VAT – Smartax Consultancy

Ever changing regulations and the growing demands of HMRC mean VAT complaince can be a difficult administrative process. We can help to ensure that you comply with the regulations and that overpayments are not made. To help you manage this complex area, we provide an efficient, cost-effective VAT service, which includes:

assistance with VAT registration;
advice on VAT planning and administration;
use of the most appropriate scheme;
VAT control and reconciliation;
help with completing VAT returns;
planning to minimise future problems with HMRC; and
negotiating with HMRC in disputes and representing you at VAT tribunals if necessary.

HMRC Investigations:

Being the subject of a tax investigation by HMRC can be a stressful and worrying experience. With the onset of personal and corporate self-assessment, HMRC staff can now review cases on a ‘sample basis’; consequently, tax investigations have become more frequent. We have a wealth of experience in dealing with HMRC investigations, whether they are enquiries into an individual’s Tax Return under the Self-Assessment regime, more detailed enquiries or employer-related investigations into PAYE and P11d compliance. If you are about to be the subject of an investigation, we can provide expert help and support.

Tax protection:

With the increased risk of such investigations it may be worth considering taking out an annual insurance policy to protect you and your business from unexpected costs; an investigation will undoubtedly result in additional accountancy work being undertaken. The amount of work will depend upon the complexity of the case but the cost could be substantial.

Important information

Maximize your capital allowances:

Changes were announced to capital allowances in the Autumn Budget. These include an increase in the Annual Investment Allowance (AIA) available. Make sure your business does not fall foul of the transitional rules which apply.

Increased AIA from 1 January 2019:

You will no doubt be aware that the maximum AIA has been set at £200,000 per annum for expenditure incurred since 1 January 2016. The AIA provides a 100% tax write off against profits for expenditure incurred on qualifying plant and machinery (except cars).

For expenditure incurred on or after 1 January 2019, the maximum AIA is increased to £1,000,000. This increase is temporary and is for a two-year period only. The AIA will then revert back to £200,000 for expenditure incurred on or after 1 January 2021.

For those businesses with a December year end that have already used their current accounting period’s AIA of £200,000, delaying expenditure until after 31 December 2018 is a straightforward option. However, watch out for the rules that apply to businesses with accounting periods which straddle 31 December.

Pro rata – straddle calculations:

Where a business has an accounting period that spans 31 December 2018, the maximum allowance for that period is potentially the sum of:

the maximum AIA entitlement based on the £200,000 annual cap for the portion of the accounting period falling before 1 January 2019; and

the maximum AIA entitlement based on the £1,000,000 cap for the portion of the accounting period falling on or after 1 January 2019.

So if Bloomers Limited makes up its accounts to 30 June each year, then for the year ended 30 June 2019 the maximum AIA will be:

July 2018 – December 2018	6/12 x £200,000	£100,000
January 2019 – June 2019	6/12 x £1,000,000	£500,000
Total	£600,000

Limits and date of spend:

Unfortunately, under the straddle rules, Bloomers Limited cannot spend £600,000 at any time in the accounting period and claim AIA on the full amount. The rules state that for expenditure incurred before 1 January 2019, a limit will be introduced for the maximum figure available.

The maximum allowance will be the AIA that would have been due for the whole of the accounting period to 30 June 2019, if the increase in AIA had not taken place. This limit is £200,000 and is deemed to be the limit for the six months to 31 December 2018.

In the example, if Bloomers Limited had spent £355,000 in the first six months of the accounting period relief would be limited to £200,000. Bloomers Limited would be able to spend £400,000 (£600,000 – £200,000) in the six months to 30 June 2019 which will qualify for AIA.

However if Bloomers Limited has not incurred any expenditure in the first six months, £600,000 AIA will be available for expenditure between 1 January and 30 June 2019.

So if Bloomers Limited is considering incurring capital expenditure in excess of the available AIA, then it may be more beneficial to defer some of the expenditure until after 30 June 2019 as the full £1,000,000 AIA may be available. Bloomers Limited could spend £1,000,000 in July 2019.

AIA set to revert to £200,000 from 1 January 2021

On 1 January 2021, the AIA will revert to £200,000. This will mean that for Bloomers Limited will have an AIA in later periods as follows:

Accounting period to 30 June 2020	£1,000,000
Accounting period to 30 June 2021	£600,000

Please be aware that special rules will apply to the straddle down period

Whilst the increase in AIA is good news for businesses it is important to incur the expenditure at the right time for your business. Please contact us for specific advice.

HMRC is reminding employees that they may be able to claim a tax rebate on their work related expenses. HMRC estimate that millions of employees, particularly those working in the service industry, could be entitled to a tax refund. Workers, including nurses, hairdressers, construction workers and those working in retail and food sectors, may be able to claim tax rebates.

Individuals in these types of roles sometimes have to pay for work-related expenses including car mileage, replacing or repairing small tools, or maintaining branded uniforms.

Where these types of expenses are incurred, employees may be entitled to claim a tax refund. HMRC is advising individuals to go directly to GOV.UK to check if they can claim extra cash back. HMRC advise taxpayers to log in to their Personal Tax Account to claim their tax relief online and that approved claims should be refunded within three weeks.

Financial Secretary to the Treasury, Mel Stride MP, said:

‘We know what a difference tax relief can make to hard-working customers, especially at this time of year. HMRC is keen to make sure customers get all the relief they’re entitled to, by using the online service.

Tax relief isn’t available for all employment expenses, so the online Check If You Can Claim tool is very helpful – then if your claim is approved, your full tax relief will be paid directly into your bank account.

The majority of claims are for repairing or replacing tools and branded uniforms, professional subscriptions and mileage. Healthcare workers, people working in food and retail, and those in the construction industry are among the top professions to claim from HMRC.

HMRC is advising that taxpayers may be able to claim tax relief on the cost of:

repairing or replacing small tools needed to do their job (for example, scissors or an electric drill)
cleaning, repairing or replacing specialist clothing (for example, a branded uniform or safety boots)
business mileage (not commuting)
travel and overnight expenses
professional fees and subscriptions.