Month: August 2014

Are you accounting for VAT on Google AdWords and Linked In?

Pay per Click

AdWords are invoiced from the Republic of Ireland and subject to ‘Reverse Charge‘ VAT.

When you buy services from suppliers in other countries, you may have to account for the VAT yourself – depending on the circumstances. This is called the ‘reverse charge’, and is also known as ‘tax shift’. Where it applies, you act as if you are both the supplier and the customer – you charge yourself the VAT and then, assuming that the service relates to VAT taxable supplies that you make, you also claim it back. So there’s no net cost to you – the two taxes cancel each other out. [HMRC]

If you can’t give Google a UK VAT registration number they will charge Irish VAT at 21%.

If you can supply a VAT registration number you won’t be charged Irish VAT and will be subject to ‘Reverse Charge’, this means you calculate the amount of VAT – Output Tax – on the full value of the services supplied to you, and then fill in the relevant boxes on your VAT Return as follows:

  • put the amount of VAT you calculated in Box 1, and if you’re entitled to reclaim the VAT on your purchase of these supplies, also put the same figure in Box 4 (this in effect cancels out the figure in Box 1)
  • put the full value of the supply in both Box 6 and Box 7

So all the figures net off to Zero!

If you make reverse charge sales – sales to which a reverse charge is applied – you must notify HMRC and send in regular Reverse Charge Sales Lists.

Linked In invoices are also subject to ‘Reverse Charge’ this is how you can give Linked In your VAT Registration:

If you purchase LinkedIn products for business purposes, you can provide your Value Added Tax # (for European Union or EU VAT customers) for proper tax handling. This information can be added for future orders (not past receipts) on the Payment section of your Privacy & Settings page.

To add your VAT number:

  1. Move your cursor over your profile photo in the top right of your homepage and click Privacy & Settings. For verification purposes, you may need to sign in again.
  2. Click Manage Billing Info.
  3. Click Edit next to the VAT # field.
  4. Enter the 2-character country code followed by your VAT#. For example, LinkedIn’s Irish VAT# is IE9740425P.
  5. Click Update.

Here is a great guide I found which explains how to master adwords

https://www.paidtraffic.io/blog/adwords-mastery-guide-start-small-win-big/

 

steve@bicknells.net

5 Key Tests the employer must pass to borrow from a Pension Scheme

Pension concept
There are five key tests that a loan from a Pension Scheme must satisfy to qualify as an authorised employer loan. If a loan fails to meet one or more of these tests an unauthorised payment charge will apply.

The five key tests are

  • security
  • interest rates
  • term of loan
  • maximum amount of loan and
  • repayment terms.

Security [S179, Sch 30]

If a registered pension scheme makes a loan to an employer the amount of the loan must be secured throughout the full term as a first charge on any asset either owned by the sponsoring employer, or some other person, which is of at least equal value to the face value of the loan including interest.

If the asset used as security is taxable property then there may be additional tax charges under the taxable property provisions if the registered pension scheme is an investment regulated pension scheme.

Taxable property consists of residential property and most tangible moveable assets. Residential property can be in the UK or elsewhere and is a building or structure, including associated land, that is used or suitable for use as a dwelling. Tangible moveable property are things that you can touch and move. It includes assets such as art, antiques, jewellery, fine wine, classic cars and yachts.

Interest Rates [S179, Sch 30]

All loans made by registered pension schemes to employers must charge interest at least equivalent to the rate specified in The Registered Pension Schemes (Prescribed Interest Rates for Authorised Employer Loans) Regulations 2005 (SI 2005/3449). This is to ensure that a commercial rate of interest is applied to the loan.

The minimum interest rate a scheme may charge is calculated by reference to 1% above the average of the base lending rates of the following 6 leading high street banks:

  • The Bank of Scotland
  • Barclays Bank plc
  • HSBC plc
  • Lloyds TSB plc
  • National Westminster plc and
  • The Royal Bank of Scotland plc.

The average rate calculated should be rounded up as necessary to the nearest multiple of ¼%.

Term of Loan [S179, Sch 30]

The repayment period of the loan must not be longer than 5 years from the date the loan was advanced. The total amount owing (including interest) must be repaid by the loan repayment date.

Maximum Amount of Loan [S179, Sch 30]

Section 179 (1)(a) of Finance Act 2004 restricts the amount of a loan which can be made to a sponsoring employer to 50% of the aggregate of the amount of the cash sums held and the net market value of the assets of the registered pension scheme valued immediately before the loan is made. These restrictions are necessary because although such loans provide a useful source of business funding, there may be liquidity problems for the scheme if there is a sudden requirement to provide scheme benefits. It may also not be prudent to lend scheme funds to one company.

Repayment Terms [S179, Sch 30]

All loans to employers must be repaid in equal instalments of capital and interest for each complete year of the loan, beginning on the date that the loan is made and ending on the last day of the following 12 month period – known as a loan year.

Often Land and Commercial Property are used as the security for Pension Scheme loans but the problem is having first charge over the asset!

steve@bicknells.net

How do you handle Input VAT on Insurance Claims?

insurance design

This often causes confusion, firstly because many people wrongly assume that IPT (Insurance Premium Tax) is VAT, it isn’t! and then when they make a claim they may get a VAT only invoice.

HMRC VIT13500 has the answer…

Insurers cannot recover any VAT incurred in obtaining replacement goods or having repairs carried out for a policy holder. The supply of goods (or services in the case of repairs) is considered to be made to the policy holder. This is so even when payment is made directly to the supplier by the insurer.

Subject to the normal rules a VAT registered policy holder may treat any VAT incurred on the supply as input tax. The insurer will normally pay the policy holder compensation exclusive of VAT. The policy holder will pay the supplier the tax and recover it as input tax.

If an insurance claim is for loss or damage at a domestic property you should make sure that any VAT claimed as input tax relates only to goods used for a business purpose.

Insurance and reinsurance is exempt from VAT under article 135 of the Sixth VAT Directive.

This also explains why an insurer may ask a contractor engaged in repair work not to invoice them VAT, its simply that they want the VAT only element to be invoiced to the insured.

steve@bicknells.net

 

Simple Tax – a great way to file your return

laptop_ipad_simpletax_right1

 

I read about Simple Tax in an article in the Express…

Backed by venture capital investors including EC1 Capital, Seedcamp and Charlotte Street Capital, SimpleTax was set up to help customers find ways to save money on their tax bills and file returns online with HMRC in minutes, without the expense of employing an accountant.

SimpleTax’s users have so far cut a total of £2.5 million from their tax bills

So I tried it out, it’s great and it’s free.

You will need your HMRC Online filing details if you want to file your return alternatively you can just print out the return.

For taxpayers who have straightforward returns Simple Tax should make it quicker and easier to complete and file online.

As you prepare the return Simple Tax gives you tips on things you can claim and ways to save tax.

Take a look and see what you think https://www.gosimpletax.com/

steve@bicknells.net

 

Will the EBA be able to stop the growing use of Bitcoins?

Three Bitcoin digital currency coins

Back in December the European Banking Authority (EBA) issued a warning to consumers on virtual currency.

Then in July the EBA issued an opinion on virtual currencies.

The best known Virtual Currency (although not named by the EBA) is Bitcoin.

The European Banking Authority, the EBA, has called on national supervisory authorities to discourage banks and credit institutions from buying, holding or selling virtual currencies.  It calls for regulation of market participants at the interface between conventional and virtual currencies. Over the longer-term, the EBA is calling for a ‘substantial body’ of regulation to be applied to virtual currency market participants, including the creation of ‘scheme governing authorities’ accountable for the integrity of a virtual currency scheme and the imposition of capital requirements.  In the short term, the EBA is calling for national authorities to ‘shield regulated financial services from virtual currencies’.

So do you think Virtual Currencies are useful and worthwhile?

 

steve@bicknells.net

We love Self Employment in UK…..

Business people group.

The UK has seen the fastest growth in self-employment in Western Europe over the past year, according to the Institute for Public Policy Research (IPPR).

The number of self-employed workers rose by 8%, faster than any other Western European economy, and outpaced by only a handful of countries in Southern and Eastern Europe.

The IPPR’s analysis shows that the UK – which had low levels of self-employment for many years – has caught up with the EU average. If current growth continues, it says, the UK will look more like Southern and Eastern European countries which tend to have much larger shares of self-employed workers.

According to Tax Research UK…

Something like 80% of all the new jobs created since 2010 are, in fact, self-employments, and there are a number of things that very significantly differentiate self-employments  from jobs.

The first is security:  there is none.

The  second is durability:  vast numbers of new small businesses fail, which is one reason why I doubt the official statistics.  I am sure they record the supposed start-ups  correctly but seriously doubt if they have properly counted the  failures.

Then there is  the issue of pay. The evidence is  overwhelming  that in recent years earnings from self-employment have, on average, declined significantly.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

In summary, why is it attractive to use Self Employed Freelancers?

  1. Skill is more important than location in many business sectors – we live in world where internet can allow you to work with anyone at anytime, you can now track down the best person to work with even if they live thousands of miles away
  2. Lower fixed costs – Using Freelancers will lower your fixed costs (in similar way to Zero Hours Contracts), you employ them for a specific project and only pay for what you need so there isn’t any surplus capacity
  3. Tax advantages – Freelancers run their own business and that means they pay less tax than employees. Employers save tax too, such as Employers NI.
  4. Competitive Advantage – You can put together a team for a contract rather than finding contracts that fit your workforce, this means you can hire the best.
  5. 110% Commitment – A Freelancers success and future work depends on them performing to the highest level on every contract, failure is not an option for a successful contractor.

So do you think self employment is good for the UK?

steve@bicknells.net

Are you ready for massive construction growth?

at a construction site

According to the Construction Products Association summer forecasts, output will rise by more than 22% over the next five years. Private housing starts are expected to grow by 18% in 2014 and 10% in 2015. Commercial offices output is also projected to grow 10% this year and 8% in 2015.

The CITB Construction Skills Network predicts that 182,000 new jobs will be created in the UK construction industry between 2014 and 2019 as employment rises for the first time since the start of the recession in 2008.

A Close Brothers survey in May showed that 65% of construction firms admit that access to cash is a major challenge for their business.

So can we keep pace? where will the construction workers come from? and will we be able to fund the projects?

steve@bicknells.net

How do you give away property in stages?

Mosaïque de logements

As long as the home you give away is your main home, Capital Gains Tax won’t be payable.

However, if you give away a second home, Capital Gains Tax may be payable if the property has increased in value between when you first owned it and when you gave it away.

If you sell your second home and give the money to your children, the gift won’t be included in your estate for Inheritance Tax purposes, provided you live for 7 years after you make the gift.

Each year individuals have a capital gains tax allowance, called an exemption

 

Annual Exempt Amounts
Customer group 2012-13 2013-14 2014-15
Individuals, personal representatives and trustees for disabled people £10,600 £10,900 £11,000

 

It is possible to to gift property in stages.

Your solicitor will draw up the required documents to conveyance a percentage of the property and register the transactions with the Land Registry.

In order to calculate the capital gain you will need to know the acquisition cost and any reliefs such as PPR.

Giving away your property in stages could save you from having to pay capital gains tax.

The person you give the property to may not have to pay SDLT…

If the property is received as a gift there’s no SDLT to pay, so long as there’s no outstanding mortgage on it.

steve@bicknells.net

Is it a Van or a Car?

black large pickup

It makes a big difference whether a double cab pick up is treated as Car or a Van for tax purposes, in summary:

  1. Benefit in Kind on Cars is linked to CO2 where as on a Van its Flat Rate (and could be zero if your private use is insignificant)
  2. Vans qualify for the Annual Investment Allowance, Cars have restricted Capital Allowances
  3. You can reclaim VAT on Vans but its much harder to reclaim VAT on cars

HMRC have some guidance in EIM23150….

Under this measure, a double cab pick-up that has a payload of 1 tonne (1,000kg) or more is accepted as a van for benefits purposes. Payload means gross vehicle weight (or design weight) less unoccupied kerb weight (care is needed when looking at manufacturers’ brochures as they sometimes define payload differently).

Under a separate agreement between Customs and the Society of Motor Manufacturers and Traders (SMMT), a hard top consisting of metal, fibre glass or similar material, with or without windows, is accorded a generic weight of 45kg. Therefore the addition of a hard top to a double cab pick-up with an ex-works payload of 1,010 kg will convert the vehicle into a car (net payload reduced to 965 kg). Under this agreement, the weight of all other optional accessories is disregarded. HMRC has also adopted this treatment.

http://www.hmrc.gov.uk/manuals/eimanual/eim23150.htm

A double cab with a payload in excess of 1000kg can still be classified as a car if the taxman dealing with the case decides it is a car. You may have to justify a genuine business need for the vehicle.

steve@bicknells.net

 

Are you ready for the OTS to check your employment status?

And now round two of justify it

Contractor Weekly reported on th 29th July 2014…

As part of the ongoing mission to create a simpler and fairer tax system the Office of Tax Simplification (OTS) has been tasked with carrying out reviews of employment status and also tax penalties, with a view to producing a report in time for next year’s Budget.

According to the OTS, the boundary between employment and self-employment no longer reflects modern working patterns, particularly in recent years. Many people have multiple jobs and can be classed as employed in one whilst self-employed in another. The rise of the freelancing business model has also caused some to suggest this is a ‘third way’ between employment and self-employment.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

It will be interesting to see the report that the Office of Tax Simplification (OTS) produce, especially if they find a ‘third way’

steve@bicknells.net