VAT Expenses

[onerealbeanie]

Hello,

I am a Director running my business from home (well in start-up stage) with costs associated.

I have called HMRC on two occasions and the 2 advisers didn't have a clue. I'm sure their lawyers would if I ended up doing it wrong though. I have a VAT return due on Monday. Granted, it's not huge like some of you and I do feel for you!

The questions I asked to HMRC were:

1. As a Director, at home, with residential broadband, electric and heating costs - and spending more time at home by virtue of working from home, can I claim back a percentage of the VAT on these?

2. If so, how do I go about calculating that, for example, electricity bill statements start before the incorporation date of 9 Sep 2021 and go after the VAT return cut off date, easy enough in the case of internet, in theory by dividing it by the number of active days within the VAT return period (but I suppose HMRC may have even more complex rules) but it is not as simple, for example, in terms of electricity use - some days more electricity will be used than others and I can't very well say how much my laptop or mobile phone used per Kwh and I don't keep a timesheet as i'm sure most Directors don't.

As an aside, I also asked them about operating as a webhosting company - we could potentially end up with companies buying from abroad - it was my understanding that VAT is applicable dependant on where the buyer is based and not the providing company is based. Adviser 1 (earlier in the week) said I wouldn't have to charge it but then he also swore blind I didn't have a VAT return due when I did and then Adviser 2 said, because we are selling a service, I would need to charge it regardless of where the customer was located.

We do have a technical ability to detect where the customer is buying from but this isn't infallable and I wonder whether best effort in this regard will be considered good enough by HMRC and, despite saying that we only do business with UK based customers, I have no idea what to do in the event that an international sale went through anyway as the process is largely automated.

As far as HMRC's VAT Technical notices go, there are more contradictions than holes in a pin cushion - little wonder the Advisers don't seem to have a clue either.

The second Adviser suggested that if I didn't put in for home related expenses (that have nothing to do with Covid, it's just a startup company and i'm on a low income), that I could file a notice later to have any amount owed added to the next return. I thought there'd be a penalty for an inaccurate filing though but he said he had noted the system so there wouldn't be.

I don't know what to believe!

Thanks

 

[Scalloway]

Unless the broadband, electricity charges etc are in the name of the VAT registered company then you cannot reclaim anything.

 

[onerealbeanie]

Can I not do this on the £6.00 per week contribution for working from home?

Thanks for your reply!

 

[Scalloway]

No that is not possible.

 

[JEREMY HAWKE]

There is an advantage to having the same business name as your actual name !

 

[MyAccountantOnline]

Hello,

I am a Director running my business from home (well in start-up stage) with costs associated.

I have called HMRC on two occasions and the 2 advisers didn't have a clue. I'm sure their lawyers would if I ended up doing it wrong though. I have a VAT return due on Monday. Granted, it's not huge like some of you and I do feel for you!

The questions I asked to HMRC were:

1. As a Director, at home, with residential broadband, electric and heating costs - and spending more time at home by virtue of working from home, can I claim back a percentage of the VAT on these?

2. If so, how do I go about calculating that, for example, electricity bill statements start before the incorporation date of 9 Sep 2021 and go after the VAT return cut off date, easy enough in the case of internet, in theory by dividing it by the number of active days within the VAT return period (but I suppose HMRC may have even more complex rules) but it is not as simple, for example, in terms of electricity use - some days more electricity will be used than others and I can't very well say how much my laptop or mobile phone used per Kwh and I don't keep a timesheet as i'm sure most Directors don't.

As an aside, I also asked them about operating as a webhosting company - we could potentially end up with companies buying from abroad - it was my understanding that VAT is applicable dependant on where the buyer is based and not the providing company is based. Adviser 1 (earlier in the week) said I wouldn't have to charge it but then he also swore blind I didn't have a VAT return due when I did and then Adviser 2 said, because we are selling a service, I would need to charge it regardless of where the customer was located.

We do have a technical ability to detect where the customer is buying from but this isn't infallable and I wonder whether best effort in this regard will be considered good enough by HMRC and, despite saying that we only do business with UK based customers, I have no idea what to do in the event that an international sale went through anyway as the process is largely automated.

As far as HMRC's VAT Technical notices go, there are more contradictions than holes in a pin cushion - little wonder the Advisers don't seem to have a clue either.

The second Adviser suggested that if I didn't put in for home related expenses (that have nothing to do with Covid, it's just a startup company and i'm on a low income), that I could file a notice later to have any amount owed added to the next return. I thought there'd be a penalty for an inaccurate filing though but he said he had noted the system so there wouldn't be.

I don't know what to believe!

Thanks

I wouldn't rely on what HMRC tell you on the phone.

Scalloway has answered your first question.

To answer your question about charging VAT on services outside of the UK have a read of the HMRC guidance here, it's not a straightforward answer

Work out your place of supply of services for VAT rules

Find out which country’s VAT rules to use when supplying services abroad.

www.gov.uk

 

[Chart Accountancy]

A business can only claim UK VAT back through a UK VAT return from HMRC on business expenses where you have a valid full invoice in place addressed to your company. For retail supplies, you can have either simplified or modified invoice depending on the amount spent. You cannot claim a % of the VAT if the expense is with dual purpose use and invoiced to you personally. If you have a business contract for your broadband and invoices are addressed to your company, then you could be able to claim the VAT back if you have a full invoice.

The rules around VAT on sales to overseas customers can be a complex matter. The default rule is that sales of services to customers outside of the UK are outside the scope of UK VAT. If however you sell Digital Services / Products then you might have a VAT registration obligation in the country you are selling where you might be required to charge VAT at the country's local rate. If this was to apply for EU, you will need a VAT MOSS registration.

 

[STDFR33]

A business can only claim UK VAT back through a UK VAT return from HMRC on business expenses where you have a valid full invoice in place addressed to your company.

That's not the case.

 

[Newchodge]

That's not the case.

Would you like to elaborate a bit?

 

[Chart Accountancy]

That's not the case.

It is indeed the case. If foreign VAT is paid for example where a supplier from Italy charged you incorrectly VAT because you didn't provide your company name and UK VAT number, you cannot claim this foreign VAT from HMRC.

If for example, you make imports and you have to pay import VAT, HMRC will issue you with C79 certificate to allow you to claim the VAT through your UK VAT return.

In any other instance when you file your UK VAT return, you must have a valid invoice from a UK supplier. If a foreign supplier is charging you foreign VAT, there is an issue as you must not be charged foreign VAT especially now after Brexit.

 

[STDFR33]

In any other instance when you file your UK VAT return, you must have a valid invoice from a UK supplier.

Again, that's not the case.

All you need is that VAT has been incurred. Obviously, the easiest way to do that is by a valid VAT invoice. But it's not the only way to claim VAT.

 

[STDFR33]

Would you like to elaborate a bit?

I have done further down.

 

[onerealbeanie]

Thanks so much folks. We sell website hosting if this helps a bit - I've read all sorts and it seems that HMRC technical notices contradict each other. It seems one angle is that it needs to be "reversed", I'm not really sure what the goodness that means as we're not at the stage where we have an accountant yet (very tiny still) but there's obviously some benefit of being an Internet service and our "shop window" being accessible to the world.

The other line is that if our services could be "enjoyed" by a division of a business or a person in the UK, even though bought abroad, this would be in VAT scope. As to how we go about discerning this, short of working on the postal address provided, I have no idea but a man at HMRC suggested "best effort".

I've then read on the government's general tax pages, that we may need to register to collect and pay overseas tax. Realistically and pragmatically, are we to register with every single country individually and report back to each? That seems a bit unworkable and maybe not what any countries/the UK/the EU intended.

I also wonder about how enforceable it actually is for the odd sale from abroad in terms of supporting the question "did the countries/UK/EU really intend this" (per para immediately above) in that it creates unnecessary and complicated work for what could be very little gain from enforcement activities - presuming there really are any, solely related to the collection of overseas tax (obviously not UK tax).

For now, we've just said "we currently only do business in the UK whilst we explore the tax implications" but it seems a shame.

It's starting to sound more complicated than what it is worth for a small business to trade with other countries. Currently we don't make anywhere near enough to even bother paying an Accountant just yet and we're only voluntarily registered for VAT largely for the rebate as we have access costs just to be open for business. In a similar way to the UK having a threshold of £85k before the requirement to register for VAT kicks in, I wonder if the same operates abroad.

Thanks so much for everybody's contributions so far! Maybe some further talking points..


As an aside, we paid for the full shebang on here including the business directory and footer but then the packages were changed very soon after. We received an Email about this and got told we'd be upgraded to the new version of the package with the legacy price honoured for the rest of the annual period if we Emailed back but then there was no reply to the Email that we sent. Does anybody have any ideas here please?

Thanks ?