VAT Hot Topics 1 October 20091 October 2009

The VAT ConsultancyLaurel House

Station ApproachAlresfordSO24 9JH

Tel: 01962 735350Fax: 01962 735352

www.thevatconsultancy.com

Agenda 1) VAT Liability 2) VAT Registration 3) Flat Rate Scheme 4) Cash Accounting / Annual Accounting 5) Prompt Payment Discounts 6) Bad Debt Relief 7) New Voluntary Disclosure Rules 8) Penalties 9) Complex Areas10) Future VAT Rate Change

VAT Liability

• Exempt

• Taxable

• Outside the scope

Standard Rate

Reduced Rate

Zero Rate

VAT Registration

• Compulsory

• Voluntary

Look back test

Look forward test

Intending trader

Trading under the limit

VAT Threshold April 2009 = £68,000

Flat Rate Scheme

• Entry level for taxable turnover is less than £150,000.

• Other income level ignored. • The exit level is £225,000. • Notice 733.• Benefits - a flat rate payment.

Cash Accounting/Annual Accounting

Cash Accounting

• Income not exceeding £1.35 million in the past 12 months to join.

• Exit level of £1.65 million.

• Notice 731.

• Benefits – built in bad debt relief.

Cash Accounting/Annual Accounting

Annual Accounting scheme

• Same entry level applies as cash accounting and exit level.

• Notice 732.

• Benefits - one VAT return and payments are made on account by agreement with Revenue & Customs or by 9 equal monthly instalments with a final balance in payment.

Early Settlement Discounts

• VAT valuation rules sometimes complex

• Value for prompt payment/early settlement discount as if discount taken

• Therefore lower VAT even if payment NOT early

Bad Debt Relief

• Unpaid sales invoice that is more than 6 months old.

• VAT Notice 700/18.

• Writing Off Procedure.

• Principles apply to unpaid purchases too!

Voluntary Disclosures

•Increased from £2,000 to £50,000, but greater of £10,000 or 1% of VAT ‘turnover’ < £5M.

•Period of discovery not error.

•Notification to HMRC -> penalty regime

Penalties

Effective: VAT Returns to be submitted on or after 1st April 2009.

How is the penalty charge calculated?•Percentage of the extra tax due. •Subject to behaviour that gave rise to the error. •Lower the tax ‘at risk’ and less serious the behaviour, the smaller the penalty.

Anti-Forestalling

• Rate change from 15% to 17% 1 Jan 2010

• Potential savings to be made but be wary of rules

• See video stream on www.thevatconsultancy.com

Complex Areas

• Property – varies between developer and owner; commercial and residential etc

• Place of supply of services – very different to rules for goods. Varies depending on TYPE of supply. Changes 1 Jan 2010 and 1 Jan 2011

ANY QUESTIONS?

• Contact any of us on:

• 01962 735350

• www.thevatconsultancy.com