Welcome to our February newsletter
I hope you’re all busy and having a productive month. Something has to make up for the miserable weather!
The 20% rate might be over a month old, but it still seems to be a huge milestone to me. I’ve been working in VAT since 1981 and this month I’ve been issuing my first invoices with 20% VAT. With the VAT cost now being an additional one-fifth of the net price, it really feels as though we’ve passed a rubicon.
And I think it’s here to stay. I read an interesting article in Tax Journal recently commenting about the fact that governments are increasingly turning to the use of VAT as a means of raising revenue while reducing employment/corporation tax burdens. With budget deficits a continuing problem, the VAT system provides a very easy and quick way of generating revenue. Five other EC countries have followed the UK in increasing their standard rates of VAT this year and I’m sure that there are more rises to come.
Some more practical issues
* Some of you will be doing client VAT returns for the 3 months to the end of January, covering the change in rate. Remember to check the HMRC guidance about the change in rate, even if you (or your client) is an invoice business (ie not a retailer) you need to make sure that you’re using updated fuel scale charges, VAT inclusive fractions or flat rate percentages for smaller businesses etc.
17th February is a key date. If you/your client invoiced VAT @ 20% but could have charged @ 17.5%, 17th is last day to issue a credit note to the customer.
* The charity sector is lobbying hard for the government to bring in some relief to make up for the additional annual £140m VAT costs arising from the 20% VAT rate. So this is a good time to make sure that any charity/not for profit clients are taking full advantage of the existing VAT reliefs on such costs as property, printing, advertising etc. I’ll be pulling together a short checklist of the main reliefs over the next few weeks that you can use as an aide-memoire to make sure that your charity clients aren’t paying too much VAT. You can, of course, always call me to have a chat about clients who might be entitled to reclaim over-charged VAT.
* The ECJ case of Astra Zeneca UK Limited about employee remuneration got the VAT world in a bit of a tizzy last year. The company claimed that it didn’t have to account for VAT on vouchers given to employees as part of their remuneration packages. The ECJ agreed with HMRC that when an employer gives goods or services to an employee for their personal use, there is a supply for VAT purposes. The decision doesn’t really change anything but is important as it clarifies how VAT should be applied to employee remuneration. Read my (relatively short) article here http://tinyurl.com/5t7ejyd if you want to understand the implications.
VAT Trivia
I couldn’t let the month go by without telling you that the Tribunal has confirmed that ferrets are pets. It was asked to rule on whether ferret food is zero-rated as an animal foodstuff or standard rated as pet food. HMRC won so it’s official. Ferrets are pets.
Sometimes you just have to laugh at the absurdity of life……
Watch out for our next newsletter soon and I’ll do my best to come up with something else about VAT to make you laugh!
And finally, we’ve recently launched our low cost advisory service for accountants and tax professionals. If you’re interested in finding out more about the service, let me know and I’ll send you all of the details.
Marie