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
Thanks for stopping by,
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?
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.
If your business is registered on the VAT Flat Rate Scheme then you will need to be aware of the changes being implemented from April 2017. You may recall this being announced in the Autumn statement as an action to tackle aggressive abuse of the scheme.
The Flat Rate Scheme, or FRS as it’s commonly referred, is a simplified VAT scheme which allows businesses with a low cost base to set the net VAT due to HMRC based on a trade sector percentage.
From 1 April 2017, FRS businesses must also determine whether they meet the definition of a limited cost trader, which will be included in new legislation.
Businesses using the scheme, or thinking of joining the scheme, will need to decide whether they are a limited cost trader. For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – this will be obvious. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.
Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.
So what is a limited cost trader?
A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:
- less than 2% of their VAT inclusive turnover in a prescribed accounting period
- greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000)
Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
- capital expenditure
- food or drink for consumption by the flat rate business or its employees
- vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services)
These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.
HMRC have developed an online test to help businesses work out whether or not they will be classed as a limited cost trader. Click here to take the test.
If you’re unsure how these changes may affect your business, please contact us for support.
Thanks for reading.