will we see more programmes along the lines of freeports, designed to stimulate investment, employment and innovation around some of the UK’s busiest ports and other transport hubs, many of which are in areas of social deprivation?
Some commentators are sceptical of the effectiveness of tax policy as a stimulant for future investment in innovation having the view that much of this innovation would have happened anyway, a
It will be an interesting few years.
Corporate Criminal Offences
This derives from a piece of legislation that was brought in as part of the Criminal Finances Act in 2017 and is part of suite of measures that have been introduced by HMRC aimed at tackling tax evaders and enablers.
It essentially means that a “relevant body” (company or partnership) can be found guilty of a criminal charge, where someone associated with that business has facilitated tax evasion, and where the company has not done enough to have prevented this from occurring.
A successful prosecution could lead to unlimited financial penalties, a public record of conviction and severe reputational damage. It may also require disclosure to professional regulators in the UK and overseas, and prevent the body being awarded public contracts.
No. CCO applies to all businesses of whatever size or sector.
HMRC expects all businesses to prevent associated persons from criminally facilitating tax evasion.
Working Through a Heatwave
The law does not say how hot or cold the workplace should be and there is no legal maximum working temperature although the temperatures should be reasonable and comfortable.
Reasonable adjustments should be made to support disabled staff or those with conditions that are not compatible with extreme heat. This might include temporarily working from home, taking longer or more frequent rest breaks, reducing normal duties or moving them to cooler areas.
Transport could also be difficult in these situations so some flexibility is required in start and finishing times or alternatively permitting working from home.
Remember not to jump to conclusions if someone calls in sick during the hot weather. It may be genuine.
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at firstname.lastname@example.org.