We can solve any VAT issues you may have. We have in-depth in house knowledge in respect of property and construction and its interaction with VAT which is often a headache for those in that industry.
Whether you are looking to reduce costs or use VAT to achieve a competitive advantage, Pierce can provide the technical insights and skills you need to realise your business ambitions.
VAT represents a key factor in a business’s cash flow and potentially a real bottom-line cost. Constantly evolving legislation and HMRC guidance make compliance a continuous challenge.
Less than superb record keeping can result in penalties, damaged reputation and/or missed opportunities.
In today’s economy where competition is fierce and cash flow management is of paramount importance, effectively managing both the risks and opportunities surrounding indirect tax is key.
Commercial property transactions and the VAT regulations are particularly complex and costly mistakes are easily made. Specifically, with property, the VAT treatment will depend upon the nature of the transaction.
Generally, the sale of commercial land and buildings will be VAT exempt, except where the commercial premises being sold are new (that is, less than three years old ) or where the seller takes the decision to waive the VAT exemption otherwise known as the Option to Tax.
The granting or assignment of a lease is treated in the same manner and will be exempt subject to the landlord’s decision to ‘opt to tax’.
Before the introduction of the option to tax on August 1st 1989, companies engaging contractors to construct or redevelop commercial buildings would have to pay VAT on the costs of acquisition and construction, without the ability to offset that cost. This problem has largely been overcome by the option to tax facility.
By opting to tax, the commercial owner can convert what would otherwise be an onward VAT-exempt supply into a standard rated supply so that they can recover the tax incurred on the acquisition and development costs.
Issues can – and do – arise around the Option not least where the property will be used to make VAT-exempt supplies, additionally once made the Option is, generally speaking, irrevocable so caution is required before deciding whether or not to Opt.
We work with our clients to review and, where necessary, improve their compliance systems.
For example, we can undertake a review of sales ledger transactions to establish whether the correct VAT liability is applied to all income streams or we can undertake a working capital review to ensure that you only ever pay the right amount of tax at the right time.
A review can identify potential risks and/or potential training needs and may identify VAT savings. We can also help you ahead of any notified VAT inspection visit so that you are fully prepared on the day, including supervising the visit on your behalf if you prefer one of our VAT experts to deal with HMRC for you.
HMRC has wide powers of inspection, including the right of access to business computers. We can help you understand the limits of their powers and ensure that they keep within them.
If you’re a VAT-registered business in the UK that supplies goods and certain services to a VAT-registered customer in another European Union (EU) country, you’ll have to tell HM Revenue & Customs about the supplies.
You need to complete an EC Sales List (ESL) showing details of each of your customers in the EU and the value (in sterling) of the supplies you’ve made to them in the period.
If you haven’t made any supplies (or issued any credit notes) you should not submit an ESL and the ESL Online service will not allow you to submit a nil declaration. The VAT specialists at Pierce can help you ensure you keep within this and other HMRC reporting requirements.
"We provide proactive advice on proposed transactions as well as on everyday problems such as liability of supply"
VAT planning before a transaction will not only avoid pitfalls and penalties but can often identify VAT opportunities. We provide proactive advice on proposed transactions as well as on everyday problems such as liability of supply etc.
We will also provide strong reactive support as necessary. The ever-widening scope of VAT, the constant stream of detailed changes to the regulations, and the ever-growing demands of Customs and Excise call for a trained professional eye to ensure that you do not fall foul of the regulations and incur a penalty.
There are various schemes available to certain registered businesses to simplify VAT accounting or, in some cases, reduce their VAT bill:
VAT can generally not be reclaimed on the purchase of cars unless they are solely for business use. In practice, this is usually only where they are used as taxis, for driving instruction or as self-drive hire vehicles.
If a car is leased, however, businesses can generally reclaim 50% of the VAT charged on the lease payments. VAT on short term car hire can be reclaimed in full if they are only used on business.
VAT on commercial vehicles can be reclaimed in full so the distinction between a car and commercial vehicle is important for VAT purposes. A car is defined as a vehicle constructed or adapted mainly for carrying passengers or has seating accommodation behind the driver’s seat with side windows. There are exceptions to this rule, such as any vehicle with a payload of 1 tonne or more or special purpose vehicles which will qualify for full VAT recovery.
Businesses which pay the cost of all fuel for cars where the director or employee is permitted to use the car for private journeys and do not make good the cost of fuel for the private journeys must decide whether to claim any input tax on the fuel purchased for the business.
If you do decide to claim you must account for the VAT due on the private fuel by reference to the VAT Fuel Scale charge, payable per VAT return period.
There is however a concession which avoids the requirement to pay scale charges. If fuel is supplied for private journeys either free or for less than the amount paid for it, then the only way to avoid paying the scale charge is by not reclaiming input tax on any fuel purchased (for any mileage, whether business or private, in cars or commercial vehicles).
Should you decide to take advantage of this concession you must inform HMRC before the start of the period in which it is to take effect and they will then treat the decision as remaining in force until told otherwise.
Where a partly exempt business uses a vehicle for both private and business purposes and accounts for the VAT on the private use via the scale charge, the input tax incurred on the petrol for private use is fully recoverable and, on business motoring, is recoverable to the extent the vehicle is used for a business purpose.
To do this, business and private fuel costs must be separated. Where a partly exempt business is unable to separate business and private motoring, all input tax on fuel (including that for private motoring) must be apportioned in the partial exemption calculations.
To compensate for this, the scale charge for private motoring may be reduced to equal the percentage of input tax recovered under the partial exemption method. For example, if only 80% of the input tax is recovered, only 80% of the appropriate scale charge is to be paid. Where an annual adjustment is carried out, the scale charge must also be adjusted.