by Jay Redman | Nov 29, 2021 | UK Updates
If you own a business in the UK yet you’re not a UK resident, it is important that you know how to comply with your business VAT. This blog can help you with just that. Continue reading to learn more.
How to Pay UK VAT
According to the legislation, UK traders with sales (turnover) above the VAT level must register for VAT and charge it on deliveries of goods or services, as stated below.
The business collects the VAT, which subsequently pays it to HM Revenue & Customs (HMRC), the government’s tax collection agency.
Traders with sales below the VAT threshold are not required to register for VAT (though they may do so freely); hence not all traders must be VAT-registered.
Paying the Standard VAT Rate
VAT is charged at a regular rate of 20%. Certain items are taxed at a lesser rate, such as children’s apparel, which is charged at 0%, while household fuel, such as gas and electricity, is taxed at 5%.
Not all businesses are liable to pay VAT. VAT payments are determined by the amount of turnover or sales from a business, however, businesses can voluntarily register.
How to Register for VAT
Entrepreneurs or business owners in and out of the UK can register for a VAT number online. This process is fairly straightforward and requires little effort.
Otherwise, you may have to complete the VAT1 form, and more information is found on the HMRC website.
When do I have to make VAT payments?
The majority of firms are required to file VAT returns on a quarterly basis. You are required to complete and file your VAT five weeks after the relevant period, which tends to be every quarter.
A VAT return for the three months ending June 30, 2021, for example, must be submitted by August 7, 2021.
Subsequent VAT returns will be due on the 30th of September 2021, the 31st of December 2021, the 31st of March 2022, and so on. With the implementation of HMRC’s ‘Making Tax Digital’ regime, the way most VAT returns must be completed has recently changed.
Suppose you have difficulty dealing with digital filings, such as if you have a disability or live in a region where broadband is unstable, you may be eligible for an exemption from digital filing of your VAT returns.
If this is the case, HMRC should be able to make alternate arrangements for you to file your returns. You can contact HMRC directly to discuss this issue.
How can I pay VAT from another country?
Before you set about paying your VAT bill, ensure that the deadline has not passed as you may be liable to fines from HMRC. The deadline for your VAT return is usually shown on your receipt.
The different deadlines are the Annual Accounting Scheme, and the payments on accounts and payments have to be made 4 – 5 weeks at the end of the quarter.
There are several ways to pay your VAT bill to HMRC. You may use the online or the telephone banking system or pay through your bank account. Finally, you can equally use the CHAPS system to pay for your VAT bill.
Paying Online or through telephone bank transfer
You can find your VAT number in your VAT account or your invoice. After this, you may use the sort code and account number provided by HMRC to make the payment.
Furthermore, your payment cannot be completed without the 9-digit registration number found on your VAT account.
Paying by Standing Order
If you are registered to the Annual Accounting Scheme, you may pay via standing order. Under this scheme, Businesses who use the Annual Accounting Scheme or pay on the account can set up a standing order to pay their VAT due.
Standing orders require three working days to reach the bank account of HM Revenue and Customs (HMRC).
Approve payments through your bank account
You can make VAT payments through your bank account. Select ‘start a payment’ and then ‘pay by bank account’ after logging into your HM Revenue and Customs (HMRC) account.
VAT payments can be made online via your bank account with the relevant account information provided by HMRC. The transfer tends to happen immediately, but it can take up to two hours for it to appear in your account.
Frequently Asked Questions
How Can I set up a standing order payment?
When registering for a VAT number, you can request to pay by standing order in the application form. Once HMRC notifies you of your application, you can inform them of your preference to use standing orders using the VAT 622 form.
Do I need to keep digital records?
VAT-registered firms who earn over £85,000 are required to follow digital record-keeping requirements as part of HMRC’s Making Tax Digital initiative.
by Jay Redman | Nov 24, 2021 | UK Accounting
Off-shore strategies can generate huge returns
Offshore tax strategies were promoted as a lucrative method to save money, with returns of up to 80%, but are they truly worth the risk? If you live and work in the United Kingdom, you must pay UK taxes.
There are no legal means to avoid paying taxes in the UK.
HMRC will inevitably notice if you pay into an offshore tax arrangement or account. In March 2020, over 250 UK taxpayers were reported to the evasion team. 23 of these are the largest businesses in the UK.
Report off-shore assets to HMRC
If you live and work in the United Kingdom, you must pay UK taxes. There are no legal means to avoid paying taxes in the UK. HMRC will inevitably identify all your undeclared income if you pay into an offshore tax arrangement.
According to a core premise of UK tax law, individuals who reside in the UK must record any income and gains resulting from their international assets, not only those owned in the UK.
This is not necessarily the case for persons whose “permanent home” or “domicile” is located outside of the UK.
HMRC is part of the common reporting standards
Financial institutions and financial service firms are required to transmit information to HMRC about accounts maintained by UK nationals and UK tax residents under the Common Reporting Standard (CRS).
The OECD oversees the Common Reporting Standard (CRS), which is a global standard for the automatic transmission of financial account information.
CRS is used by over 100 countries and HMRC has data on 5.7 million offshore accounts owned by UK residents in 2018.
HMRC has also enhanced the penalty that can be imposed in cases where offshore accounts are used to dodge/evade tax to between 100 and 200 per cent of the tax owed.
Strategies to reduce your UK tax bill
1) Pension contributions: Your taxable income falls when you make a pension contribution. For example, if your income was £60,000 and you contributed £10,000 to your pension, your income drops to £50,000 to calculate child benefit allowance.
Not only will you get a 40% tax break on whatever money you put into your pension, but you gain £1,827.80 in child benefit if you have two children.
When you factor in income tax and national insurance, child benefit for two children alone is the equivalent to a pay raise of nearly £3,000. To summarise this point, it is better to have a higher pension contribution to lower your tax bill.
2) Use your capital gains allowance: If you own assets such as real estate taxed at very high rates, you can always dispose of them to use your capital gains allowance. You have to pay capital gains tax on any dividends or income earned above your tax-free allowance.
The current Capital Gains tax-free allowance is £12,300 and £6,150 for trusts.
3) Transfer some assets to your partner: You can equally transfer some assets to your partner in order to lower your tax bill.
4) Giving to Charity: The end of the tax year is also a good time to consider charitable giving. Charitable contributions, like pension contributions, reduce your tax bill. Gifts made through the Gift Aid scheme qualify for immediate tax relief of 20% for UK residents.
Higher or extra rate taxpayers claim back the difference via self-assessment. Charity donations are tax-free, and the Charity of community amateur sports clubs (CASCs) will give you a form to sign.
When you file your Self-Assessment tax return, you can claim the difference between the tax you paid on the donation and the amount the charity received.
Frequently Asked Questions
Can I be charged for past avoidance?
The Royal Court of Justice determined on Thursday, January 28, 2010, that the retroactive effect of BN66 is not illegal. As a result, HMRC can look at past income declarations to determine if a citizen or entity has been evading taxes in the UK.
Should I pay foreign tax?
If you have income from a foreign country, it may be taxed in the foreign country. If that income is also taxable in the UK, you should be able to claim a credit in the UK for the foreign tax you paid.
How can I pay lower taxes as an entrepreneur?
If you live and work in the United Kingdom, you must pay UK taxes. There are no legal means to avoid paying taxes in the United Kingdom. Working through your own limited company is the most tax-efficient way to work in the UK.
Conclusion
As an entrepreneur, a sudden increase in sales of your goods or services can cause your overall income to rise overnight. There are strategies to reduce your tax bill that are legal.
However, if you own an off-shore account, you should ensure that any income and revenues are either transferred to a trust or your partner to reduce your bill.
If you are single, huge charity donations can serve as a buffer as they will lower your tax bill and enable you to get the balance in the form of tax returns.
by Jay Redman | Nov 19, 2021 | Uncategorized
TITLE: Pay VAT: How Do You Know How and When to Pay Your UK VAT? Easiest Ways to Know to File Your VAT
If you’re a business or self-employed contractor, you may have to pay HMRC a Value-Added Tax (VAT). It is important to know when and how to pay your UK VAT bill. This will prevent any fines or late payment charges from Her Majesty’s Revenues and Customs (HMRC). This article will look at how and when to pay your VAT tax bill. It equally explains how to register, the different options available to those looking to pay their VAT bill, and some frequently asked questions.
What is the VAT rate?
A value-added tax (VAT) is a consumption tax applied on a product or service anytime value is added at each stage of the supply chain, from manufacture through the point of sale.
The amount of VAT you pay is based on the cost of the product, minus any taxed costs of materials used in the product.
UK traders must register for VAT and charge it on supplies of goods or services if their sales (turnover) exceed the VAT threshold of £85,000.
The trader collects the VAT and subsequently pays it to HM Revenue & Customs (HMRC), the government’s tax collection agency.
Traders with sales below the VAT level are not required to register for VAT (though they can if they want to).
How do I register for VAT?
You can register for VAT online if you are a business or an entrepreneur. You equally need to complete the VAT1A form if you’re an EU business selling to Ireland.
You may equally appoint an agent such as Sterlinx Global to deal with HMRC. Once you receive your VAT number, you can sign up for a VAT online account.
You may register by post using the VAT1B form if you sell to Northern Ireland, VAT1B if you import over £85,000 of goods to Northern Ireland, and VAT1C when you are disposing of assets where the 8th and 13th directive refunds have been reclaimed.
How to pay your UK VAT to HMRC
Before paying your VAT bill, make sure the deadline has not passed in order to avoid fines. The fastest way to pay for VAT is online or through telephone banking. You could equally make the payment through your online bank account.
A third option is the Clearing House Automated System (CHAPS) that can be used for large payments. It requires your 9-digit VAT number. However, your payment may be delayed if you use the wrong number.
Remember that the CHAPS payment usually takes a day, while the Bacs payments take three working days to reach HMRC. Click here for the bank account details for CHAPS or Bacs.
If you are paying from another country, you may use the IBAN and Bank Identifier Code (BIC) found here.
If the deadline falls on a weekend, you should make your VAT payable on the last working day of the week.
Furthermore, other options such as Direct Debit, Standing Order, debit or corporate credit card, and bank transfers could take up to three working days.
How to Pay for the EU VAT MOSS Scheme
After Brexit, the UK VAT Mini One Stop Shop (VAT MOSS) scheme was closed. If you sell digital services to an EU country, you must register for VAT MOSS in an EU country or pay VAT in each country you supply.
When to Pay for my VAT or make returns
The deadline for VAT payments is found on your VAT return. The different deadlines include the Annual Accounting Scheme and payments on account. Ensure that your payment reaches HMRC before the deadline.
If you do not pay on time, you may be charged a late fee. You determine how much time to allow, utilise the VAT payment deadline calculator.
The majority of firms are required to file VAT returns every quarter. VAT returns must be completed and filed within one month and seven days after the relevant period’s end, with payment provided at the same time.
To put this more simply, after the end of the period for which you are paying VAT, you have five weeks to ensure your payment reaches HMRC.
Simplified VAT schemes
If your estimated VAT turnover for the coming twelve months is £1.35 million or less, you may use the Annual Accounting VAT scheme.
Under this scheme, you can submit one VAT return annually, and you can also make advance payments to HMRC.
However, this may not be a suitable scheme if you expect regular VAT payments. The Cash Accounting VAT scheme equally falls under the category, but VAT is calculated on actual cash receipts as opposed to the invoice date.
Finally, if you are a business with a VAT turnover of £150,000 (excluding VAT) or less, you can use the VAT Flat Rate.
Frequently Asked Questions
Are all Sales from my business liable for VAT?
They aren’t, no. Some traders are not VAT registered because their firms have a limited turnover (sales). Therefore, they cannot charge VAT on their sales (unless they voluntarily register). Additionally, some business activities are exempt from VAT.
When do I have to start charging VAT for sales?
You must begin charging VAT on sales once you register.
by Jay Redman | Nov 14, 2021 | Banking
Bank your Money in UK: The UK Banking Sector in brief
The UK banking sector is made up of traditional banks such as HSBC, Nationwide, Santander, Lloyds, Royal Bank of Scotland, Barclays, and NatWest.
In order to open an account in a challenger bank, you need to have a U.K. address and proof of residency.
Although traditional banks have a renowned position across the banking world, several challenger banks can enable you to bank from another county.
Digital banks such as Monzo, Revolut, and Wise are ideal for foreigners or entrepreneurs that live in other countries.
At these banks, you can open a bank account, and own a sort code and account number, which enables you to make transactions both in and outside the UK.
Types of Bank Accounts
There are different bank account types, but most people prefer to bank in the UK using a current account. They are ideal for everyday business needs and transactions such as paying bills, payrolls, and VAT.
These accounts usually arrive with a debit card as well as an overdraft. Additionally, new clients are no longer given chequebooks, but you can request one if you bank with a traditional institution such as Barclays or Nationwide.
However, savings accounts tend to pay higher interest rates and are intended for businesses who are looking to save cash for less accommodating times.
Even so, some traditional banks pay interest on currency accounts, provided that your account balance remains above a certain threshold.
Requirements to open a UK Bank Account
To open a UK bank account, you need the following documents:
- The UK or foreign passport or a UK national identity card as proof of identity. Foreigners are advised to use their passports even in cases where an EU national identity card is deemed acceptable.
- Secondly, you need a recent utility bill or council tax bill as proof of address. The majority of banks do not accept phone bills even if they have a UK address.
Opening a UK bank account for foreigners
Providing proof of address is usually challenging for people who recently moved to the UK or live in another country. However, this is the primary requirement for traditional banks.
This is especially challenging if you arrive in the UK and are living with family. Most individuals do not have any bills or contracts in their name. As a result, it might be preferable to use one of the challenger banks.
These digital banks, such as Monzo, Revolut, and Wise enable you to open a bank account in the UK without burdensome requirements. The cards issued by these companies can be used in stores and online to make purchases.
Each service equally has its own set of requirements, so be sure to know the details of the account you may be getting as well as withdrawal and bank charges.
Foreigners can bank their money with challenger banks
Option 1: Wise – Our TOP PICK
If you own a Wise multi-currency account, you will be able to make payments in and outside the UK. Once you open your bank account, you will equally need to authenticate your identity through their interface.
Upon completing this, you have the option of providing proof of address with a selfie. This is a novel and effective way of providing proof of address for non-UK residents or foreigners.
Option 2: Monese
Monese is equally a new challenger bank that enables you to bank in the UK as a foreigner. You can access all functionalities from its app.
Monese is equally the perfect app for businesses and foreigners that make payments abroad or in multiple countries. For example, after BREXIT, you may need to pay VAT in both the UK and EU.
Such a card can enable you to make VAT payments without any hassle and equally makes payments using mid-market exchange rates, so you are sure to be paying a fair price when you transact online and offline.
Option 3: Monzo
Finally, Monzo is one of the more popular digital banks in the UK. It provides full account and payment functions for foreigners and Uk citizens.
It is good at monitoring payments as you can get a prepaid card with a limit and spend this on items or services that are useful for your business, such as VAT.
Another advantage of Monzo is that paying with your debit card is free, even when you pay or bank from abroad. However, there is a cost associated with withdrawing cash from an ATM.
Even so, this option is ideal for businesses and foreigners in the e-commerce sector. You can equally link this to your HMRC gateway account to set up direct debits and pay your VAT bill on time.
Frequently Asked Questions
How much does Monese Charge for ATM withdrawals
Monese charges 2% for ATM withdrawals after the £200 free allowance. Furthermore, you are equally charged 2% on foreign currency withdrawals after an initial allowance of £2000. This makes it ideal for both online transfers and offline purchases.
Can I withdraw at an ATM without incurring bank charges?
If you use Monese or Monzo, you will likely incur some charges when you withdraw from the ATM. However, each bank has a different policy for withdrawals, which they provide when you sign up for a card.
Are there debit cards with no fees?
The majority of banks do not charge for a current account, especially challenger banks. While Monzo and Monese have fixed charges, Revolut is a digital banking alternative that charges no monthly fee.
Conclusion
Opening a bank account in the UK can be challenging, however, several digital and challenger banks such as Monzo, Monese, and Wise can enable you to a bank in the UK effectively. Check out Sterlinx Global to help you out with your Accounting Needs.
by Jay Redman | Nov 4, 2021 | Tax & Accounting
Why do tax investigations occur?
HMRC is always looking to narrow the tax gap and ensure that all companies pay their fair share. The tax gap is the difference between what the HMRC hopes to collect and what it actually gets.
This is designed to ensure that HMRC gets all that it’s owed from businesses and corporations. The number of investigations from HMRC is on the rise as the HMRC seeks to maximise its tax receipts.
Small businesses are equally in HMRC’s sights
As HMRC looks to crackdown on tax avoidance, they may be looking into your affairs because you have made regular errors on your returns or there has been a significant drop in your corporate tax bill over the years.
This is usually a red flag and suggests the company may be avoiding taxes in the UK. There may equally be inconsistencies with industry earning standards or a director’s pay may be questionable due to reasons that are unknown to HMRC.
In essence, any factor could cause an investigation into your company. While all these are legitimate reasons HMRC may investigate your company, an investigation could result from random selection.
Keeping all your bills and payments in order is important as the HMRC could be looking back by up to 20 years. They use sophisticated software to verify payments and other details over a long period.
This is an effective tool to enable them to identify inconsistencies in your tax returns. It equally enables them to easily launch an investigation.
What goes on in an HMRC investigation
After HMRC has decided to investigate you, you will receive a letter that asks various questions. You are obliged to supply HMRC with such information or may automatically risk large fines or prosecution.
However, you may equally query the decision by HMRC if they are investigating your taxes and you believe this to be incorrect.
Some investigations involve errors that have been resolved or closed. However, others are quite detailed involving bank or credit cards, which can usually result in a very lengthy process.
The majority of investigations equally result in the investigated party paying back some taxes to HMRC. They usually have up to thirty days in order to do this or risk fines and prosecution.
However, if HMRC finds that the error in question was deliberate, they are likely to prosecute your business.
How to take preventive measures
In order to prevent you from being investigated by HMRC, there are a few steps you may take. Firstly, make sure you keep organised and accurate records of all your tax dealings, revenues, and expenses.
Secondly, make sure you have a strong understanding of all your research obligations; Finally, seek the assistance of counsel of a tax or accounting professional in order to better report to HMRC.
1). On a daily basis, good bookkeeping practice will enable you to run your business in an organised fashion. Good book-keeping practices will ensure you appear in an appositive light to investigators.
All you record equally provides you with the intelligence to ward off any investigations.
2). If you are audited by HMRC, make sure you have all the adequate records, which can be usually obtained from good accounting software.
They will provide the evidence you need to show concerning your payments to HMRC, and any good accounting software should be able to provide you with such records.
Obtaining professional assistance from an advisor
Whenever HMRC investigates you, do not hesitate to ask a professional for help. Finding the right advisor to enable you to navigate the demands of HMRC is advisable and will equally save you time and hassle.
You should seek help to enable you to decipher why HMRC may be asking for specific information and strategies you could employ to prevent you from paying huge fines.
Frequently Asked Questions
How to cover the costs with investigation services?
A good option is to purchase the services of an investigator, who may charge a monthly or annual fee. By planning effectively, you will avoid paying hefty fines to HMRC, and they will be able to help you account for any shortcomings.
What if I have great records?
You may have all the records as required by HMRC, but rules change, and you are required to adjust to any incoming rules around taxation and reporting. These new rules can impact even the best of businesses, so keep track of changes in the law.
What are the costs of an investigation?
Depending on the nature of the investigation, tax investigations can be costly and lengthy. Bear in mind that the longer it goes, the more likely you will pay more taxes. However, some businesses simply rely on their accountant.
Conclusion
When in doubt, always find the right tax and financial help. This will save you both time and money.
If you are under investigation by the HMRC or receive a letter of intent, the advisor you hire will help you navigate this difficult process and ensure you comply with the tax authorities as needed.
This could determine if you pay a fine to HMRC or not.
