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Posts archive for ‘Business News’


12th September 2017

Making Tax Digital delayed until 2020 for all taxes except VAT

Filed Under: Tax, Accounting, Business News


HMRC has announced a deferral to the launch of Making Tax Digital (MTD) following concerns raised by the accountancy profession, businesses and parliamentary bodies. The recommendation to postpone the implementation of MTD to 2019/2020 was originally proposed by the Treasury Committee in January which called HMRC’s plans ‘over ambitious’ in their 50 page report. The system for keeping tax records digitally was originally set to go live from April 2018.

The new timetable

  • Businesses with a turnover above the VAT threshold (currently £85,000) will start to keep digital records, for VAT purposes only, from 2019. All other taxes are optional until 2020.
  • Businesses and landlords with a turnover below the VAT threshold will not have to keep records digitally until ‘at least’ 2020.

We will continue to keep you updated with developments as HMRC release more information!

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29th June 2017

Making Tax Digital

Filed Under: Tax, Accounting, Business News


Major changes are being made to the way in which all taxpayers interact with HM Revenue & Customs (HMRC). This is known as “Making Tax Digital” (MTD) and work has already started with some changes implemented in April 2016, and further changes planned through to completion in 2020.  The introduction of MTD will mean that business, self-employed people and landlords will need to keep their records digitally and make quarterly reports to HMRC.

Timescale

Businesses, self-employed people and landlords will be required to start using the new digital service as follows:

Landlords and unincorporated businesses with a turnover in excess of the VAT threshold (currently £85,000) April 2018
Landlords and unincorporated businesses with a turnover above £10,000 but below the VAT threshold April 2019
All VAT payments will have to be processed through MTD for the self-employed, unincorporated businesses and landlords. April 2019
All taxpayers that pay corporation tax and partnerships with a turnover of over £10m April 2020

 

Keeping records digitally

Currently, individual taxpayers can, if they wish, submit their annual tax return to HMRC on a paper form, whereas limited companies have had to submit their annual returns electronically for some time.  MTD not only means that all income tax, corporation tax and VAT returns are submitted electronically they must also be submitted on a quarterly basis.  As all returns must be digital they must provide information in a format specified by HMRC they are insisting that software be used to keep the records required.  However, HMRC have firmly said that will not provide free software to the taxpayers concerned.

Getting ready for MTD

Consider using software – If you do not already use bookkeeping software in your business you should consider doing so.  There are a variety of packages out there and so it can be a bit of a nightmare to decide which is best for you.  We would very much like to work with you in this process so please call your usual THL contact. We would also be able to offer setup support, initial training and ongoing assistance.

Consider changing your year ended – Currently draft rules mean that businesses with a 31 March year end look to enter MTD twelve months later than those with a 5 April year end.

Consider incorporating – Limited companies don’t have to enter MTD until April 2020 so if you’d like more breathing space you could incorporate your business.

Please do not hesitate to get in touch if you’d like to discuss how MTD will affect you.

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10th March 2017

SIGNIFICANT CHANGES TO THE VAT FLAT RATE SCHEME

Filed Under: Business News, VAT


You may be aware that HMRC are amending the way the VAT flat scheme works.  The changes will affect businesses that use the VAT Flat Rate Scheme but which spend very little on goods, including raw materials – such as firms providing services.

The VAT Flat Rate Scheme simplifies the record keeping and makes it easy to work out the VAT to pay or reclaim  The flat rate scheme was designed to give the government roughly the same amount of VAT, but for smaller businesses it should be much easier to work out.  However, the government is concerned that some businesses are using the Flat Rate Scheme to pay less VAT than is appropriate.

What is changing?

The changes which affect businesses which have a very low cost base. These businesses are now called “limited cost traders”.

Limited cost traders can still use the Flat Rate Scheme, but their percentage will be 16.5%. So if they sell £120 of work, including £20 of VAT, the flat rate amount is £19.80 (£120 x 16.5%).

A limited cost trader is defined as one that spends less than 2% of its sales on goods (not services) in an accounting period.

When working out the amount spent on goods, it cannot include purchases of:

  • capital goods (such as new equipment used in a business)
  • food and drink (such as lunches for staff)
  • vehicles or parts for vehicles (unless running a vehicle hiring business)

Who will this affect?

You’re a limited cost business if the amount you spend on relevant goods including VAT is either:

  • less than 2% of your VAT flat rate turnover
  • greater than 2% of your VAT flat rate turnover but less than £1000 per year

If your return is less than one year the figure is the relevant proportion of £1000. For a quarterly return this is £250.

For some businesses this will be clear, other businesses – particularly those whose goods are close to 2% – may need to complete this test each time they complete their VAT return. This is because you can move from a limited cost rate of 16.5% in one period to your relevant sector rate in another. This would happen if your costs fluctuate above and below 2%.

What to do next?

Firstly you’ll need to check to see if you are a limited cost business.  The easiest way to do this is to use HMRC’s calculator.  This can be found using the following link:

https://www.tax.service.gov.uk/check-your-vat-flat-rate/vat-return-period

If you’re a limited cost trader this means that you may pay more VAT than you do on standard accounting – you may want to check to make sure the Flat Rate Scheme or, if your voluntary registered, whether being VAT registered is still right for you.

Example 1

A business has a flat rate turnover of £10,000 a quarter. It spends £260 on relevant goods.

This is more than 2% of the flat rate turnover and more than £250 so the rate they need to use is the sector rate for their business.

Example 2

A business has a flat rate turnover of £20,000 a quarter. It spends £325 on relevant goods.

This is more than £250 but less than 2% of the flat rate turnover so the rate they need to use is 16.5%.

Example 3

A business has a flat rate turnover of £10,000 a quarter. It spends £225 on relevant goods.

This is more than 2% of the flat rate turnover but less than £250 so the rate they need to use is 16.5%.

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