Navigating the world of mileage claims, fuel receipts and vehicle maintenance can seem complicated. We often get asked about how to claim, what can be claimed for and how it needs recording. So, we have put together some useful information and tips to explain it all.
If you are required to use your own vehicle or company vehicle for work, you may be able to claim Mileage Allowance Relief from HMRC based on the number of business miles you travel. This tax relief could be worth up to 45p for every mile you have travelled since April 2011!
eBay recently wrote to business sellers to remind them of the upcoming changes to how VAT will be charged on fees. Effective from the 1st of August VAT will be applied to all fees. For the first time sellers will be able to reclaim the VAT on their VAT returns.
Historically sellers were unable to reclaim VAT but if they gave eBay their VAT number eBay would deduct the VAT at source. Then for the past 18 months eBay had special dispensation to not charge VAT for any business seller (even if they weren’t VAT registered).
This follows on from last year’s package of measures introduced by the Chancellor, aimed at tackling the rapidly growing VAT evasion by overseas traders that sell goods in the UK via online marketplaces such as eBay, Amazon and others. As a result, HMRC was given the power to force online marketplaces to ensure that their overseas customers were registered and accounting for VAT or risk being liable for the VAT themselves.
The change to how eBay charge VAT
Now, from the 1st of August eBay UK will bill from a UK entity and charge VAT on fees and only those who are VAT registered and able to claim input tax credits will be able to recoup the VAT paid to eBay.
Many sellers have welcomed the move – eBay will be charging VAT as a UK entity and the VAT will be passed to the exchequer. Sellers, especially those who have been suspected of dodging VAT will find the VAT added to their eBay invoice and if they’re not registered for VAT with HMRC won’t be able to claim it back!
For sellers who can reclaim VAT it’s effectively just a cash flow and accounting change with no financial impact to their bottom line.
Those it will negatively impact
There are a few sellers who will be negatively impacted – sellers registered as businesses whose turnover is too small to compulsorily register for VAT will either start paying VAT at 20% or take the decision to voluntarily register. Also sellers on certain VAT schemes who are unable to reclaim input VAT will also see their costs rise. It’s important to realise that this isn’t eBay’s fault however (net fees are not changing). VAT is a government mandated charge and for the past 18 months sellers have had a free ride and it’s just that this added Brucie bonus is coming to an end.
What if you’re billed mid month?
If you’re a business seller billed on the 15th of the month, your invoice dated the 15th of August 2017 will show VAT on all your fees. However, you’ll also see a credit for any VAT applied to your fees between the 16th and 31st of July.
If you need further help or have questions on VAT, we’d be happy to help. Perhaps we can help organise your accounts with a free month of Xero? Get in touch to organise a free of charge consultation. Drop us an email firstname.lastname@example.org or give us a call 01858 289189
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We’re fairly certain you didn’t start your business to become a business, marketing or financial expert. We suspect most of you started your business to do what ever you are passionate about or just really good at! What you probably found very quickly is that what your business actually does consumes most of your day. But maybe you’ve come to find that general information, tips and advice from others has been essential to the survival and growth of your business. Well, if that’s the case, you’re not alone.
Since The Business Hut began in 2014 we have taken on so much advice from friends, family and clients. This has helped us to not only to continue to grow but to also really enjoy what we are doing. So we thought we would share some of the golden nuggets of information from other successful business owners – that could just help you too. We particularly like the advice from William Chase – what advice do you think will help you?
It seems that with every VAT rule – everything you think you know – there are a bunch of exceptions surrounding it. Motoring expenses are a great example of this – as a rule, you can’t claim VAT when a car is bought, unless…
There is a lot to it, and we know there are plenty of people out there scratching their heads over these rules. So, as simply as we can, let’s see if we can explain things.
VAT can be reclaimed on cars that are mainly used as a taxi, self-drive hire or driving instruction car. Any other type of car used for business purposes must be used exclusively for business purposes – that means not even being available for private use. And before you ask, ‘private use’ includes the commute to and from work.
This rule is also true of other vehicles. Commercial vehicles like tractors or vans, motorcycles and motorhomes can all be reclaimed on so long as they are only used for business.
Maintenance, parking, and other costs
Even if you can’t reclaim VAT on the vehicle itself, many business-related costs do qualify. For example, for any repair work on a vehicle that is paid for by the business, VAT can be reclaimed. Many off-street parking options charge VAT at the standard rate, and this can be reclaimed for business trips.
I’m sure you are noticing the pattern and know what I am about to say; if the vehicle is used only for business, then all VAT on fuel can be reclaimed.
It is a bit more complicated for vehicles used for both business and private, and there are two ways to go about it. The first is to keep detailed mileage records and just reclaim on the business use fuel, the second is to reclaim all VAT and pay a fuel scale charge.
A fuel scale charge is worked out using your vehicle’s CO2 emissions figure, and can be worked out at gov.uk.
Businesses must always be able to show how they have worked out their claims; records of business journeys are integral to working out claims and cars that qualify must have the records to prove it. It can be a pain keeping all this organised, but believe me your bookkeeper will thank you!
In conclusion, it’s really important to know all the exceptions to every VAT rule, and really important to stay up to date. If you are still scratching your head and need to find out more, email us at email@example.com or phone 01858 289189. We’d be happy to help!
If you want to talk to us about your bookkeeping or accountancy requirements, we offer completely free of charge business consultations so we can get to know each other and see if The Business Hut is a good fit for your business.
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Source: gov.uk goes into much greater detail clarifying many of these points, with VAT Notice 700/64 a particularly important resource.
Procrastination is part of human nature, it’s amazing how mundane things like housework become super important when you have a project on the go or deadline that should be tackled. The house and garden usually gain more attention when putting something off. As small business owners one of your new year’s resolutions may have been to convert to a new accounting software in the new financial year.