The 12 VAT rules of Christmas – Day 12
On the twelfth day of Christmas ….
- Make it your New Year’s resolution to review your insurance policies as the rate of Insurance Premium Tax (IPT) always follow the rate of VAT and consequently will also be going up to 20%
- Pay particular attention if you or your clients import. Import VAT deferment levels should be reviewed. SIVA (Simplified Import VAT Accounting) could be a good option but make sure you take further advice on this.
- Finally, make it your New Year Resolution to plan your activities carefully and continually review your methods for calculating the amount of VAT that is recoverable to ensure you achieve optimum benefits from the available reliefs. Don’t assume that the current method will remain efficient and suit your charities needs.
The 12 VAT rules of Christmas – Day 11
On the eleventh day of Christmas ….
- So what do you buy the person who has everything for Christmas and keep it VAT-free? Well, a private jet of course, but do pay for it before 4 January 2011 as private aircraft will carry the standard rate of VAT after this date, meaning your purchase will cost 20% more.
- Businesses on the flat rate scheme should take the opportunity to review their position. Revised flat rate scheme rates will become effective at the time of the rise so take advice to establish if there is the chance to use a lower banding. This could have a considerable impact on cashflow.
- When dealing with your suppliers, don’t accept a VAT charge if there is a relief available and be prepared to explain any available VAT reliefs to suppliers; after all charity is about giving and sharing.
The 12 VAT rules of Christmas – Day 10
On the tenth day of Christmas….
- Time to curl up on the sofa in front a roaring log fire with a glass of mulled wine and watch a Christmas movie – but don’t rent them! As with presents, buy your films from one of the many VAT-free import online retailers and for the ultimate VAT-free munchie opt for microwave popcorn or Pringles.
- Businesses on the flat rate scheme should take the opportunity to review their position. Revised flat rate scheme rates will become effective at the time of the rise so take advice to establish if there is the chance to use a lower banding. This could have a considerable impact on cashflow.
- Christmas is a time when charities may be reliant on voluntary or seasonal staff – don’t overlook their training so that VAT free sales are recorded correctly.
The 12 VAT rules of Christmas – Day 9
On the ninth day of Christmas….
- Christmas is a great time to catch up friends and family for dinner. When you’ve been slaving over a hot stove for a few days, it’s tempting to indulge in a takeaway, but be warned this will carry VAT. Better to cook something at home. Looks like it’s turkey curry after all then!
- Charities and VAT-exempt businesses, which are unable to recover VAT costs on purchases, will be hardest hit. Be aware that your budgets will stretch 2.5% less far in 2011 than they did this year. If you’re considering making a capital investment, you may wish to consider bringing the purchase forward to benefit from the 17.5% rate.
- If you are one of the larger charities and have a shop, encourage and sell donated goods, which are VAT free. Goods that are bought in for resale will be subject to VAT; but don’t forget that books and children’s clothing are VAT free!
The 12 VAT rules of Christmas – Day 8
On the eighth day of Christmas….
-If you’re planning a family day out over the festive period, zoos and museums are generally VAT-free. If you take a packed lunch you’ll not only avoid the VAT in the park café, but you’ll get through the left-over turkey a lot quicker.
- If you are not registered for VAT and sell mainly zero rated products, the rise is a good prompt to register as you will be able to recover the VAT you incur on suppliers’ costs and so reduce overheads.
- Mail-outs have a proven track record for publicity and generating responses. General mail outs or bulk mailings are VAT free, whereas those targeted to specific individuals or groups will incur a VAT charge.
The 12 VAT rules of Christmas – Day 7
On the seventh day of Christmas….
- If you’re looking for ways to keep the children amused while you finish off those last minute Christmas preparations – take a look at what activities local independent organisations are running as generally they will be VAT-free.
- Get your accounting right to avoid any fines from the tax man. HMRC will as ever penalise mistakes such as a wrongful declaration of output tax so don’t expect leniency.
- When it comes to advertising your charity, take advantage of zero-rated advertising such as “pay per click” internet click through facilities.
The office party VAT rules!
When times are tough and businesses are looking to make savings, events like the office Christmas party are one of the first things to get cancelled. Yet what many businesses don’t realise is that they can claim back the VAT for staff on their Christmas parties, and can backdate a claim by up to 4 years.
The rules on what can and can’t be claimed back on Christmas entertaining and staff gifts are not straightforward. From a VAT perspective, the expenditure on non-employees is viewed as entertainment and cannot be claimed back, so you will need to show the split between employees and their non-employee guests to make a claim. If the entertainment is limited only to the partners or directors of a business then the VAT incurred is not input tax and cannot be recovered. However, if partners or directors attend staff parties along with other employees, the tax is viewed as input tax and is recoverable.
And, should you be splashing out on a Christmas gift for staff, then it’s worth remembering that there will be no VAT on gifts under £50.
The 12 VAT rules of Christmas – Day 6
On the sixth day of Christmas ….
- Looking for the ultimate outfit for the office Christmas party? Remember that all adult clothing carries VAT, so opt for vintage chic and visit your local charity shop, and get a double saving – the clothes will be VAT-free and cheaper.
- Retailers should ensure their POS systems can identify goods bought before the rise so that any later refunds reference the rate that was applied for the original supply.
- During an event, if you are asking for any kind of monetary donation, make sure that it stays VAT free by not offering to provide anything in return for the donation.
The 12 VAT rules of Christmas – Day 5
On the fifth day of Christmas….
- Gift vouchers and books make great VAT-free presents, as do CDs and DVDs from online retailers with special VAT-free import arrangements.
- One of the great traditions of Christmas shopping is the return of unwanted presents in the New Year, so retailers should make sure they understand the rate to put on credit notes, the value of gift vouchers to give in return and the value of exchanged goods.
- Selling raffle tickets for a Christmas prize draw is always a guaranteed way to raise funds, but make sure you don’t charge VAT on the sale of the tickets
The 12 VAT rules of Christmas – Day 4
On the fourth day of Christmas….
- After a morning’s shopping, no doubt you’ll be feeling peckish. Tuck into a homemade VAT-free packed lunch instead of heading for the nearest department store restaurant.
- Businesses need to factor in the VAT rise to cashflow forecasting. Depending on your market, there is likely to be a rush of sales before the rise and a slump afterwards with the usual post-Christmas credit card hangover.
- As a charity, you should limit the number of fund raising events you hold to a maximum of 15 in a particular location in any given year.