Sage Warns of VAT Change Complications

Two thirds of businesses could be leaving preparations for VAT changes too late warns financial software giants.

Sage has warned businesses to prepare for the VAT changes or face the consequences.

The financial software provider has found that just a third of businesses will be prepared for the VAT changes before they close their offices for the Christmas period.

The VAT rate will return to 17.5% on 1 January 2010 causing disruption to accountancy firms and businesses in the New Year.

“This is cause for serious concern - managing the change for something as integral as VAT is not as easy as simply flicking a switch. In fact, it can be hugely complex for businesses both small and large,” said Kevin Hart, head of government relationships at Sage UK & Ireland.

“Those that fail to plan the changes now will pay the price later,” he added.

When the VAT rate was reduced this year, businesses were given just four days to prepare for the amendments. Sage has said that its VAT development team and support staff had to work around the clock to prevent widespread disruption.

There are special arrangements being drafted for certain businesses operating beyond midnight on 31 December.

Sage is advising its clients to get in touch with their accountants as soon as possible to discuss how the changes will impact them.

Accountancy Age

HM Revenue & Customs vs ‘Pringles’

The Court of Appeal issued its decision in this case on 20 May 2009. The judgment is in HM Revenue & Customs (HMRC) favour and confirms that the sale of regular ‘Pringles’ is standard-rated for VAT.

Background

Proctor & Gamble manufacture ‘Pringles’, a savoury snack product, commonly sold in retail outlets.

Although food is generally zero-rated, some items, including potato crisps and similar products made from the potato or from potato flour or from potato starch are excluded from zero-rating and charged with VAT at the standard rate.

Procter & Gamble appealed to the VAT Tribunal on the grounds that a ‘Pringle’ was not similar to a crisp and that it was not wholly or mainly made from a potato product. The Tribunal did not accept this argument and found in favour of HMRC.

Procter & Gamble subsequently appealed to the High Court which found in their favour and decided that regular ‘Pringles’ were eligible for zero-rating because they were not wholly or mainly made from potato.

HMRC appealed to the Court of Appeal which has upheld the Tribunal’s original decision.

Implications of this judgment

The judgment confirms HMRC’s view that ‘Pringles’ are standard-rated for VAT and always have been.

Therefore, any business that chose to stop charging VAT on ‘Pringles’ as a result of the High Court decision must now resume charging VAT on all such sales. Tax must also be accounted for, for the period from when zero-rating was applied to the current date.

An adjustment may be made to your current VAT return, but the value of the errors must not exceed the greater of either £10,000 or 1 per cent of the box 6 figure on the VAT return for the VAT return period of discovery, subject to an upper limit of £50,000.

Where the errors exceed the limits set out above, a written notification detailing the error should be submitted to HMRC (in these cases the errors must not be corrected through the use of VAT returns).

Details of where to send your notification can be obtained from update 2 to VAT Notice 700/45 - How to correct VAT errors and make adjustments or claims from the HM Revenue & Customs National Advice Service on Tel 0845 010 9000.

Any claims for overpaid VAT lodged as a result of the High Court decision will now be rejected.

If you have any queries about this please contact the National Advice Service.

Change of HMRC Bank Account Details From 6 April 2009

From 6 April 2009 some of HM Revenue & Customs’ (HMRC) bank account details will be changing. You will need these new account details when making a payment to HMRC.

The changes will take place over a period of time starting with the following areas:

• Self Assessment
• Tax credit repayments
• Corporation Tax
• PAYE and Class 1 National Insurance contributions
• Class 1A National Insurance contributions
• PAYE Settlement Agreements payments
• Pension scheme payments
• Stamp Duty Land Tax
• Petroleum Revenue Tax
• HMRC penalties and other miscellaneous payments

If you pay by BACS Direct Credit, Internet, telephone banking or CHAPS

HMRC is now using the bank Citi for these types of electronic payments. You can find the new bank account numbers and sort codes by referring to the papers sent to you by HMRC or in the relevant guide in the ‘Paying HMRC’ section of this website - follow the link at the end of the page.

Individual banks and building societies will start accepting the new account details on or shortly after the 6 April 2009. If there is a delay your bank/building society will be able to advise you. You can continue to make payments using the old details until your bank is ready to accept the new ones.

Once your bank/building society is ready to accept HMRC’s new account details you should arrange to update any templates or transactions that you have stored for online banking purposes.

Payments using a payslip by Bank Giro or at the Post Office

HMRC will be using NatWest and Alliance & Leicester to process payments made by Bank Giro and at the Post Office. In time each payslip will show the new HMRC bank account details. You do not need to take any action because payments made using both old and new HMRC bank account details will continue to be accepted.

Note that the new bank account details differ from those used for paying by BACS, Internet, Telephone and CHAPS.

Planned changes for other payment types

HMRC will provide more information in due course as the new bank account changes take place in HMRC for other types of payment (for example VAT, Class 2 & 3 National Insurance Contributions).

Businesses Given More Time to Pay Business Rates

Businesses will be able spread payment of this year’s inflation up-rating to Business Rates over three years, under new legislation announced by the Government today.

Under existing legislation business rates are adjusted every April in line with the Retail Prices Index for the previous September. The new measures are designed to smooth the effects of the spike in inflation of 5 percent in September, which would have seen businesses facing an impact on their cash flow this year.

The majority of independent economists expect RPI inflation - which has now fallen to 0 percent - to turn negative at the end of 2009. The impact of up-rating if RPI is negative would be to reduce total business rates in cash terms in 2010-11. However the Government recognises that many businesses also need help now to ease cash flow.

Business ratepayers will be able to defer around £600m across 1.6 million properties, boosting their cash flow for the current year. This will include measures to allow those affected by the end of the 2005 transitional relief scheme also to spread payment of the increase in their bills over a three year period.

Today’s announcement builds on other measures to help businesses meet the challenges of the current economic climate, such as HM Revenue and Customs’ time to pay arrangements, which have already benefited over 100,000 businesses by giving them extra time to pay NICs, VAT and corporation tax bills.

The Chancellor of the Exchequer said:

“The Government recognises that businesses need help now to ease their cash flow at a time when money is very tight. This measure will help businesses to smooth their rates payments over the next three years.”

Secretary of State for Communities and Local Government Hazel Blears said:

“It’s vital that we support businesses as they navigate their way through this tough financial climate. The steps we are taking today will provide them with real help now, by giving them the flexibility to defer part of this year’s increase in business rates, and manage the financial pressures that they are facing.”

Bumper April Package to Help Businesses

A bumper package of measures to increase consistency and streamline how business, agents and other customers work with HM Revenue & Customs (HMRC) will be introduced in April.

From 1 April 2009:

• HMRC will have one set of powers and safeguards covering PAYE, VAT, Income Tax, Capital Gains Tax and Corporation Tax. This means there will be less confusion for customers because the same rules will be applied, no matter which tax position we are checking.
• a new two-tier system of tax tribunals comes into effect - a ‘first-tier tribunal’ and an ‘upper tribunal’. General Commissioners, Special Commissioners and the VAT & Duties Tribunal will no longer exist.
• changes to simplify the entry and leaving rules for small businesses using the VAT flat rate scheme will take effect.

From 6 April 2009:

• employers with 50 or more employers will have to file their employee starter and leaver notifications and similar pensions notifications online.
• a new A4 version of the P45 form will replace the old style A5 form.
• changes to form P46 (Car), used for reporting the private use of cars supplied by employers, will be implemented.

Dave Hartnett, HMRC Permanent Secretary for Tax, said:

“These are important measures which will make it easier for businesses and their advisers to meet their obligations whilst making it easier to work with us and to get decisions on points of law. These initiatives will provide businesses with more consistency, certainty and faster on-line processing of key documents”.

VAT Recovery - Business Entertainment of Overseas Customers

HM Revenue & Customs (HMRC) are currently reviewing the input tax treatment of business entertainment provided to overseas clients in the light of a recent European Court of Justice (ECJ) judgment in the joined case of Danfoss and AstraZeneca (Case-371/07).

The case concerned a Danish law provision, which excluded certain types of expenditure from the right to deduct VAT, and whether it was still effective, since although, it had been introduced before the Sixth Directive came into force, it had not been applied in practice.

Businesses may wish to consider the relevant time limits applying to potential claims and to submit claims, together with supporting evidence, in order to protect their position, pending HMRC’s statement of their position. Businesses should note that, in any event, any claim would be confined to entertainment which is of a kind and on a scale that is reasonable. Any claims submitted should, as a minimum, include:

• Details of the overseas clients (NB overseas suppliers are not covered).
• The type of expenditure (eg meal, drinks, sporting event etc).
• The amount of VAT claimed.
• Evidence to support the fact that the VAT had not previously been deducted.

HMRC do not consider that this decision has any implications for the input tax block on expenditure on entertaining UK business clients. Nor does it have any impact on input tax that can be claimed on expenditure on meals and other entertainment provided to employees - business can continue to claim this input tax subject to the normal rules.

If you require any assistance with VAT, please contact us by completing the simple form below, to see how Davenports can help you.

Accountancy Request

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2. Post Code
3. Contact Number(required)
4. Email(valid email required)
5. I Need...
6. Help!
   A Change of Accountant
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Get Ready for New Compliance Checks Regime

Businesses need to get ready for the new aligned compliance checks framework that comes into effect next month, HM Revenue & Customs (HMRC) warned today.

With new information and inspection powers, record keeping requirements, time limits for tax assessments and claims and the accompanying safeguards, businesses need to make sure that they know what this will mean for them.

From 1 April 2009, HMRC will have one set of powers and safeguards covering PAYE, VAT, Income Tax, Capital Gains Tax, Corporation Tax and the Construction Industry Scheme. There will also be safeguards in place to ensure that the powers are used appropriately.

HMRC’s Dave Hartnett said:

“This new approach to compliance checks will improve HMRC’s ability to ensure that the right tax is paid at the right time. We have consulted with taxpayers and their agents to make very sure that HMRC achieves the right balance between obtaining the information we need and appropriate use of our powers.”

To ensure you remain compliant, why contact us to see how Davenports can help, simply complete the quick form below and one of our team will get back in touch shortly.

Accountancy Request

1. Your Name(required)
2. Post Code
3. Contact Number(required)
4. Email(valid email required)
5. I Need...
6. Help!
   A Change of Accountant
   Assistance starting up
   Help with the Payroll
   Help with Tax, CIS or VAT
   Help with getting money from my clients
7. Any other comments
8. To receive your FREE key fob, tick this box
9. Verification

 

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£1Billion Cashflow Boost to Business

Over 60,000 businesses have agreed time to pay tax arrangements with HM Revenue & Customs (HMRC) totalling more than one billion pounds.

The Business Payment Support Service (BPSS) announced by the Chancellor in November’s Pre-Budget Report provides a fast track service that offers support to businesses needing more time to pay their tax bills. These businesses can quickly agree terms they can afford with HMRC over the phone.

The Right Honourable Stephen Timms, Financial Secretary to the Treasury said:

“I’m delighted that HMRC’s Business Payment Support Service is proving such a huge success, already providing a cashflow boost worth over a billion pounds to UK businesses.

“This service is delivering the kind of tangible support that business needs at this time. I would urge any business anticipating or experiencing difficulties paying their tax to call the helpline and get a quick response tailored to their specific needs.”

The End of Paper VAT returns

HM Revenue and Customs plan to phase out paper VAT Returns with effect from 1 April 2010, when it is expected that all VAT registered businesses with an annual VAT exclusive turnover of £100,000 or more, and all newly registering businesses, whatever their turnover, will be required to submit their VAT Returns online and make payments electronically. This follows Lord Carter’s recommendation that HMRC should aim for universal online submission of the main business tax returns by 2012.

Paper returns will still be an option for the remaining VAT registered businesses, but this will be reviewed in the run up to 2012.

If you need help with your VAT Returns or setting up VAT online get in touch with Davenports now to see how we can help.

Internet Shopping

Buying goods on the Internet is an increasingly popular way of shopping.

We hope the following will provide you with basic information about various charges, such as Customs duty, that may apply to goods you buy.

Before buying goods on the Internet, you need to be aware that whilst you may think you have found a real bargain and have paid fully for the goods:

• Some websites may not make it clear that in addition to the total price you pay, you may also have to pay Customs duty, Excise duty and/or import VAT.
• Other websites may advertise that they will misrepresent or undervalue your goods so you avoid paying any extra Customs charges. However, by law you are the importer of the goods and are legally responsible for the information on the Customs declaration made by the sender and for any charges due. If you buy goods and the declaration is found to be incorrect, you may be liable to financial penalties or prosecution. In addition, the goods may be seized. It is in your interest to ensure the sender completes the Customs declaration accurately.
• Royal Mail, Parcelforce Worldwide and Fast Parcel Operators may charge you for processing your package through Customs. These charges are normally collected together with any duty/taxes on delivery but they are not Customs duties. If you need to know the exact cost of these extra charges in advance, you should contact the seller and ask which carrier they will be using to send your goods. You can then contact the carrier and ask what their charges will be.

For more information why not take a look at our basic guide to Shopping on the Internet, or get in touch to see if Davenport can help.

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