I started this blog with my favourite scheme the flat rate scheme which is still not used enough, in my opinion, by many traders who could benefit from it.
Having said that, an article in the national press today appears to demonise the scheme for certain retailer's, namely those in the children's clothing sector.
Read the article with caution, as although the article suggests a 'stealth tax' has been introduced on the small children's clothing retailers' using the scheme, in my opinion they are failing to see how well off they still are under this scheme.
As a simple re-cap, the scheme means that no input VAT is recovered, but a specified percentage is paid over to HMRC on sales. 'Sales' for this purpose will include exempt zero rated sales. The 'specified' percentage varies depending on the industry you are in, it was 2% for children's clothing retailers', now it stands at 3.5%.
It must of course feel like these retailer's have been stung, losing 1.5% of their income suddenly. However, there are a couple of points to consider:
1) If the retailer was only selling zero rated children's clothes then the scheme is not for them anyway
2) If the scheme is deemed suitable for them, they have enjoyed one of the lowest flat rates for many years and still do AND they are still using a beneficial scheme. Rather than looking at the glass half full they should focus on the positive angle that they could be worse off if the scheme was scrapped completely.
Friday, March 5, 2010
Friday, February 5, 2010
HMRC v All Football Clubs
Portsmouth has rumored to be on the brink of being wound-up by HMRC following failure to pay its tax liabilities. This is the latest club being chased down by HMRC who are certainly holding no prisoners. Back in July last year HMRC served a winding-up petition on King’s Lynn, showing they will chase non League and League teams alike. It is questionable whether it is the money or the principle that HMRC are after!
Portsmouth FC are said to be “shocked and surprised this action has been taken in respect of VAT, PAYE and National Insurance Contributions which either have been, or are about to be paid, or are disputed”. Although on this blog I may sometimes question HMRC’s approach, you do have to question with football clubs, just maybe if they didn’t pay their players so much and factored in the tax bills (which are not unexpected ones) they could simply manage their cash flows just a little better! Here I think I am treading on dangerous ground and I may open a football debate rather than a VAT one – so let’s move on.....
On a serious note, more and more of our commercial clients are finding HMRC going for winding-up order once a ‘Time to Pay’ agreement is broken. Commercial businesses that struggle to pay due to their customers struggling to pay due to their customers struggling and so on. The failure to pay therefore stems from real cash flow issue rather than greed. There seems no scope to negotiate, despite the economic climate and the previous promises that HMRC will strive to help businesses through the recession, we have to ask whether the reality is anything like the press releases HMRC ever issue!
The problem certainly stems from the change in the ‘preferred creditors’ status of HMRC on insolvency orders, but the recent heavy tactics makes me cynically question (and yes that is most unlike me to be cynical about HMRC), but are Debt Management Unit Officers simply told to panic that they will get nothing if they leave a company to try to struggle through the recession and the risk doesn’t pay off? Yes, HMRC are not a bank, but are they not part of what should be helping to keep this economy going, taking a risk therefore that UK businesses can eventually ride this recession out........ ?
Portsmouth FC are said to be “shocked and surprised this action has been taken in respect of VAT, PAYE and National Insurance Contributions which either have been, or are about to be paid, or are disputed”. Although on this blog I may sometimes question HMRC’s approach, you do have to question with football clubs, just maybe if they didn’t pay their players so much and factored in the tax bills (which are not unexpected ones) they could simply manage their cash flows just a little better! Here I think I am treading on dangerous ground and I may open a football debate rather than a VAT one – so let’s move on.....
On a serious note, more and more of our commercial clients are finding HMRC going for winding-up order once a ‘Time to Pay’ agreement is broken. Commercial businesses that struggle to pay due to their customers struggling to pay due to their customers struggling and so on. The failure to pay therefore stems from real cash flow issue rather than greed. There seems no scope to negotiate, despite the economic climate and the previous promises that HMRC will strive to help businesses through the recession, we have to ask whether the reality is anything like the press releases HMRC ever issue!
The problem certainly stems from the change in the ‘preferred creditors’ status of HMRC on insolvency orders, but the recent heavy tactics makes me cynically question (and yes that is most unlike me to be cynical about HMRC), but are Debt Management Unit Officers simply told to panic that they will get nothing if they leave a company to try to struggle through the recession and the risk doesn’t pay off? Yes, HMRC are not a bank, but are they not part of what should be helping to keep this economy going, taking a risk therefore that UK businesses can eventually ride this recession out........ ?
Wednesday, December 9, 2009
Money in taxpayers pocket please....
Over the last couple of years we have seen an increase in HMRC refusing monthly returns for new traders. In the main they say they will allow it after 12 months trading, but how is this useful to repayment traders starting out in business? In amongst the increase in 'Time to Pay' agreements, you would have thought they might just have decided to allow monthly returns to improve cashflow of businesses, therefore not putting themn under financial strain to need a Time to Pay, but clearly this doesn't make election winning headlines!
A recent case we have had here involved a TOGC (transfer of a going concern) of a repayment business. The vendor is on monthly returns, but HMRC have refused the purchaser the same cash flow benefit, claiming again that they need 12 months trading first before being allowed the same benefits! If the business model on which you thought you were buying was based on cashflow - then buyer beware when HMRC are involved!
As an aside, our very own M.D. John Crawford is to appear for one night only (well afternoon) on BBC Radio Solent (also broadcast on Surrey & Sussex) on Sunday January 10th between 3.00p.m and 4.00p.m for a VAT discussion.
A recent case we have had here involved a TOGC (transfer of a going concern) of a repayment business. The vendor is on monthly returns, but HMRC have refused the purchaser the same cash flow benefit, claiming again that they need 12 months trading first before being allowed the same benefits! If the business model on which you thought you were buying was based on cashflow - then buyer beware when HMRC are involved!
As an aside, our very own M.D. John Crawford is to appear for one night only (well afternoon) on BBC Radio Solent (also broadcast on Surrey & Sussex) on Sunday January 10th between 3.00p.m and 4.00p.m for a VAT discussion.
Tuesday, September 1, 2009
Plain Sailing or Stormy Seas ahead?
HMRC have just announced their new tactics against their favourite topic of yachts. The new tactics effectively try to attack those who believe they have already managed to jump through the loops and had their VAT Registration (and subsequent input VAT recovery paid) all agreed. They will attack anything they consider as abusive, such as:
(The existence of one or more of the following features might indicate an abusive structure (the list is not exhaustive - the indicators are illustrative of the points that we might take into account, together with others):
· The main user of a pleasure craft is the ultimate owner of the chartering or leasing entity.
· The main user of a pleasure craft funded the purchase of the vessel (directly or indirectly).
· The person who funded the purchase of a pleasure craft (directly or indirectly) uses the vessel for prolonged periods in the peak chartering season.
· The chartering of a pleasure craft to third parties would not, alone, be of sufficient continuity and substance to comprise an economic activity.
· The chartering or leasing entity shows significant ongoing losses in its financial statements.
· Charter fees or lease instalments due from the main user of a pleasure craft are paper transactions only (for example being offset against loans).
· Charter fees or lease instalments are below open market value.
The terms of a lease differ significantly from normal commercial practice (for example, the duration of the lease is unusually long).
If you are off the boat show in Southampton in the next couple of weeks then you may want to rethink your plans now before you find significant penalties (HMRC have to reclaim the revenue lost through Fleming claims somehow!) as well as interest an input VAT to be repaid.
(The existence of one or more of the following features might indicate an abusive structure (the list is not exhaustive - the indicators are illustrative of the points that we might take into account, together with others):
· The main user of a pleasure craft is the ultimate owner of the chartering or leasing entity.
· The main user of a pleasure craft funded the purchase of the vessel (directly or indirectly).
· The person who funded the purchase of a pleasure craft (directly or indirectly) uses the vessel for prolonged periods in the peak chartering season.
· The chartering of a pleasure craft to third parties would not, alone, be of sufficient continuity and substance to comprise an economic activity.
· The chartering or leasing entity shows significant ongoing losses in its financial statements.
· Charter fees or lease instalments due from the main user of a pleasure craft are paper transactions only (for example being offset against loans).
· Charter fees or lease instalments are below open market value.
The terms of a lease differ significantly from normal commercial practice (for example, the duration of the lease is unusually long).
If you are off the boat show in Southampton in the next couple of weeks then you may want to rethink your plans now before you find significant penalties (HMRC have to reclaim the revenue lost through Fleming claims somehow!) as well as interest an input VAT to be repaid.
Wednesday, August 12, 2009
Fleming Claims Update
The level of the claims is estimated to range from £5 billion to £8.5 billion, but is anyone getting their money back?
Well it is always good to know that right at the front of the queue in submitting claims were the Labour Party, with a claim of £2.15m (and £2.45m interest thereon), but wait for it, this was in relation to staff expenses!! Better than that is to know that they have been one entity to submit their claim and actually have it paid so far.
I think from our experience we are seeing many of the much smaller claims finding it harder to get their money from Customs quite that quickly!
If you have submitted a claim and are either, being asked for information that is impossible to produce considering the time scales (some claims date right back to 1973), or indeed struggling for even an acknowledgment from HMRC then I am sure these experiences would be interesting to share........
Well it is always good to know that right at the front of the queue in submitting claims were the Labour Party, with a claim of £2.15m (and £2.45m interest thereon), but wait for it, this was in relation to staff expenses!! Better than that is to know that they have been one entity to submit their claim and actually have it paid so far.
I think from our experience we are seeing many of the much smaller claims finding it harder to get their money from Customs quite that quickly!
If you have submitted a claim and are either, being asked for information that is impossible to produce considering the time scales (some claims date right back to 1973), or indeed struggling for even an acknowledgment from HMRC then I am sure these experiences would be interesting to share........
Friday, July 3, 2009
Has Mandlesen been employed by HMRC?!
It feels to me like there has been a recent flurry of activity in HMRC and the result is that some of the ESC's have been removed. The recent one regarding the relevant residential/relevant charitable buildings is being phased out as HMRC now readily accept that 'solely' does allow some de-minimis usage - although the amount accepted will lower by 5% after the ESC is finally withdrawn next year after the years transitional period is over. For many this is a negative outcome, but HMRC have a wonderful creative team who manage to put a positive spin on anything and on this ESC withdrawal is no exception. Their positive angle is that parties will no longer be restricted to the prescribed usage calculations in the ESC - which in my opinion doesn't quite outweigh the negative!
Anyway, will they be able to put a positive spin I ask myself on the latest registration delays? The minutes from the recent JVCC meeting provided statistics of the delays in processing those applications which require further checks and the average time for these applications rose to 70 days in March. Amongst other 'positive slants' apparently additional telephone lines have been installed at Wolverhampton in response to 'concerns from JVCC members and others'. Personally this is rather shocking to me as I have struggled to get through to the mainline for Wolverhampton for the whole of May and June and if I ever did the 4/5 lines they tried were always engaged and then they all go home at half three!
Has anyone suffered at the hands of recent registration delays? We are trying to collate a sample of cases studies which highlight the registration delays to forward to HMRC via the VAT Practitioners Group, please email me if you have had a negative recent experience........
Anyway, will they be able to put a positive spin I ask myself on the latest registration delays? The minutes from the recent JVCC meeting provided statistics of the delays in processing those applications which require further checks and the average time for these applications rose to 70 days in March. Amongst other 'positive slants' apparently additional telephone lines have been installed at Wolverhampton in response to 'concerns from JVCC members and others'. Personally this is rather shocking to me as I have struggled to get through to the mainline for Wolverhampton for the whole of May and June and if I ever did the 4/5 lines they tried were always engaged and then they all go home at half three!
Has anyone suffered at the hands of recent registration delays? We are trying to collate a sample of cases studies which highlight the registration delays to forward to HMRC via the VAT Practitioners Group, please email me if you have had a negative recent experience........
Thursday, June 4, 2009
Once you pppppop you just can't stop...
Those of you who remember those rather annoying adverts will also note that once Pringles started their VAT liability argument, they just couldn't stop!
However, the Court of Appeal have finally concluded that HMRC were the right to contend that the snacks should be standard rated, despite the content of potato falling below 50% of total ingredients.
It is likely HMRC are wiping the sweat from their brows (rather like me as our office air con has broken down this week!), imagine if the ingredients % were the main decision for liability as the High Court had seemed to suggest, it could have opened up a world of manipulation in the food arena!
Anyone who stopped charged VAT based on the High Court decision will potentially have a voluntary disclosure to now be made.
However, the Court of Appeal have finally concluded that HMRC were the right to contend that the snacks should be standard rated, despite the content of potato falling below 50% of total ingredients.
It is likely HMRC are wiping the sweat from their brows (rather like me as our office air con has broken down this week!), imagine if the ingredients % were the main decision for liability as the High Court had seemed to suggest, it could have opened up a world of manipulation in the food arena!
Anyone who stopped charged VAT based on the High Court decision will potentially have a voluntary disclosure to now be made.
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