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October 2019

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To October’s Tax Tips & MYOB News.

Changing address?
If you are moving business premises don’t forget to let HMRC and others know promptly.  From our experience inconsistent addresses can cause alot of extra w
ork.  For example HMRC will reject forms that show a different address from their records.
As part of our Business Companion service we will inform the following for you:
  • Companies House (for the Business, Directors and People with significant control)
  • HMRC Self Assessment
  • Pensions Regulator
  • Pension Scheme
  • as well as updating our own records.
And of course you will need to tell your bank, suppliers, customers etc. And you will need to update business stationery and your website.
October 2019
· VAT – can we get it all back?
· Intrastat and EC Sales List Reporting – after October
· AccountEdge Database Errors
· Casual workers still have to pay tax
· October questions and answers
· October key tax dates
VAT – Can we get it all back? top
Just because your business is charged VAT it doesn’t mean you can automatically claim it back. Certain things are generally excluded from VAT recovery, plus there are some specific exceptions.

What’s to know?

General exclusions:
VAT registration doesn’t give you an automatic right to recover VAT. The following criteria must be met:
1. The expenditure must be for the purpose of the business, not for private purposes nor for another business.
2. You must hold a valid tax invoice in your business name.
3. The supply shown on the tax invoice must actually occur, and be made to your business (not to you personally).
4. If you have exempt sales, you can’t recover the related VAT.
5. If you use the flat rate scheme you can’t recover input tax except on large capital expenditure of over £2,000 (including VAT).

Tip. An invoice in the name of the business includes one in the name of a company within the same VAT group, because input tax of all companies within the VAT group is treated as that of the representative member.   
The mere fact that a business pays an expense does not in itself mean that it is incurred for the purpose of its business. It may be legally liable to pay, but there may not have been a supply to it. For example, when the loser of a legal dispute pays the costs of the other side, it is for supplies to that opponent, and is therefore not recoverable.

Business or personal?
The VAT man is bound to see a personal number plate as being for the private satisfaction of the individual, rather than for the purposes of the business. To claim input tax on the cost, you would need to show that it’s in some way promoting the business. In Sunner and Sons (MAN/9111205 No. 8857), a tribunal accepted that the number plate “7 SUN’ was bought to promote the Sun name on own label goods sold in a supermarket called Sun.

Items specifically excluded
VAT is also irrecoverable on a number of specific business expenses, of which the main ones are:
• entertainment
• cars
• directors’ accommodation
• goods not ordinarily installed by builders as fixtures in new houses
• goods sold under a second-hand scheme
• costs of a tour operator.

Tip. If part of a director’s accommodation is used for business purposes then input tax can still be recovered on that element. For example, if a company director converts his loft into an office so that he can work from home, he will be able: to reclaim the VAT on the conversion costs.

Trap. If there’s any private use of a car then the input tax on the purchase is disallowed.  However, if you lease a car then you can recover 50% of the VAT on the leasing charges and all of the VAT on the maintenance and roadside assistance costs etc., provided the charge for these is shown separately on the lessor’s invoice. 

In general terms, be sure that the charge has been incurred for a business purpose, “that you hold a properly addressed invoice and that the supply actually occurs. Look out for specific exceptions such as entertainment and cars.

Requoted with permission from Indicator Magazine

For more information about accounting for VAT see our Tricks of the Trade.
Intrastat and EC Sales List Reporting – after October
AccountEdge (AE) Database Errors
If we leave the EU with no deal then there will be no need to complete either the Intrastat or EC Sales List any longer.

If we leave the EU with Boris Johnson’s withdrawal offer to the EU in place then Northern Ireland will be in the EU Customs Union, but not the rest of the UK.  Therefore Northern Irish businesses will have to file Intrastat and EC Sales lists for their sales to the Irish Republic and elsewhere in the EU.  But businesses elsewhere in the UK will cease filing these two reports.

Finally if we extend beyond 31st October 2019 then the responsibility to file these returns continues.

In a poorly formatted article on the website the HMRC tells us more details on the VAT situation after we leave the EU. Some say this is what they should have been telling us for the past three years, but forgot to do so.  Nevertheless it is now on the website.

Highlights include the end of EU Moss, VAT on imports, and zero rating of all exports to EU (with EU VAT instead assessed on entry to the EU).  There is nothing on this site about Intrastat.

So our conclusions?  If an EC Sales Report is not actually sent in, our view is it will probably not be pursued by HMRC.  But we do recommend that the report is at least run off and kept as a record.  Intrastat is more serious and therefore should continue to be filed electronically.

Finally,note that the Reverse Charge for VAT on Buildings Supplies change mentioned in our August Newsletter has now been deferred for a year.
We have had a couple of clients with similar year end issues on their datafiles.  One was Mac, one PC.  In both cases the data has had to be sent away for repair.  The datafiles involved were for more complex stock-based businesses.  

The errors were related to a financial year rollover issue.  A datafile may have both the Negative Inventory Preference turned on, and simultaneously use Received Items on Purchase Orders.
For every item which is Received and Sold, MYOB tracks the Purchase Order waiting for the Item to be Invoiced so the Cost of Goods Sold (COGS) can be determined – it also tracks each Sale of these Items. As long as the Order is not converted then every time that Item is purchased, MYOB processes a COGS adjustment for every Sale of that Item.  MYOB/AE will keep doing this until the Order is converted to a Bill and the final cost is determined.  This is a bug in MYOB.

The answer is to use the datafile in a disciplined way.  If you are using Received Items, it is imperative that Orders be converted to a Bill as soon as the Supplier Invoice arrives. Otherwise you will end up unnecessary COGS adjustments.

During a Year End Rollover Purge MYOB sometimes deletes one of the Sales invoices it was tracking against a received purchase order.  It is the long standing part received unresolved supplier orders that causes a Test 43 Verification Error. This can only be fixed by a systems engineer.   . 
Casual Workers still need to pay tax
HMRC can question whether casual workers have been paid through the PAYE system.  The word “casual employee” has a specific meaning as far as HMRC are concerned. A casual employee is someone taken on for a week or less but not taken on again within the same tax year. If someone is taken on for longer, they are not a casual employee in the HMRC’s eyes – the PAYE system must be operated.

If you decide the employees are casual workers and they earn less than the PAYE threshold, you just need to keep a record of what you paid them, and their name and address.

If the wages payment exceeds the threshold for tax and NI, then we need to be told.  We will add them to our payroll system for you and PAYE applied accordingly. A BR or emergency tax code would be applied.
October questions and answers top
October key tax dates top
Q. Our house has always been owned jointly by myself, my mother and my sister. My sister and I now want to buy our own homes and want to make mum the sole owner of our current home. If we put the house in her sole name will she have to pay capital gains tax (CGT) on it? Answer

Q. I have recently started a new job and have been provided with a company car. I pay for fuel for private use but I can claim mileage for business journeys. Will I have to pay tax on fuel payments? Answer

Q. I have just started my first job working for a building contractor. My boss says I need to register for tax as a Construction Industry subcontractor. How do I do this? Answer
14 – Return and payment of CT61 tax due for quarter to 30 September 2019

19 – Tax and Class 1B national insurance due on PAYE settlements for 2018/19

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/10/2019 or quarter 2 of 2019/20 for small employers
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

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See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Clearbooks.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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