Charities have until August to enjoy reduced VAT rate on energy saving materials
The Government has announced its intention to defend the UK’s stance on 5% VAT for energy saving materials for residential buildings, which is the subject of a formal challenge from the EU. However under the VAT guidance of HMRC Brief 26/12 they confirm that similar installations in charitable buildings is to be withdrawn from a date following Royal Assent to the Finance Bill 2013 which is likely to be 1st August 2013. Any works that have commenced BEFORE the date will still attract 5% and will apply to the whole installation.
Any charity considering installing energy saving materials should act now and for further VAT help please contact Sarah Shears or Steve McIntyre on 01962 735350.
VAT rise survival plan – don’t pay the price for poor preparation
With VAT rising today to 20% we’re urging businesses not to bury their heads in the sand. Whilst the 2.5% hike can make for a difficult start to the New Year, if businesses assess the impact and act accordingly it will be possible to manage the rise as effectively as possible and minimise the risk of errors arising.
Be prepared, seek clarification if you are unsure on how to treat an item for VAT purposes, and you never know you may actually profit from the rise.”
Here’s our 12-point survival plan:-
1. Be aware of the tax point rules and make sure that you have a company policy that your staff know and understand. Because each business is unique, it is neither necessary nor appropriate for all businesses to have identical policies relating to the VAT rate increase. It is, however, essential that any policy adopted fits within the scope of the tax point rules as well as the anti-forestalling legislation.
2. Think about pricing – will you pass the VAT increase onto customers or absorb this cost to keep prices the same, remembering that you will still have to pay over the additional 2.5% to HMRC. This will be a commercial decision based on what competitors are doing, whether suppliers are increasing their prices and elasticity of customer demand.
3. As the vast majority of people will be aware of the VAT rise, a marketing push could encourage customers to make purchases. Holding any prices as they are could provide a competitive edge especially if you can boost margins on other lines to compensate.
4. Don’t forget if you are a business only selling standard rated goods, one-sixth of your revenue will be VAT.
5. 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.
6. 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.
7. 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. Careless errors could trigger a 30% penalty.
8. 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.
9. Charities and VAT-exempt businesses, which are unable to recover VAT costs on purchases, will be hit the hardest. Be aware that your budgets will have 2.5% less to work with in 2011 than you did in 2010.
10. Take a look at supplier terms and don’t be fooled by ‘Beat the VAT Increase’ promotions. Unless cash-flow is extremely tight or VAT is irrecoverable it will take a £1,000 spend to incur an additional £25 cost as a result of the VAT rate increase. However, for larger businesses, payments on account will be based on pre-VAT rate rise quarterly liabilities which will give some relief from the effect of the rise.
11. 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.
12. 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.
Ultimately our advice would be to be prepared, seek clarification if you are unsure on how to treat an item for VAT purposes, and you never know you may actually profit from the rise.
For further advice or information get in touch with us: vat@thevatconsultancy.com
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 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