VAT Hot Topics

1 October 2009
The VAT Consultancy
Laurel House
Station Approach
Alresford
SO24 9JH

Tel: 01962 735350

Fax: 01962 735352
www.thevatconsultancy.com
 Agenda
1) VAT Liability
2) VAT Registration
3) Flat Rate Scheme
4) Cash Accounting / Annual Accounting
5) Prompt Payment Discounts
6) Bad Debt Relief
7) New Voluntary Disclosure Rules
8) Penalties
9) Complex Areas
10) Future VAT Rate Change
 VAT Liability
• Exempt

• Taxable Standard Rate

• Outside the scope Reduced Rate

Zero Rate
 VAT Registration

Look back test

• Compulsory
Look forward test

• Voluntary Intending trader

Trading under the limit

VAT Threshold April 2009 = £68,000

 Flat Rate Scheme
• Entry level for taxable turnover is less than
£150,000.
• Other income level ignored.
• The exit level is £225,000.
• Notice 733.
• Benefits - a flat rate payment.
 Cash Accounting/
Annual Accounting
Cash Accounting
• Income not exceeding £1.35 million in the
past 12 months to join.
• Exit level of £1.65 million.
• Notice 731.
• Benefits – built in bad debt relief.
 Cash Accounting/
Annual Accounting
Annual Accounting scheme
• Same entry level applies as cash accounting and
exit level.
• Notice 732.
• Benefits - one VAT return and payments are made
on account by agreement with Revenue & Customs
or by 9 equal monthly instalments with a final
balance in payment.
 Early Settlement Discounts
• VAT valuation rules sometimes complex

• Value for prompt payment/early settlement

discount as if discount taken

• Therefore lower VAT even if payment NOT

early
 Bad Debt Relief
• Unpaid sales invoice that is more than 6
months old.
• VAT Notice 700/18.
• Writing Off Procedure.
• Principles apply to unpaid purchases too!
 Voluntary Disclosures
•Increased from £2,000 to £50,000, but greater of
£10,000 or 1% of VAT ‘turnover’ < £5M.

•Period of discovery not error.

•Notification to HMRC -> penalty regime

 Penalties
Effective: VAT Returns to be submitted on or after
1st April 2009.

How is the penalty charge calculated?

•Percentage of the extra tax due.
•Subject to behaviour that gave rise to the error.
•Lower the tax ‘at risk’ and less serious the
behaviour, the smaller the penalty.
 Anti-Forestalling
• Rate change from 15% to 17% 1 Jan 2010

• Potential savings to be made but be wary of rules

• See video stream on www.thevatconsultancy.com

 Complex Areas
• Property – varies between developer and
owner; commercial and residential etc

• Place of supply of services – very different to

rules for goods. Varies depending on TYPE of
supply. Changes 1 Jan 2010 and 1 Jan 2011
 ANY QUESTIONS?
• Contact any of us on:

• 01962 735350

• www.thevatconsultancy.com