by Eunice | Nov 16, 2022 | UK Accounting
As a sole trader, you can claim some costs from your VAT
If you work in the construction sector, you may be eligible for various tax deductions based on your position. Before you claim, there are two essential principles to remember.
- The money you want to claim must have already been spent.
- The expenses must be proportional to your earnings.
Any claim you make will be invalid if your employer has compensated you for work-related travel, food, lodging, incidentals, flights, public transportation, taxi, or overnight stays. This article illustrates what you can claim as a sole trader builder in the UK.
1. Materials used for your work
In paragraph 13.8.1, articles that are ‘typically’ included in a building (or its site) are listed. This isn’t an exhaustive list. Remember that these items are only considered building materials for VAT purposes if they meet all of the requirements listed in paragraph 13.2. Examples of tax-deductible material for work include air conditioning, bathroom accessories, builders’ hardware, decorating material, and dust extractors, just to name a few.
2. Replacement tools
Because HMRC considers tools purchased for work to be an essential job expense, you can claim the tax returned. This means that the IRS recognizes that you require this equipment to perform your job and that you must pay for them out of your pocket.
3. Repairs & maintenance of equipment
Because HMRC considers tools purchased for work to be an essential job expense, you can claim the tax returned. This means that the internal revenue system recognizes that you require this equipment to perform your job and that you must pay for them out of your pocket. The requirements apply to all mechanics, whether they work for a garage, a franchised dealership, a fast fit center, or are self-employed. As long as you pay income tax for the year in which you are seeking a tax rebate, you are eligible as a part-time or full-time PAYE employee. (See Article 13.5.2)
4. Insurance
Health and car insurance are tax-deductible for sole traders or construction workers under the CIS program.
5. Protective clothing such as overalls and work boots
You must use standard rate products that you sell whether you’re a retailer, a builder’s merchant, or supplying goods from stock. There are some exclusions, such as the supply of industrial safety boots and helmets (VAT Notice 701/23) and printed manuals (VAT Notice 701/10). See the VAT guide for a list of commodities that can be supplied at a zero or reduced rate (VAT Notice 700).
6. Laundry & cleaning
You can deduct the expense of washing, drying, and ironing your qualified work clothing, as well as the cost of having them dry-cleaned. You don’t have to give written documentation for your laundry expenses if your overall laundry expenses are $150 or less and your total work-related expenses are $300 or less.
7. Vehicle Cost: fuel (if vehicle used solely for business, please refer to HMRC simplified or actual expense)
A tradies’ income is frequently based on the use of a vehicle. Most construction workers and tradies are aware that they can claim income-related costs; however, certain rules must be followed to ensure that the correct amount is claimed. Your records must stand up to inspection, whether you employ the logbook approach or the cents per kilometer traveled method.
Evidence of a second personal use car is required to claim 100% of your expenses on one vehicle. If you use your car for work, you can deduct a percentage of the expense.
8. Vehicle Cost: repairs & maintenance (if vehicle used solely for business)
As part of a category of car-related expenses, car repairs are tax-deductible. However, only a limited number of people are entitled to a tax deduction for automotive expenses. This comprises entrepreneurs and other self-employed employees.
9. Vehicle Cost: road tax, insurance & MOT (if vehicle used solely for business)
Road tax and MOT are tax-deductible only if you can show evidence of a second car. You can claim road and insurance tax if you use a single car for your travel.
10. Other sundry items
For CIS, this category includes expenses incurred as part of your job that do not fall into one of the other categories, such as phone fees, stationery, and postage.
Frequently Asked Questions
Does VAT for Tool apply to sole trader builders?
The requirements apply to all mechanics, whether they work for a garage, a franchised dealership, a fast fit center, or are self-employed. As long as you pay income tax for the year in which you are seeking a tax rebate, you are eligible as a part-time or full-time PAYE employee.
When are building supplies zero-rated?
When the contract specifies that any services provided by architects, surveyors, or anyone acting as consultants or supervisors are simply cost components of the contractor’s supply and are not specifically sold to the customer, the entire supply might be classified as zero-rated.
What is the logbook method?
Your logbook records should always be up to date, and a logbook can keep track of your business activities for up to five years. You must keep account of your car usage for 12 weeks, which will be averaged over the year. Work-related usage should also be documented in your logbook.
Conclusion
by Eunice | Nov 14, 2022 | European VAT
VAT Records – Importance
VAT is included in the list of all accounting procedures associated with business functions. Every VAT-registered business is required to charge and pay VAT, known as Output and Input VAT, respectively.
For this purpose, it is important to keep the important records that hold significant fiscal value so they can be included in the VAT Return document. Only the proper and valid records shall allow the business to reclaim VAT and receive the amount fairly.
VAT Records – What You Must Keep
According to the UK VAT regulations, there are important records associated with the VAT amount that you are required to keep to prove your statement’s validity.
There are two types of records that you are required to keep as evidence of your VAT transactions. These are the special records for VAT and the Business records as termed by the UK government.
Special Records for VAT
The special tax records for VAT include two important documents that the businesses must keep as proof of input and output VAT. One of these documents is the VAT account. A VAT account is a link that exists between all the business records and the VAT Return.
The other important document is the VAT Invoice. It is an invoice document that consists of important details laid by the government laws.
These details are documented according to three VAT invoice structures namely simplified modified, and full. According to its very type, the invoice document provides information on VAT related to the items, seller, and recipient.
Business Records
In addition to the special VAT records, the UK government has advised keeping the business records as part of the VAT records. Here is a list of the common business records required by you to keep and produce before the HMRC when asked.
- All the annual accounts.
- The bank statements, debit and credit notes, and all the account books.
- Documents for import, export, order, and delivery.
- Books and invoices for purchase and sales.
- Daily taking records.
- Documents for special VAT treatment.
Moreover, the businesses registered in Northern Ireland are required to present the documents associated with the sales and purchases made with the EU businesses.
Also, all the records of sales and purchases that existed between Great Britain and the EU before Brexit must also be included.
VAT Records – Procedure
The duration of keeping all the VAT records is six years as marked mandatory by the UK VAT laws. Moreover, other tax records might be needed to be kept for further extended periods in time.
However, the UK government provides relaxation for the businesses that are likely to face issues keeping the records for extended periods of time.
Such business entities are provided with an option to consult with the VAT general inquiries office so that they may receive approval or allowance for keeping the records for a comparatively shorter period of time.
The VAT records can be saved electronically. There are no specific laws for keeping records on an electronic device. However, there do exist some regulations related to issuing VAT invoices to clients through electronic media.
VAT Records – VAT Invoice
As mentioned previously, there are three types of VAT invoices. For the sales amount smaller than £250, a simplified invoice is required to be issued. If the amount exceeds the stated one, a business must issue a full or modified invoice. This regulation is similar for businesses that are retailers or non-retailers. Moreover, there is no requirement to issue invoices to unregistered clients.
Frequently Asked Questions
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What is a VAT Return document?
VAT Return is a form that includes the VAT records, including all VAT invoices. This document is sent to the HM Customs and Revenue department after the accounting period. It includes the details of input and output VAT. If you are looking for expert guidance and assistance, then we might be all you need. At Sterlinx, we manage your accounting matters, including VAT, for your business’s prosperity.
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What is the accounting period for UK VAT?
The accounting period for UK VAT has been set to 3 months by the government of the UK.
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What is the deadline for submission of the VAT return?
The deadline for submitting your return online is usually one calendar month and seven days after the end of an accounting period.
Conclusion
The blog elaborated on all the necessary documents associated with VAT. These are the special VAT and business records that a business entity must keep for at least six years.
However, there exists a possibility for exception upon application of a request. In the case of VAT Invoices, the laws instruct the responsible stakeholders to issue invoices according to the established criteria.
We at Sterlinx skillfully and efficiently assist with all accounting and eCommerce matters. We value your business and understand the importance of your time and attention.
We provide you with an opportunity to focus on your important affairs while we manage your VAT and accounting matters.
by Eunice | Nov 12, 2022 | Business
Your Accounting Problems Will Be Solved with a Team of Experts
For years, Andrew had dreamt of setting up his own Food Business from the ground up. When he finally owned a small shop, he was bound to encounter challenges like any business owner. For all small businesses, no matter the size, finance is the lifeblood of all operations and determines the success of your establishment. Andrew knew he would be in deep trouble without help. Here is how Sterlinx helped this small-scale business succeed.
While he oversaw his small-scale business, he expected to manage the finances and accounting himself to ensure he was on track with every decision and investment. However, managing the finances, tax, and overall accounting robbed much of his time and energy. It became harder for him to catch up with the growing revenue and cost of running his business.
Aside from that, it was challenging to find accountants for a small business in the UK. He thought he could manage the finances and taxes of his business alone.
For any establishment, mismanagement of finances will result in discrepancies in tracking your business growth. Tracking your business’s cash flow and taxes will require a tax specialist. After all, taxes are crucial, and mistakes in filing your taxes will result in losses and put your business and yourself at risk. Sooner or later, you will need a small business accountant.
Andrew realised what he would go through if he continued doing the accounting himself just to cut expenditures. He would have put himself and the business he worked hard on at risk by not asking for help from professionals.
He knew that his business was growing and would demand better management, he looked for solutions to his dilemma. Having a tax specialist would help him greatly in this ordeal.
In his quest to find a helping hand that would lessen the weight on his shoulders, he found out about the renowned UK Accounting Services Sterlinx offered for small businesses. Andrew was unsure of the decision at first. He knew that availing of the services that accounting firms such as Sterlinx offer would be an additional cost he would need to keep track of.
He realised, though, that Sterlinx could offer him more than just a small business accountant to help his growing business.
Sterlinx provided Full Accounting services for Andrew, so he had more time to manage his business without accounting on his mind. He could rest easy, knowing he could check his business’s growth without getting confused about Sales Tracking. He was also assured that he would never miss any tax deadlines through Deadline Reminders from his small business accountant. Sterlinx makes getting the needed help from a tax specialist trouble-free.
The Results
With more time to be a hands-on business owner with Qualified Accountancy Services, he could rely on, Andrew’s business showed visible growth.
To experience the relief Andrew now has in managing his business, allow Sterlinx to provide you with a dedicated Accounting service. With our team of AAT and ACCA-qualified accountants, we can take care of everything accounting. Aside from that, we boast of ourselves as certified Xero partners and Amazon SPN service providers.
We make it easier for small business owners to reach a small business accountant. Our tax specialist is willing to help you no matter your business size.
We handle everything from Bookkeeping, Payroll, VAT, Self-assessments, and Digital documentation to E-commerce Accounting and Xero training. We consider every project different and every client special.
Whether you need assistance with bookkeeping or managing finances, we will find solutions for any situation. A tax specialist from our team will ensure you and your small business are taken care of. Let us help you and watch your small venture grow. Contact us now at Sterlinx Global.
by Eunice | Nov 10, 2022 | European VAT
TITLE: Things You Need to Know About a VAT Account: What It Should Contain
VAT Account UK – Importance and Structure
VAT Account is an important document associated with VAT charged to consumers and from suppliers. It is a significant record that allows businesses to complete the procedure of VAT return.
VAT Account the UK – Importance
The VAT Account carries useful information that holds a significant fiscal value. It carries the information related to the VAT paid and received. Moreover, it is presented before the HM Revenues and Custom department to be reviewed for the respective VAT records.
VAT Account the UK – Structure
According to the regulatory framework structured by the government of the UK, there are some specific details that are required to be present in a VAT account. However, the government has not formulated any laws that declare a specific mandatory structure for the account. Nevertheless, the important information that must be provided is as follows:
- The input and output VAT amounts.
- The amount of VAT payable to HMRC.
- The amount of VAT reclaimable from HMRC.
- If the business employs the VAT Flat Rate Scheme, then the respective percentage must be added.
- The Northern Ireland-based businesses must also include the EU VAT records.
UK VAT Account – Bad Debts
According to the UK government recommendations, such VAT invoices where the consumer fails to complete the payment procedure are labelled as bad debts.
These invoices can be added to the VAT account in order to receive a relation for the loss experienced by the business. This is done in the VAT return. Moreover, the Bad Debt account is required to be kept separate from the other documents.
Bad Debts – Conditions
The UK VAT regulations have made it mandatory for the Bad Debt to be more than six months old in order for it to be considered valid.
Also, the maximum limit of the time span is four years and six months, during which the claims made to the HMRC are declared to be considered. Moreover, the record of the claim must be kept for four years and ten years in case of VAT MOSS.
Bad Debts – Structure
The government has also pointed out the important details that must be included in the Bad debt document in order for it to be considered. These important details are as follows:
- The total VAT amount must be included.
- Received payments
- VAT claimed on a debt
- VAT period
- Details of invoice.
UK VAT Account – Timelines
The timeline is important when filing tax records. At the time of VAT return, the accuracy of timelines associated with the transaction may allow the responsible stakeholder to accurately decide the VAT amount for the specific period.
It is to be noted that the VAT account is presented to the HMRC at the end of the accounting period.
Therefore, it is important to know the period of any transaction under subjection.
This means that only after knowing the time period of the transaction can it be decided which period the transaction is associated with and to which return it must be included.
Timelines – Tax Point
The time of the transaction, particularly that of the supply, is known as the tax point. It can vary according to the situation of the transaction.
There are some specific possibilities where the tax point can be considered to be according to the situation. In the case where no invoice is issued, the date of the item supply serves as the tax point.
When an invoice is issued, the date of the invoice must be considered. If the dates of the issue of VAT invoice and the supply hold 15 days or greater gap in between, then the date of supply is to be considered.
In case when invoice is issued in advance, the date of payment or the invoice is considered according to the one that took place earlier.
Timelines – Tax Point Exceptions
In the case of the VAT Cash Accounting Scheme, the date of receiving payments acts as the tax point. Moreover, there are also different tax rules for barristers and construction-related trades. If business items are acquired for personal use, there exist other exceptions. Further, there may be two tax points, i.e., an advance deposit and a final payment.
Frequently Asked Questions
How do you work out a tax point in exceptional situations?
There are two types of tax points, the basic and the actual tax points. The basic tax point is considered as the time of availability or supply of goods and performance of services. The basic one is overruled in the case of the actual one.
This occurs if the invoice is issued or the payment is received either before the basic tax point or the invoice is issued 14 days after the basic tax point. In this case, the tax point is the time when either the entry is made in the former scenario or the invoice is issued in the latter case.
How can I claim a discount?
Suppose the discount is taken up within the specified time. In that case, you need to adjust the consideration. The VAT amount is accounted for by issuing a credit note. In case you choose not to use a credit note, the original invoice must contain the following information:
- the discount terms (which must include the time by which the discounted price must be paid),
- a statement that the customer can recover as input tax the VAT paid to the supplier
How to account for goods that are put to private or non-business use?
Suppose you give away or put to private or other non-business use goods you have acquired or produced during your business. In that case, VAT is due on cost, and you need to record only the following:
- the date that the goods were given away or set aside for non-business use,
- description and quantity of the goods,
- VAT-exclusive cost
by Eunice | Nov 7, 2022 | UK Updates
TITLE: High Street Retail Store Tax UK: Top 10 Expenses You Should Claim From Your Tax
Not knowing the expenses you should claim if you have a high street retail store in the UK can be a loss for you! Learn more about them on this blog.
Saving costs on tax as a high-street retailer
It is essential to save costs as a retailer, especially as the sector can become seasonal, with huge retail chains such as Toys R Us and Maplin collapsing due to rising costs, changing consumer preferences, and external shocks imposed on the industry via the COVID-19 pandemic.
Furthermore, a study by consultancy PwC shows that fewer shops are opening each year, and closures are becoming increasingly common. The study found a total loss of 1,772 stores in 2017 across over 500 major town centres.
To support your revenues, it is important to claim VAT for certain items as expenses as a high street retailer. High street retail stores can benefit from expert advice to help cut their tax bill.
1. Shipment cost
You may deduct shipping costs. You pay shipping fees to your carrier, and because this is a business expense, you can deduct it from your taxes. Postal services from Royal Mail are generally exempt from VAT as they are subject to regulation and price control. However, this exemption cannot be applied to similar services provided by other suppliers or the Royal mail itself.
Additionally, any stamps that were bought and not used are not subject to VAT (See Notice 701/8 on postage stamps and other philatelic supply materials). If postage stamps are a cost incurred when you deliver your product, you have to charge VAT on the total amount of the product, including those stamps to your customers.
2. Business licence
In general, you can set up a small business without a business licence. All you need to do is set up as self-employed, choose a legal structure for your business and register with HMRC. But many specialised business activities need you to have a business licence. These can be deducted from your VAT bill and save you some pretty high costs.
3. Salary-related expenses
Employee salary costs such as PAYE and pensions are not subject to VAT; these could be recharged if they relate to companies rather than employees. These salary expenses can be deducted from a company’s overall cost.
4. Marketing & advertising costs
For HMRC, showing that particular marketing has benefited your company is not sufficient to claim back VAT. You must be able to show that the marketing that has taken place either online or offline has produced a direct benefit to the business. As a result, while you can claim VAT on Google Ads, for example, you cannot claim the VAT back on a gym membership even if this allows you to network with people and gain new clients.
5. Accounting fees & salaries expenses
The golden rule of VAT states that you can only reclaim costs that are related to the provision of goods and services from your business. Such things as accounting fees or any expenses that are incurred paying salaries can be deducted.
6. Rent expense (if you are renting your space)
As a business, you can deduct your rent as an expense and include services and other costs such as water and council tax. You can claim all such costs you claim as expenses according to HMRC.
7. Repairs and maintenance
HMRC guidelines state that you can claim expenses that are incurred in running property you own as a business. This can dramatically reduce your tax bill.
8. Waste management costs (if you offer dine-in services)
Managing waste is an important business cost and it can be deducted from your final tax bill. However, this is only limited to businesses that offer dine-in services and tax-deductible items ranging from septic tanks to sewer connections.
9. Utilities such as light and water
Electricity and gas are deemed to be important costs for businesses. This counts as business costs, which are tax-deductible as a high street retail store (See HMRC guidance).
10. Insurance costs
Any costs that are directly attributable to insurance policies will be eligible for full VAT claims. Business insurance is standard among restaurants that wish to guard against fires or other hazards.
Here is a list of recently asked questions about the top 10 expenses you should claim from your tax as a high street retail store in the UK
What forms do you complete for a VAT return?
You can get a VAT 407(NI) form, which will require proof that you are eligible for such VAT returns. Be sure not to include any good you are leaving behind or may have returned. You may require a passport or another travel document.
What goods are non-refundable?
Most mail-order goods, such as sales of Internet services are non-refundable. Where you need to make a customs declaration, such goods are not subject to VAT returns. This is equally the case if you need an export licence for a particular good.
VAT on insurance-related products
Under certain provisions from HMRC, there’s an entitlement to recover VAT incurred on supplies of insurance when they’re made to customers belonging outside the UK or directly linked to the export of goods from the UK.
Conclusion
Online shopping has been the major cause of the faltering high street in the UK. The costs that online and e-commerce retailers have to bear are much smaller, and they can reach a larger customer base.
