Changes For VAT Registered Businesses Post Brexit

VAT Registered businesses post Brexit 

The UK left the European Union on 31 January 2020. From 1 February 2020, the UK enters a transition period that lasts until 31 December 2020.  

VAT registered businesses who trade with the European Union are required to register for an Economic Operator Registration and Identification (EORI) number. This application can be done online via this website www.gov.uk/eori 

There will also be a requirement to make customs declarations following the end of the transition period. Businesses are advised to start planning for this e.g. buy appointing someone to deal with customs on their behalf. 

More information about these changes can be found on HMRC website. Let us know if this affects your business and we can provide further assistance. 

Transferring your VAT Registration Number

transferring your VAT number

VAT can be complex and confusing at times. Under current guidelines, you need only register for VAT if your VAT taxable turnover exceeds £85,000. You can also register voluntarily, if you wish.

VAT – Value Added Tax is a consumption tax which applies to good and services. The current VAT rate (as of 2011) is 20% – this must be added to the price of good and services where VAT applies. Supposedly, VAT only applies to ‘non-essential, luxury items’, but there are some inconsistencies, so it’s worth checking.

With services, such as plumbing, decorating or building work, you only have to pay VAT if the company is VAT registered (i.e turning over in excess of £85,000).

There may be circumstances where a VAT registration number needs to be transferred to another business. Here, we answer some common questions about the process and how to navigate it with ease.

Why would you need to transfer your VAT registration number?

You may wish to transfer a VAT registration number if you have bought a company and wish to continue using it’s VAT registration number, or likewise, if you are selling a VAT registered business. You may set up a new business and wish to transfer your VAT registration to the new one, as the old business will no longer meet the threshold. Be aware the continually transferring a VAT registration number may arouse suspicions. If you are buying a company, but you are already VAT registered, you may use your current VAT registration number.

How to do it…

The first thing to remember about VAT registration transfers is that both parties must tell HMRC of the intention.

  1. Cancel any and all direct debits connected to the VAT registration number in question.
  2. Use your VAT online account to fill out a transfer form, OR send a VAT68 form by post.
  3. Within 3 weeks, you will receive confirmation from HMRC that the transfer has been successful.

Responsibilities…

Once the VAT registration number has been successfully transferred, there are a few final steps to complete to ensure VAT compliance.

  1. The original registration holder should cancel their VAT online account’s accountant access. (Unless the new registration holder intends to use the same accountant).
  2. Any and all records relating to the previous owner’s VAT registration number should be passed over to the new owner, to compile a complete VAT history.
  3. The new owner must set up new self-billing arrangements, in order to pay their VAT correctly – in order to do this, they must register for VAT from the day they take over the business.
  4. As the new business owner, you may only claim VAT on purchases for the business once you own it. These can be reclaimed on your first VAT return.

Once you are registered for VAT, you must pay your quarterly tax return online. There are some tax benefits to paying VAT, such as claiming VAT in director’s mileage.

If you’re confused or concerned about transferring a VAT registration, paying your VAT contributions or claiming back VAT, check out the HMRC website or get in touch today.

Claiming VAT on Director’s Mileage

Claiming VAT on Director’s Mileage

Questions surrounding VAT on mileage claims are common. It can be difficult to work out and hard to ensure that you have the correct evidence to give HMRC.

Let us clear up some of the terms surrounding VAT and mileage.

What is the Advisory Fuel Rate?

As VAT is charged on fuel, HMRC allow you to claim back the VAT from the fuel portion of the mileage. To calculate this, they use their advisory fuel rate, which estimates the amount of fuel used per mile based on engine size.

HMRC asses their Advisory Fuel Rate every quarter. As of March 2019 it stands that employees using a company car can claim between 7 to 21 pence based on car engine size and type of fuel used.

You are only able to claim back VAT on ‘work miles’, i.e not ‘private use’. Private use includes travelling between work and home. Work miles might include travelling to meetings, transporting items, using the vehicle as a taxi or being a driving instructor.

There are different ways to reclaim VAT on fuel, your accountant will be able to advise you on the best way for your business.

  • Reclaim the VAT and pay the correct fuel scale charge for the vehicle (see above).
  • Only reclaim VAT on fuel used for business and ensure that you keep a detailed record of all mileage.
  • Choose not to claim VAT back if it is a very low amount and the claim does not out way the administration effort.

What is the VAT Fuel Scale Charge?

Some businesses choose to provide their staff with the added benefit of ‘free’ fuel or a fuel card. In this case staff are provided with fuel for business and personal use and, therefore, the business can claim back VAT on the fuel purchased.

However, as there is a personal use element to the fuel, HMRC requests an amount of the VAT being claimed.  The amount of VAT requested by HMRC is called the Fuel Scale Charge. HMRC sets out flat rates for this charge, which is based on the CO2 emissions of the car being used – View the full VAT Fuel Scale Charge table here.

To work out your VAT Fuel Scale charge, HMRC has produced a calculator.

  • Simply designate which tax year you are you are wanting to calculate the charge for.
  • Then select the period of time (1, 3 or 12 months of that tax year).
  • Enter the car’s CO2 emissions band (you can use this Vehicle Certification Agency index to find out the CO2 emissions band for your make and model).
  • Your VAT Fuel Scale charge will be calculated and displayed with and without VAT.

What is the VAT Flat Rate Scheme and how does it affect the VAT Fuel Scale Charge?

The amount of VAT a business pays or claims back from HMRC is usually the difference between the VAT charged by the business to customers, and the VAT the business pays on their own purchases. If a business is using the VAT Flat Rate Scheme, then no VAT is reclaimed on fuel and no scale charge is required.

  • You pay a fixed rate of VAT – therefore no estimations or advisory charges are necessary to calculate.
  • You keep the difference between what you charge your customers and pay to HMRC.
  • You can’t reclaim the VAT on your purchases.

Navigating the intricacies of claiming VAT on fuel can be very complicated. There are several hoops to jump through that become more complicated the more staff you have.

If you’re struggling to deduce the amount of VAT you could be claiming or the Fuel Scale Charges you may owe – get in touch today. We’re here to help.