Category: HMRC

VAT rules are changing from 1st January 2019 for vouchers.

The rules are not concerned with if VAT is due, they concern when it’s due.

New rules apply to any vouchers issued on, or after, 1 January 2019. This legislation only affects vouchers for which a payment has been made and which will be used to buy something.

Vouchers are divided in two types.

Single purpose vouchers (SPV) – A voucher where the place of supply and VAT rate is known.
VAT will be due at the time of payment for the voucher – not at redemption.

Multi Purpose Vouchers – MPVs – A voucher which is not a single purpose voucher. These are effectively gift vouchers, where a payment has been made but the exact nature of what is to be provided is not known at the time of payment.

 

How restaurants will be effected?

Restaurants usually issue SPVs.

Presently, VAT arises when the voucher is redeemed.

Example, if a restaurant sells a voucher for £100 to a customer via an intermediary which acts as the restaurant’s agent. The customer pays the £100 to the intermediary, which passes the money back to the restaurant after having deducted its £5 agent’s commission.  The intermediary also gives an invoice for its commission to the retailer.

The customer goes into the restaurant and spends £150, he pays his bill by redeeming £100 voucher and rest in cash.

The accounting will be as follows:

~ The intermediary will charge the retailer output VAT on the £5 commission which is consideration for its intermediary services.  The intermediary will also be able to deduct any input VAT on its expenditure in providing the intermediary service;

~ The retailer will charge output VAT on the total bill of £150 when the voucher is redeemed in its shop.  It will also deduct the input tax on the intermediary’s commission charge.

 

From 1^st January, 2019 :

VAT will arise when the voucher is sold to the customer.

The accounting will be as follows:

~ The intermediary will charge the retailer VAT on the £5 commission which is consideration for its intermediary services.  The intermediary will also be able to deduct any input VAT on its expenditure in providing the intermediary service;

~ The retailer will charge output VAT on sale of voucher of £100. It will also deduct the input tax on the intermediary’s commission charge.

~ When the customer comes to redeem the voucher. Restaurant will out charge output VAT on £50 as it has already charged VAT on voucher part of the consideration.

 

Conclusion

We accountants will have to change some processes to correctly account for VAT. We will also need to speak with EPOS providers to amend their systems to ensure correct VAT is charged to the customer on sale of goods and services.

Transition – we will have to be mindful of treating vouchers issued before and after 1st January 2019 differently.

 

Source:

HMRC Consultation document

India

As an individual coming from India, I was used to seeing the political class enjoying all kind of privileges. As an accountant I came to know early in my career that political parties in India are exempt from paying tax.

Also, donations made by individual or company are also allowed as deductions under section 80 GGC and 80 GGB respectively on the Indian Income Tax Act.

India recently introduced a new way of funding political parties called `Electoral bonds`. Under this new system – donor, recipient and amount all will remain unknown and yet according to the Government it will increase transparency.

I will not give any glowing example of political donation scandals in India due to limitation of memory of my computer and time at my hands.

 

United Kingdom

Political parties pay tax on their income in the UK.

Further, Donations made to political parties are not allowed as deductions in in calculating the profits of a trade as they are almost always made wholly or partly for non-trade purposes. (BIM 47405). See also Taxation query.

This is not to say political parties do not get donations in the UK and if they get they do not get influenced by them. Transparency International UK has highlighted the case of Lycamobile.

Also, see Reuters article on how wealthy individuals are donating via their companies and avoiding tax but HMRC is avoiding to look into this difficult question.

 

Conclusion

I draw your attention to the facts. Please draw your own conclusions.

 

Software gives us the confirmation but if you wish to check if HMRC has received it and successfully processed it.

Go to online account to the below screen and if the Tax has a hyper link as shown below – yes, the tax return has been successfully received and processed by HMRC.

 

Bonus facts

a- Client’s bank account details must be provided in every CT600.

 

 

 

 

Source:

HMRC webinar on Common filling errors . HMRC runs a series of fantastic webnairs. Click here for more details.

 

What is PILON?

PILON is a payment made to an employee when employment is terminated without notice, instead of the employee working through a notice period and receiving pay in the normal way.

It is different from ‘gardening leave’, in which the employee is still in employment during the notice period and is paid during that period, even though he or she is not present at work.

What has changed?

Tax laws have changed regarding PILONs from 6^th April 2018.

All payments in lieu of notice on, or after 6 April 2018 are chargeable to income tax and Class 1 National Insurance Contributions (NICs), whether or not they are contractual payments.

Notes:

Please note this applies to basic pay only i.e. anything paid over and above this, we can use the £30k threshold.

PILON payments will not benefit from £30,000 threshold.

Statutory redundancy payments are not PILON payments and they benefit from the £30k threshold.

If an employer pays more than the PILON the remaining balance should be tax free up to the first £30,000.

 

Sources:

• HMRC manual – EIM13765
• A worked example – EIM 14000
• Agent update 64

 

 

Current law

Carried-forward losses can only be used by the company that incurred the loss, and not used in other companies in a group. Additionally, certain losses can only be set against certain types of income, for example trading losses can only be used against trading profits.

 

New Law

Losses arising after 1^st April 2017 can be set off against own and group company profits. Type of income restriction is also removed.

There is a new loss restriction i.e. only 50% of the carried forward losses can be relived. Don’t worry there is an annual threshold of £5 million for each standalone company or group, ensuring 99% of companies are unaffected by the restriction.

 

Additional notes:

1. Capital losses not effected by these new rules.
2. Losses expire when trade closes.
3. A company can only surrender losses under group relief after its has used its own carried forward losses against its current year’s profit to the full extent.
4. Similarly, company claiming losses under group relief has to first exhaust its own carried forwarded losses before claiming any under group relief.
5. Group Allowance allocation statement is also required.

 

Source:

1. Basic guidance in simple English – see HMRC note.
2. HMRC has recorded a webinar on this topic – click here. Then Ctrl + F > “reform”.