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expertise in specialist areas George Osborne presented his first Budget on Tuesday 22 June 2010.
We have added a full analysis of the Budget to our website and it is available here:
http://www.humph-net.co.uk/general/budget2010/index.htm
A summary of the tax rates which will apply as a result of the Emergency Budget, please also take a look at:
Pubs, clubs, restaurants and other retail businesses remaining open past midnight on New Year’s Eve will be allowed to continue charging VAT at 15% on their sales until they close or until 6am on 1 January 2010, whichever is the earlier.
Similar arrangements will apply to telecommunications companies in respect of calls and texts made up to 6am on 1 January.
Making this announcement, Financial Secretary to the Treasury, the Rt Hon Stephen Timms MP, said:
“New Year’s Eve celebrations are a vital source of income for many in the service sector. The Government recognises that it would be very difficult for them to make the necessary changes to account for VAT at 17.5% immediately after midnight. To make the transition as easy as possible retail and telecommunication businesses will be able to charge VAT at the old rate into the early hours of New Years Day.
“I announced in May 2009 that HMRC would be allowing a ‘period of grace’ to help businesses trading across midnight on 31 December in implementing the VAT rate change, and that they would work with business on the details. I am very pleased that HMRC is now able to confirm these arrangements and I hope that those businesses affected will find them helpful.”
The ‘period of grace’ is restricted to those businesses that account for VAT at the point of sale such as businesses on a retail scheme – pubs, shops, restaurants etc and to the cost of calls or texts made and billed in the early hours of January 1. It will not apply to businesses that account for VAT on the basis of VAT invoices issued or to mail order or on-line retail sales.
HM Revenue & Customs (HMRC) will publish a Revenue & Customs Brief on the HMRC website (www.hmrc.gov.uk) shortly, explaining the extent of the concession in more detail.
There are a number of changes which will affect many businesses from 1 January 2010. Here is a quick summary of the key changes.
The standard rate of VAT goes back to 17.5% on 1 January 2010. The new VAT fraction to use when a price is stated as being inclusive of VAT is 7/47. This change will affect all VAT registered business that make standard rated supplies of goods or services. Accounting systems will need to be amended, so that all invoices issued on or after 1 January 2010 use the new rate of VAT unless the supply was made more than 14 days beforehand, or payment was made before 1 January 2010.
With effect from VAT periods commencing on or after 1 April 2010 existing businesses with an annual turnover of £100,000 or more will have to file their VAT Returns on-line and pay their VAT by electronic payment. The same rules also apply to all new businesses (regardless of turnover) that register for VAT on or after 1 April 2010. Other businesses will need to follow the compulsory on-line filing at a later date which has yet to be confirmed.
An increasing number of clients make supplies outside of the UK. The following changes will apply to them:
There have been a number of changes affecting how EC services are taxed. There is also the requirement for businesses that supply services to EC businesses to submit an EC Sales list and there is a new system for recovering any VAT that is incurred in other EC countries.
From 1 January 2010, the basic rule for determining the place of supply of B2B services will change from being the place where the supplier is located to being the place where the customer is located. There will, however, be a number of exceptions, mainly in transport services, to this basic rule. The main changes will be implemented on 1 January 2010. For cultural, sporting, scientific and educational services, the change will be introduced on 1 January 2011.
The effect of this is to make most intra–EU services received by business customers subject to the reverse charge, whereby the customer accounts for VAT on the service in his country.
For supplies of services B2C the basic rule for the place of supply will continue to be the place where the supplier is established. Changes are expected to be introduced in 2015 to make the place of supply where the customer belongs.
The existing exceptions to the basic rule, such as for land-related supplies, will remain, with the exception of valuations of, and work on, moveable property, which will be taxed where the customer is located, rather than the place of performance. This will be a welcome change for businesses involved in cross-border maintenance contracts.
The rules on the time the VAT is due under the reverse charge are also changing on 1 January 2010, Instead of the date of payment triggering the requirement to account for VAT, the date VAT is due will be the earlier of:
- the date the service is completed; or
- when payment is made.
For continuous supplies the time of supply will be linked to payment periods, but where no payment is made or invoice issued in a 12-month period, a deemed tax point will occur at the end of the calendar year.
From 1 January 2010 businesses supplying services to businesses which are liable to the new reverse charge procedures will have to submit ESLs for the first time.
They will therefore need to ensure they have the customer’s VAT number. If the customer is a business which is not VAT registered there is no requirement to record the transaction on the ESL, but it will still need to be recorded on VAT returns.
Businesses which supply goods to the EU are already required to submit ESLs. If they supply both goods and services the same form can be used.
The new filing dates require submission within 14 days, or 21 days if filing electronically.
Penalties will be imposed for failure to submit ESLs, or for late filing.
The paper system for claims for the refund of VAT incurred in other EC countries is to be replaced by an electronic system via the customer’s member state. The claim will then be passed to the member state where the VAT was incurred for refund. The time limit for making claims will be extended by 3 months to 9 months from the end of the calendar year in which the VAT was incurred, so claims must be made by 30 September. Member states must refund within 4 months of receipt and interest is due if payment is late.
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The main impact of the changes will be the need to ensure that accounting systems and procedures are in place to deal with the new requirements.
Businesses making supplies of services to other EU states will need to:
- review contracts to determine where such services will be deemed to be received;
- ensure they have details of customer VAT registration numbers,
- ensure they are clear in which jurisdiction a client is receiving a service where customers have one or more business establishments; and
- ensure they are ready to submit ESLs by 1 January 2010.
Traders receiving supplies of services from EC businesses will need to consider how to account for UK VAT on such services and what the likely impact (if any) will be.
If you have any questions on the new VAT rules then please contact Humphrey & Co for further advice.
On 1 December 2008 the standard rate of VAT was temporarily reduced to 15 per cent. It reverts to 17.5 per cent on 1 January 2010. HMRC recognises that the date of the change may cause problems for certain businesses at a particularly busy time of year so we have introduced two measures to help business to implement the change. These are:
* special accounting arrangements for businesses operating beyond midnight on 31 December 2009;
* the ‘light touch’ to be operated by HMRC audit staff in dealing with errors arising out of the rate change.
Further details on each of these are provided below.
The temporary reduction of the standard rate of VAT to 15 per cent ends on 31 December 2009. As is normal with changes to the VAT rate, the return to 17.5 per cent will be effective from midnight on 31 December. However, HMRC recognises that making the necessary changes to account for VAT at 17.5 per cent may cause particular problems for certain businesses operating after midnight at what can be a particularly busy time of year. For example, it would not be practical for a pub, club, restaurant or hotel hosting a New Year’s Eve celebration to stop serving customers at midnight in order to adjust their tills to account for VAT at 17.5 per cent and to amend their prices accordingly.
In order to assist businesses in this position HMRC will allow them to account for VAT at 15 per cent on takings received up to the earlier of the end of trading of the 31 December session or 6am on the morning of 1 January 2010.
This treatment is subject to the following conditions:
- It is restricted to those businesses open at midnight on 31 December 2009 that account for VAT at the point of sale such as businesses on a retail scheme – pubs, shops, restaurants etc. It will not apply to mail order or on-line retailers, businesses that account for VAT on the basis of VAT invoices issued; pre-payments for supplies of goods or services to be provided after 6am on 1 January 2010.
- It will not apply to sales made through coin operated or similar machines (vending, amusement or gaming machines etc). In these cases businesses must follow the normal rate change rules as set out in section 10.1 of the detailed rate change guidance (PDF 248K) and account for VAT based on the date that the machine is used or by apportionment if the machine does not record the date of usage.
- It will not apply to transactions made after midnight on 31 December that would have been caught by the rate change anti-forestalling legislation (Finance Act 2009, Schedule 3) had they been made before midnight. Any such supplies will be liable to VAT at 17.5 per cent. Further guidance on the anti-forestalling legislation (PDF 79K) is available.
- HMRC may withdraw or restrict the application of this treatment in individual cases.
The following guidance has been given to HMRC VAT audit staff about the approach to adopt in relation to errors discovered in relation to the rate change:-
What if businesses make mistakes implementing the change of rate (light touch)?
HMRC wants to encourage and assist businesses as they make the changes necessary to deal with the change in the standard rate.
If a business discovers that it has made material mistakes, it should correct them through the normal error correction process.
HMRC will however be operating a ‘light touch’ in terms of errors made in the first VAT return after the change (where the error relates to a change of rate issue). This means that in our audit plans we will not target change of rate errors that are unlikely to lead to any material net revenue loss. And if we find errors which relate to a change of rate issue we will not seek an adjustment unless we have reason to suppose that there is an overall revenue loss.
For example, consider a fully taxable business which supplies standard-rated goods to a fully taxable customer and incorrectly charges 15 per cent rather than 17.5 per cent. As the detailed guidance makes clear, the customer should treat only 15 per cent of the tax exclusive (net) price as input tax. If the customer does this there will be no overall loss of tax. When auditing the supplier, HMRC will assume that the purchaser has followed the accounting documents unless there is good reason to suppose otherwise.
However, if the supply is or may be to a customer who is not able to recover VAT in full, then there is likely to be an overall loss of tax and HMRC will seek to adjust (issue an assessment) in the normal way.
In situations where HMRC do need to adjust (and issue an assessment) we will take into account the difficulties the business has faced in adjusting to the change in considering whether penalties apply.
Traders are required to display clearly their prices inclusive of VAT. For a period up to 14 days, they are permitted under the Price Marking Order 2004 (SI 2004/102) to let consumers know, by way of a general notice, that an adjustment in price, to take account of the VAT change, will be made at the till.
The minimum wage is a legal right which covers almost all workers above compulsory school leaving age.
With effect from 1st October 2009, the rates will increase, so it is important to review your employees rates of pay to ensure that they are not being underpaid.
There are different minimum wage rates for different groups of workers as follows:
- The main rate for workers aged 22 and over increases from £5.73 per hour to £5.80 per hour.
- The development rate for 18-21 year olds increases from £4.77 per hour to £4.83 per hour.
- The development rate for 16-17 years olds increases from £3.53 per hour to £3.57 per hour.
If you have any queries, or require further information and guidance please contact Sarah Scammell at Humphrey & Co: 01323 730631, payroll@humph.co.uk
Or visit the following websites:
As the spread of the swine flu virus (officially known as influenza A H1N1) accelerates, business readiness is growing in importance. To keep updated on what your business can do to help your employees get treatment and to prevent further spread of swine flu, we have put together some useful links which may aid you in planning over the coming months.
Furthermore, it may be important that your business puts in place a contingency plan if key members of your team fall ill, or if a large proportion of your workforce fall ill at the same time. For helpful advice on your options, and ideas for support arrangements which can be put in place, please visit the Business Link Website. A link is at the bottom of this page.
As an employer, your employees may want to know what arrangements you have put in place if a manager or workmate falls ill, or what the procedures are for reporting you of their illness. Again, the Business Link website has a host of links to helpful resources for putting together this kind of plan.
Useful links:
