Whether you have already embarked on an ambitious venture and are growing quickly, or are about to set sail, VAT needs to be given a high priority. There are many pitfalls that can be encountered and these need to be managed.
Here are our top 10 VAT issues that need to be understood and managed.
Whether or not to charge VAT on disbursements, both going forward and historically, has become a key area in the last couple of years, largely as a result of a case against Brabners LLP, a firm of solicitors specialising in conveyancing.
Speaking at our seminar hosted for charities on 11 July, Rupert Moyle, Partner and Head of VAT and Duty, spoke about: “Understanding the importance of where your funding comes from and the difference between a grant and a contract for services for example can have a big impact on VAT.”
From 1 January 2018 there has been a change in how the threshold for compulsory VAT registration in Switzerland is calculated. This is expected to catch an additional 30,000 foreign businesses. Our Kreston associates in Switzerland believe that many businesses making supplies into their country will be unaware of the issue.
In little under a year all businesses that file VAT returns will have no choice but to file those returns online and through dedicated accountancy software. The move is part of the Government’s Making Tax Digital programme, and businesses are far from ready.
The first phase of Making Tax Digital for Businesses (MTD) will come into effect in less than 12 months time. While the quarterly reporting for income tax purposes has been pushed back until at least 2020, the digital reporting for VAT purposes is on schedule and will impact all VAT registered businesses with turnover above the VAT threshold from 1 April 2019.
The default VAT position for selling or letting land and property is that it is exempt from VAT. Whilst this means no VAT is chargeable, it also means that no VAT can be reclaimed from HMRC on related expenditure. Exemption can also have a negative impact on a business’s overhead VAT recovery. This issue can, however, be solved where land and commercial properties are concerned and which is why an owner ‘Opts to Tax’. This turns a VAT exempt supply into a taxable one, at 20% VAT, allowing VAT incurred on construction, refurbishment, maintenance and sale costs to be recovered from HMRC.
The Government has today announced a consultation looking at alternative methods of VAT collection – what it calls ‘split payment’ where VAT is collected by the payment card issuing company or payment company. It is part of the Government’s efforts to more effectively collect VAT due on sales in the UK from global technology companies.