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VAT

Deregister for VAT

How to De-register for VAT?

How to, Tax, VAT

There is a “de-registration threshold” (which is actually the exception from registration figure), which has traditionally “tracked” the registration threshold at £2k less (though there is no obvious reason why it should be this figure). The general approach is that once an entity’s turnover is below that threshold the entity need no longer be registered until and unless it exceeds the registration thresholds.
The legislation specifically allows HMRC to entertain de-registration where the entity satisfies HMRC that its taxable turnover in the ensuing year will be below the prevailing “de-registration threshold”‘. How to deregister for VAT?Read More

Penalties

Penalties

Tax, VAT

The rules relating to penalties can also change somewhat independently of the specific rules about VAT registration. For that reason, reference should be made as necessary to the specific VAT penalties rules. Nevertheless, the following is a brief guide that applies at the time of writing and that provides some pointers.

The current penalties for failure to register on time apply as a percentage to the net payable tax.Read More

Groups of companies

Groups of companies

VAT

Group registration is a business facilitation measure which also reduces HMRC’s administrative effort. It allows different entities(groups of companies) to form one VAT registration and to submit common returns. This has the effect of aggregating both the sales and purchases of the grouped entities. It also allows supplies to be made between members of the VAT group without them being treated as supplies for VAT purposes (and accordingly no VAT is chargeable on them).Read More

VAT after Brexit

VAT policy changes after Brexit

News, VAT

VAT after Brexit: In the run up for Brexit, the UK may retain the current structure of taxes, make changes or replace it. It is deemed to be very unlikely that the UK will make significant changes in the VAT structure system and the VAT rates. The government will want to protect and keep the level of revenues if receives from VAT tax.

The Scottish government has been receiving half of the revenue collected in Scotland. Therefore, leaving the VAT system as it is will safeguard the trade with EU countries. The ruling of the Court of Justice of the European Union will soon end, but the UK will probably want to maintain the legal continuity and heed the CJEU.

Business Fragmentation

Business fragmentation and VAT registration

VAT

The idea, here, is that steps may be taken to split a single business between two entities or more in order that one or more of them should avoid having to be VAT registered. As mentioned elsewhere, the general rule is that it is the legal entity which is registered for VAT (irrespective of how many businesses it contains), and not the business as such. Thus, unless there are safeguards, it is unduly tempting to try to split a business down the middle in order to avoid VAT registration, by partitioning it between various different legal entities.
HMRC have two defences against this:Read More

Profit or Consideration

Profit or Consideration for VAT Purposes

VAT

A common business model is for parties to come together in a joint venture, sharing the costs, and, they hope, sharing the profit in preordained ratios. It is also common to believe that the amounts shared are merely a profit distribution and therefore outside the scope of VAT. This is based on the view that neither party makes a supply to the other, because they are both in a joint endeavour, and they are both seeking simply to make supplies to other third parties. Leaving aside, for the moment, whether, jointly, they are making taxable supplies, the question remains as to whether this analysis of the share of proceeds being “profit” has any impact on the VAT position.Read More

Agent or principal

Agent or Principal

VAT

The distinction between acting as agent or principal, in relation to the question of whether or when a business must register for VAT, cannot be over-emphasised. This is because VAT registration thresholds are measured in the value of the supply made, i.e. turnover, and not any profit that is derived from the supply. It is therefore fairly obvious that a person who buys someone else’s goods or services must make a supply to the value both of the purchase price and profit added, whereas a person who acts as an agent/intermediary, and charges a commission to either the buyer or seller or perhaps both, will only make a supply to the value of the profit.Read More

Business activity for VAT

How to determine business activity for VAT purposes?

VAT

Irrespective of the basis upon which VAT registration arises, it will only arise in regard to the activity which is “in the course or furtherance of a business”. In plain terms, transactions in return for payment are not within the scope of VAT at all (and are therefore not a “taxable supply”) unless the activity amounts to a “business”. How to determine business activity for VAT purposes?Read More

Voluntary registration

Voluntary registration

VAT

It seems counter-intuitive to apply for voluntary registration before one actually has to do so, but in fact, it is very common for various reasons. These are:
1. to enjoy the fiscal and commercial advantages identified in our previous posts;
2. to ensure that VAT recoverable on start-up costs can be reclaimed in situations where it is inevitable that the business will exceed the thresholds in due course;
3. to avoid waiting too long and failing to register on time.Read More