Value Added Tax
One cannot help but ask – “where is the value being added”?
This is one of the hardest taxes to understand and get right all of the time. Unlike income tax or corporation tax there does not seem to be any software provider that wants to invest in the programming required to build in enough variables to offer a comprehensive, cost effective VAT solution.
Below we’ve tried to shortlist some of the things that you have to give consideration to when thinking about VAT. They are in no particular order:
- Different rates to apply according to what you do
- Various schemes you can opt into
- A flat rate to simplify record keeping but which can also encompass other income sources that you wouldn’t otherwise have thought to charge VAT on. Also it is a rate that applies to the total value of your gross sales, not net sales like standard VAT.
- Split supplies and possibly partial exemption rules to follow. Partial exemption leads to some complicated quarterly calculations and an annual review that can overturn the decisions made during the quarterly phases.
- Rules for buildings, construction or renovation. Every build needs a full review including considering what you are going to do with it once complete. If you change your mind later on it could have disastrous effect on any VAT you have recovered to date.
- Rules for trading with other countries in the EU or rest of the world which includes some hard to fathom reverse charge implications
- VAT Moss if you sell digital services. Digital services can be sold world wide. Moss takes the burden away from registering for VAT in every country that you might have become liable for VAT in.
- Disbursements that are disbursements for VAT purposes and disbursements that are, well, not.
- Tribunal hearings that set precedent in specific situations
- Rules for entertaining and whom you are entertaining and what kind of events are taking place
- Missing traders
- How much to spend arguing if something is a cake or a biscuit
- How frequently should you report? Monthly, quarterly, annually?
- Invoice accounting or cash accounting
- Bad debt relief. If your customer isn’t going to pay, claim bad debt relief. If you are very late paying a supplier you need to consider whether you might have to apply the reverse of bad debt relief and give VAT back.
- VAT registration threshold – and monitoring turnover on a rolling 12 months
And more recently:
Making Tax Digital reporting, for which VAT registered businesses have been cherry picked to pilot the system from 1 April 2019
It is a difficult landscape and we at Darrall & Co would like to ease that burden for you. Please get in touch to see how we can help you: