How to claim VAT back using Fuel Advisory Rates Reply

Mileage for the current tax year can be reclaimed at a maximum  of 45p per mile for the first 10000 miles then 25p after that

http://www.hmrc.gov.uk/rates/travel.htm

Most people are already using these rates, but a large number of businesses don’t reclaim the VAT on the Fuel element – see VAT Notice 700/64

8.7 My employees are paid a mileage allowance, how do I work out my input tax?

You work out your input tax by multiplying the fuel element of the mileage allowance by the VAT fraction. You can do this for all fuel bought

The allowance paid to employees must be based upon mileage actually done.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000090&propertyType=document#P159_17774

 

Company cars: advisory fuel rates
The rates below apply from 1 December 2011.

Engine size

Petrol

LPG

1400cc or smaller 15p 10p
1401cc to 2000cc 18p 12p
Bigger than 2000cc 26p 18p

Engine size

Diesel

1600cc or smaller 12p
1601cc to 2000cc 15p
Bigger than 2000cc 18p

So this is how to work out the claim:

1000 business miles = 1000 x 45p = £450

On which VAT (assuming a 2000cc (bigger) Diesel) 1000 miles x 18p divided by 1.2 x 20% VAT = £30 VAT to reclaim

For large businesses there could be a lot of VAT to reclaim

steve@bicknells.net

 

A quick guide to VAT on Sandwiches, Takeaway Food, Cakes and Pasties 14

Most takeaway and sandwich shops are not part of the big chains like Greg’s, McDonalds or Subway, they are just small businesses doing their best to comply with complicated and confusing VAT rules, here is a quick summary to help those businesses account for their sales. Basically by using keeping 3 separate receipt books it will make it easier for their accountants to calculate the VAT, rather than a single takings book which almost inevitably means making estimates of the split between zero rates and vatable.

 

 

The rules are in HMRC Notice 709/1

So what changed in the Budget 2012

Food is subject to VAT once it is heated to “above air-ambient temperature”, and meant to be eaten in or near the shop or restaurant. So “takeaway food” is already subject to VAT, while most hot food sold by bakers and supermarkets is exempt as it has been heated to improve its appearance (ie it could equally be enjoyed cold); or it will be eaten at home.The aim of the change is therefore to “clarify the definition of ‘hot takeaway food’ to confirm that all food (with the exception of freshly baked bread) that is above ambient temperature when provided to the customer is standard [VAT]-rated”.

http://www.guardian.co.uk/lifeandstyle/2012/mar/28/pasty-tax-pie-budget

VAT can be very complicated as highlighted in the case of Jaffa Cakes – Cakes or Biscuits?

The leading case on the borderline is that concerning Jaffa cakes: United Biscuits(LON/91/0160). Customs and Excise had accepted since the start of VAT that Jaffa cakes were zero-rated as cakes, but always had misgivings about whether this was correct. Following a review, the department reversed its view of the liability. Jaffa cakes were then ruled to be biscuits partly covered in chocolate and standard-rated: United Biscuits (as McVities, one of the largest manufacturers of Jaffa cakes) appealed against this decision. The Tribunal listed the factors it considered in coming to a decision as follows.

  • The product’s name was a minor consideration.
  • Ingredients:Cake can be made of widely differing ingredients, but Jaffa cakes were made of an egg, flour, and sugar mixture which was aerated on cooking and was the same as a traditional sponge cake. It was a thin batter rather than the thicker dough expected for a biscuit texture.
  • Cake would be expected to be soft and friable; biscuit would be expected to be crisp and able to be snapped. Jaffa cakes had the texture of sponge cake.
  • Size: Jaffa cakes were in size more like biscuits than cakes.
  • Packaging: Jaffa cakes were sold in packages more similar to biscuits than cakes.
  • Marketing: Jaffa cakes were generally displayed for sale with biscuits rather than cakes.
  • On going stale, a Jaffa cake goes hard like a cake rather than soft like a biscuit.
  • Jaffa cakes are presented as a snack, eaten with the fingers, whereas a cake may be more often expected to be eaten with a fork. They also appeal to children, who could eat one in a few mouthfuls rather like a sweet.
  • The sponge part of a Jaffa cake is a substantial part of the product in terms of bulk and texture when eaten.

Taking all these factors into account, Jaffa cakes had characteristics of both cakes and biscuits, but the tribunal thought they had enough characteristics of cakes to be accepted as such, and they were therefore zero-rated.

http://www.hmrc.gov.uk/manuals/vfoodmanual/vfood6260.htm

Surely there must be a way to simplify the rules?

steve@bicknells.net

Plan out the Key Dates for your Business Reply

There are so many things to remember when you have a company, accounting dates, vat dates, paye dates, corporation tax, self assessment dates, the list seems endless. The only way to keep on top of the dates is to put them in your diary.

I found this link http://www.businesslink.gov.uk/bdotg/action/keydates

Business Link can generate all your key dates, the results look like this

July 2012

05/07/12 Ensure agreement is reached with HM Revenue & Customs re Class 1B voluntary settlement.
Find out more: National Insurance: an introduction
PAYE and NICs
06/07/12 Ensure copies of P9D/P11D are with employees. PAYE and NICs
Submit P11D(b), P9D and P11D forms to HM Revenue & Customs.  
Report shares/securities information to HM Revenue & Customs.
Form 42 is provided by HM Revenue & Customs for this purpose.
Find out more: Share schemes – Opens in a new window
 
22/07/12 Pay PAYE, NICs, student loan deductions and deductions for payments to subcontractors for the month up to the 5th of this month electronically.
Find out more: PAYE for employers: the basics
PAYE and NICs
Pay Class 1A NICs shown to be due by your form P11D(b), electronically.  
31/07/12 If you need to make a Self Assessment payment on account, this is the date for your second payment.
You won’t have to make payments on account if your tax bill for the previous year was less than £1000, or if more than 80 per cent of your income tax for the previous year was deducted at source.
Find out more: Tax return deadlines and penalties
Self assessment

You can then print the list and pin on the wall or fridge and pop the dates in your diary.

Brilliant!

It could save you a fortune in late filing penalties

steve@bicknells.net

 

How cash accounting can improve your cashflow Reply

Cash Accounting is a VAT scheme and it will improve your cashflow if your customers pay more slowly than you pay your suppliers and other costs. For example if your clients pay on 60 to 90 day terms and you pay suppliers on 30 days then VAT Cash Accounting should work in your favour. When you use Cash Accounting you pay VAT based on money received and money paid (so you exclude customers who havent paid).

You can use the Cash Accounting Scheme if your estimated VAT taxable turnover during the next tax year is not more than £1.35 million.

Once you start to use cash accounting, you can continue to do so until your VAT taxable turnover reaches £1.6 million.

You can use Cash Accounting with other VAT Schemes, for example the Flat Rate Scheme.

You do not need to complete an application form or advise HM Revenue & Customs (HMRC) to start using the Cash Accounting Scheme.

You can start using the Cash Accounting Scheme at the beginning of any VAT period if you are already registered for VAT

Why pay VAT before you need to?

steve@bicknells.net