VAT 12 months rolling and the tax year

[nickjonesuk]

Hello,

If a business we're to turnover £67,000 in a 12 month period, with the last 2 of those months in the new tax year 09/10. Would 100% of the VAT still be payable? Is there a deadline for payment?

Another question: Our accountant claims he can reduce our turnover figure for VAT registration by subtracting Royal Mail postage costs (its a mail order company), they are approx £6,000. EG: instead of £67,000, HMRC would see the actual figure as £61,000, therefore, below the VAT threshold.

Is this some sort of valid loophole?? What some quick research it seems to be a grey area.

Thanks In Advance.

[Maslins]

I think it's bad news on both fronts.

Reaching the VAT turnover limit does not relate to your financial year. Ie in your case if the last 10 months from one financial year and the first 2 from the next put you over, you're over, simple as that.

You cannot net expenses from your turnover, postage or otherwise.

[CassioAcc]

The Post Office cost to you may be exempt, but your charge to the customer is a standard rated supply, so you cannot exclude it from your turnover.

[Jaydee]

Our accountant claims he can reduce our turnover figure for VAT registration by subtracting Royal Mail postage costs (its a mail order company), they are approx £6,000. EG: instead of £67,000, HMRC would see the actual figure as £61,000, therefore, below the VAT threshold.

There was a thread on here some months ago about this - what your accountant is suggesting is that if you make no profit out of postage, then you may consider treating your postage revenue as a disbursement and it is therefore excluded from the test of whether you have breached the threshold.

I suspect though that if you read the other requirements for an entry to be classified as a disbursement you will find that no mail order companies can validly achieve this.

The legislation on this reads:

If you are a supplier, payments you make to third parties on behalf of a client can be treated as disbursements for VAT purposes if:

you acted as the agent of your client when you paid the third party
you charged your client the precise amounts you paid out, eg without any mark-up for profit
your client authorised you to make the payment on their behalf
your client knew that the goods or services would be provided by a third party
your client actually received and used the goods or services provided by the third party
your client was responsible for paying the third party eg estate duty or stamp duty
the item was separately itemised when you invoiced your client
the goods or services are additional to the services you directly provide to your client

[nickjonesuk]

Over 95% of our orders we offer FREE P&P, do you think this would suffice?

[RAL]

Hello,

If a business we're to turnover £67,000 in a 12 month period, with the last 2 of those months in the new tax year 09/10. Would 100% of the VAT still be payable? Is there a deadline for payment?

Another question: Our accountant claims he can reduce our turnover figure for VAT registration by subtracting Royal Mail postage costs (its a mail order company), they are approx £6,000. EG: instead of £67,000, HMRC would see the actual figure as £61,000, therefore, below the VAT threshold.

Is this some sort of valid loophole?? What some quick research it seems to be a grey area.

Thanks In Advance.

If you provide some dates when the £67,000 threshold breached would help to answer your queries. If your taxable supplies in the last 12 months exceeds the registration threshold (currently £67,000), then you must notified within 30 days from the end of the month in which the limit is breached. You have to charge/account for vat on supplies from the first day of the following month. For example at end of Sep-08 taxable supplies in the previous 12 months amounted to £67,500; you have 30 days to register for VAT and you must charge vat from 01/11/08. If you are late in registration HMRC will back dated registration to 01/11/08 and you have to pay the VAT. Generally you have to file quarterly return. For example your first quarter if Nov-08 to Jan-09, then you have to file return by end of Feb-09 and pay vat due by end of feb-09. But if you make use of electronic means of payment, both the due date for the return and you get extra 7 days to file the return and for the payment.

You have to be careful as new penalty regime is already in place from 01/04/08. Knowing the postage is taxable supply and if you treat as exempt supply or disbursement, it would be Deliberate and concealed action which attracts up to 100% penalty of the potential lost revenue.

There is a penalty of late registration too starting from £50 to 15% net tax due for the period of default.

[nickjonesuk]

Thanks RAL...

So what your saying is (just to clarify) those nice people at HMRC will not want VAT of the £67,500 turnover in the last 12 months, but will want the VAT from 2 months after the threshold was breached? Then VAT will be due quarterly from then?

I heard you can reclaim VAT on purchases from 6 months before registration, is this true? Even though I wouldn't of paid (based on information above) any VAT on receipts during that same 6 month period?

Thanks...

[David Griffiths]

I heard you can reclaim VAT on purchases from 6 months before registration, is this true? Even though I wouldn't of paid (based on information above) any VAT on receipts during that same 6 month period?

Thanks...

You can claim VAT that you have paid - supported by a valid VAT invoice - for any goods that you still have on hand at the date of registration. If the goods have been sold pre-registration, then there is no claim. The claim is therefore basically on the trading stock on hand, plus any equipment or other fixed assets.

You can recover VAT incurred on supplies of services for the six month period before incorporation, provided that the services relate to taxable supplies.

[nickjonesuk]

Thanks David,

If 50% of one stock item is still on hand after registration, and 50% was sold before registration. Could I still reclaim 100% of the VAT I paid for that stock as the VAT invoice for this particular stock item is from before registration if this makes sense?

[David Griffiths]

Thanks David,

If 50% of one stock item is still on hand after registration, and 50% was sold before registration. Could I still reclaim 100% of the VAT I paid for that stock as the VAT invoice for this particular stock item is from before registration if this makes sense?

No, you can only claim for the VAT paid on the stock that you have on hand at the date of registration - half of the VAT on the invoice in this example.

[RAL]

Thanks RAL...

So what your saying is (just to clarify) those nice people at HMRC will not want VAT of the £67,500 turnover in the last 12 months, but will want the VAT from 2 months after the threshold was breached? Then VAT will be due quarterly from then?


That is correct. As I said in my previous post if you provide some figures and dates then I would be able to provide you some accurate figures and information.

Going back to my example, your rolling previous 12 months taxable supplied exceeded threshold of £67,000 in Sep-08. So you have to account for VAT from 01/11/08 not from when you breached the threshold in Sep-08. So if you want you can pm me some figures then I will be able to tell you when you should have been registered from!

HMRC would allocate you a a stagger group quarters ending 30/4, 31/7, 31/10 and 31/01. You can request which quarter ending you need for your convenience to coincide with your financial year. You have to file and pay vat due following month end.



I heard you can reclaim VAT on purchases from 6 months before registration, is this true? Even though I wouldn't of paid (based on information above) any VAT on receipts during that same 6 month period?

David already answered this query for you. And David is spot on as usual.

Just one thing I am going to add that if your vat registration is backdated, you would be able to claim vat from the date of registration (I am just stating the obvious).
HTH

[taxattack]

Just one thing I am going to add that if your vat registration is backdated, you would be able to claim vat from the date of registration (I am just stating the obvious).
HTH

But, just to be clear, you would then have to account for Vat on sales from registration date.

Chris

[Kevin Hall]

Over 95% of our orders we offer FREE P&P, do you think this would suffice?

I'm afraid not. You must recharge to your customer precisely the amount you paid to the transporter/courier.

The underlying concept behind (what we think is) your accountant's suggestion is that the customer is arranging the delivery of the goods. In its simplest form, the customer calls the transport tells them where to collect the goods, etc. and then the supplier pays the transporter/courier as agent for the customer. The supplier obviously recharges this on to the customer as a "disbursement" and is not part of the main supply by the supplier to the customer.

The concept still works if the supplier is more actively involved in arranging the transportation of the goods. But the essential hallmarks must still remain: the customer must know what is going on and is essentially responsible for the transportation. You are merely the agent (though with responsibilities under an agency arrangement).

Hope that helps, rather than confuses!