by Jay Redman | Aug 5, 2021 | European VAT
What is a Value-added Tax?
The term VAT, an acronym for Value Added Tax is a percentage of the price that consumers pay when they purchase specific goods or services.
The VAT rate has been 20% in the U.K. since January 2011 and is periodically updated in the budget by the UK Chancellor of the Exchequer.
Some goods are exempt from this tax; for example, children’s clothing and footwear, which have a zero rate for VAT.
It is usually assumed that all businesses charge VAT, so it’s no wonder that many people who contact us about starting a business expect they’ll need to register with Her Majesty’s Revenue and Customs (HMRC) for VAT.
Register for a VAT Number: Why do Overseas Non-EU Companies Need It?
Not all foreign companies are obliged to have a U.K. VAT number. VAT registration for non-EU companies is necessary for some circumstances, which include:
- When goods or items are imported into the U.K. and sold there.
- Where sellers from outside the UK sell low-value items in the UK, the e-commerce platform where the goods are sold may be required to register for VAT and disclose the output tax for these transactions on behalf of the seller.
- If you keep stock in the UK and sell it to UK clients, you may equally be required to register for VAT.
- Goods imported from outside the UK are subject to VAT and import charges at the time of entry.
If the company importing a product is VAT registered, such VAT can be reclaimed while import payments can also be postponed.
However, VAT registration is not necessary where a non-EU company is not supplying goods to the UK.
What is the VAT threshold?
Businesses should only register for VAT if their annual turnover in the last 12 months or the next thirty days is larger than the current VAT threshold of £85,000. Any turnover above this threshold can be taxed by HMRC.
How can you register for VAT in the UK?
Most non-EU companies, including partnerships and groups of corporations filing under one VAT number, can register online.
You’ll be able to register for VAT and create a VAT online account (also known as a “Government Gateway account”). To submit VAT returns to HM Revenue and Customs (HMRC), is required.
Using an agent
You can equally hire an accountant (or agent) to handle your VAT returns and dealings with HMRC. You can sign up for a VAT online account and choose the ‘VAT submit returns’ option once you have your VAT number from HMRC.
How Long does the VAT registration process take for non-EU companies?
The time it takes to process a VAT registration in the United Kingdom is usually relatively short. A VAT number for a non-UK firm typically takes three to six weeks to be issued.
Frequently Asked Questions
What are the VAT registration requirements in the UK?
The UK tax authorities demand specific information about the firm, including how and where it trades, to process a VAT registration application. The company will have to reveal if it has a presence in the UK or if it operates from a non-UK headquarters in Germany, the United States, or France, for example. The applicant for VAT must be a company director and must provide personal identity information as well as details of prior and current UK VAT registrations with which they are affiliated.
Should I get a VAT registration form?
Register by post only if you are an EU business selling to Northern Ireland (VAT1A), you import goods into Ireland worth over £85,000. Non-EU businesses do not need to get any forms that require them to apply by post.
Is it possible to do VAT registration if you do not have a U.K. bank account?
In order to complete your VAT registration, you need to own a U.K. bank account. This applies especially to non-EU businesses. Without this, it will be impossible to complete your application.
by Jay Redman | Aug 2, 2021 | European VAT
What is VAT?
VAT is an acronym for Value Added Tax. It is a sales tax levied on the value of goods or services sold to customers by VAT-registered merchants.
According to the legislation, UK traders with sales (turnover) above the VAT level of £85,000 must register for VAT and charge it on deliveries of goods or services.
What is the VAT Rate Imposed by HMRC?
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 charged at a reduced rate of 5%.
How to Get a VAT Number: Six Things you need to Know When registering for a VAT number
1) Are all Sales Liable to the VAT Sales Tax?
They aren’t, no. Some traders are not VAT registered because their firms have a limited turnover (sales), therefore they are unable to charge VAT on their sales (unless they voluntarily register) – and some business activities are exempt from VAT.
2) How do I register for VAT?
Most businesses can register for a VAT number online. To complete the application for a VAT number, you need to complete the VAT1 form that can be accessed on the HMRC website if you cannot register online.
This form is equally useful if you want to apply for a registration exception or register separate business units under the same corporate body for tax purposes.
3) Getting a VAT certificate
After registering for a VAT number, you will most likely get a VAT registration certificate in 30 days although this could take longer due to disruptions from Brexit.
Your VAT registration number will either be sent to your online VAT account or be posted to you if you used an agent to register for your VAT number.
4) Registering for a VAT number in European Union countries
If you sell to consumers and businesses in the EU, you may need to register for VAT in EU countries. If you are a software or communications company, for example, providing digital services to EU customers, you are required to register for the VAT Mini One Stop Shop (MOSS) in any EU country.
5) Other VAT Schemes: Annual Accounting, Cash Accounting, and Flat rate
VAT-registered businesses usually register and submit their VAT returns to HMRC four times each year. However, under the Annual Accounting Scheme, you may submit one VAT return annually and equally make advance payments to HMRC.
If your estimated VAT taxable turnover in the next twelve months is forecast to be £1.35 million or less, you may register for the Cash Accounting VAT scheme. VAT is calculated based on receipts and payments rather than invoice dates under this scheme.
The VAT Flat Rate is designed for businesses whose taxable turnover is £150,000 or less. Businesses who register for this scheme may pay VAT on a specified percentage of sales and this figure varies by industry, and you may equally include business expenditure for products in such category.
Except for some capital assets costing more than £2,000, you cannot claim the VAT back on purchases.
6) Record Keeping for VAT-Registered Companies
Generally, you should maintain all information pertaining to your VAT return for at least six years, including business invoices and receipts. On the GOV.UK website, you can find thorough information on what you need to keep and for how long.
When the Making Tax Digital for VAT regime went into effect in April 2019, some changes to the record-keeping obligations for VAT were imposed. For example, you must preserve at least some of your records in digital format to comply with the Making Tax Digital for VAT standards.
Frequently Asked Questions
When should I register for an EU VAT number?
You should register for a VAT number if you sell to European customers or have business dealings in Europe where you are charged for goods or services. Find out how to register for VAT in European countries on the European Commission’s website.
by Jay Redman | Jul 29, 2021 | UK Updates
TITLE: Corporation Tax Services: Best Corporation Tax Services Companies in the UK
What is Corporation Tax?
Businesses in the United Kingdom pay corporation tax, which is based on their annual profits in the same manner that people pay income tax.
Since April 2016, the corporation tax rate has been 19 percent for all limited enterprises. Previously, the rate was determined by the company’s profits.
Companies, unlike individuals, do not receive any type of tax-free allowance, hence all profits are taxable. There are, however, a variety of charges and deductions that you can claim to lower your bill.
You must file a corporate tax return (CT600 form) with HMRC once a year to pay.
How to reduce your Corporation Tax Bill
1) Claim all Allowable Expenses
All companies can deduct the cost for expenses that have been incurred for an activity, good, or service. This can include meeting rail tickets, office equipment, petty cash for tea and biscuits, and other items unique to your industry.
Salaries and employer National Insurance contributions are additional business expenses that can be deducted from taxable profits if you have employees.
2) Pay Yourself a Salary
Even if you’re the sole person employed by the company, the earnings are not yours. As a result, you can pay yourself a salary.
Your wage, like that of any other employee, is a business expense, as are any National Insurance contributions made on your behalf by the company. By paying yourself, you can lower the company’s taxable profits.
3) Make an Earlier Payment to HMRC
Fortune favors the organized when it comes to business tax. If you pay your tax bill early, HMRC will refund you a portion of it as interest at a rate of 0.5%.
Interest is normally paid by HMRC from the time you pay your corporation tax until the payment deadline. However, it will begin paying interest six months and thirteen days after the start of your accounting period.
Top 10 Corporation Tax Services Companies in the UK
1). Sterlinx Global is a leading and reliable accountancy firm that provides a range of services for SMEs and start-ups across a range of industries including e-commerce.
They provide an affordable service for entrepreneurs in the retail sector and can help with VAT registration, reporting. They have helped a range of clients with tax issues and are well ranked by traders on top e-commerce websites.
They have a strong grasp of both tax policy in selected EU countries and the UK.
2). Lite Tax: are Bristol Certified Accountants and Xero Gold Partners with a focus on small and medium businesses. Lite Tax is a major tax accountancy practice in Bristol, Nailsea, Portishead, and the surrounding areas.
3). Grant Thornton: Grant Thornton is a global network of independent accounting and consulting member firms that provide assurance, tax, and advisory services to privately held enterprises and governmental entities.
4). Moore Kingston Smith LLP: Moore Kingston Smith LLP was founded in 1923 and specializes in accounting and business consulting. Payroll processing, bookkeeping, financial accounting, and tax preparation are among the services provided by the London-based team of approximately 500 people.
5). Clear House Accountants: Our expert tax accountants help you through the tax compliance standards specified by HMRC, the major UK tax authority, and provide inventive and customized solutions to your difficult tax concerns.
They don’t just provide tax compliance services; they equally include various approaches and strategies to help you lower your overall tax liability.
6). Tax & Advice: Tax & Advice is a London-based bookkeeping service with around ten members. They’ve been providing tax preparation, payroll processing, and bookkeeping services to a variety of clientele since 2010.
7). Salient Accounting & Finance: Salient Accounting and Finance is a team of more than 50 people situated in Basildon, England. This accounting firm, which was founded in 2008, specializes in financial accounting, tax preparation, and payroll processing for small enterprises.
8). HSKS Greenhalgh: Chartered Accountants in Nottingham, Derby & Uttoxeter providing tax and accounting services.
by Jay Redman | Jul 26, 2021 | UK Updates
TITLE: UK Business Tax: 10 Most Popular Questions about UK Business Tax
As an entrepreneur, a start-up, or a business, you are faced with different tax-related problems every day. From business filings to VAT flat rates, you might be missing out on some tax opportunities or be at risk of paying fines.
To prevent this from happening, this article looks at the ten most frequently asked questions for businesses in the UK. You’re probably wondering what the VAT flat rate is when to pay income tax and what to do if you’re a business selling in the European Community.
This article answers the ten most frequently asked questions related to the VAT flat rate, late payments, negotiations with HMRC as well as national insurance contributions.
1. UK Business Tax: What is the VAT Flat Rate Scheme?
This eliminates the requirement for small enterprises to register VAT for individual purchases and transactions, simplifying VAT reporting. If your company’s annual revenue is less than £150,000, you can sign up for HMRC’s VAT Flat Rate scheme.
2. How does the Flat Rate VAT Scheme Work?
This VAT scheme aims to make the VAT process as simple as possible. You still charge 20% VAT on your invoice, but depending on the sector you trade in, you pay HMRC a lower percentage of the gross invoice in VAT.
IT contractors often save roughly £2,000 per year – based on a turnover of around £77,000 net – by paying 14.5% of the gross invoice in VAT to HMRC.
3. What’s the Penalty for Submitting VAT Returns Late?
It can be fairly tricky, and depends on whether this is your first “offense.” If you don’t pay on time or knowingly pay the wrong amount, you may be subject to penalties and fees.
HMRC will charge you a penalty if you don’t file your return when it’s due. You must file a VAT return every quarter.
4. Can I negotiate a lower settlement with HMRC for a late VAT declaration?
In most cases, HMRC will levy a penalty for late registration. There are, however, some instances in which it can be minimized.
Failure to notify can result in a penalty of up to 30% of the VAT not disclosed although companies could negotiate a lower settlement.
5. Can I Reclaim VAT on my Business Expenses?
This is a difficult situation. When traveling for business, you can claim VAT on meals and lodging, but not on things like entertaining clients.
It is also possible to claim VAT on gasoline and vehicle expenses, although certain conditions must be met in the case of fuel, so this would need to be reviewed before departure. Other expenses such as import VAT, inventories purchases can also be claimed.
6. For Businesses Selling to the European Community, how do we Verify our VAT number?
The check can be done on the EU website using a program called VIES. It not only tells you if the VAT number is valid, but it also tells you the name of the company.
If this verification is not performed and HMRC is not notified, the customer will be unable to be established as a legitimate entity.
Furthermore, because the sale cannot be zero-rated, this could result in a high VAT bill.
7. How do I pay National Insurance Contributions as a director?
If you work as a director of a limited business and earn more than the yearly personal allowance, Income Tax will be deducted at the source through your firm’s PAYE scheme. In order to pay yourself, you are required to have an approved payroll scheme.
Any dividends you get from the company are taxed as part of your annual Self Assessment, which all company directors must submit.
8. Do sole traders have to pay income tax if they do not make a profit?
Income Tax is paid by sole traders on the profit they produce from their firm, which they report on their yearly Self Assessment tax return.
The deadline for reporting Self Assessment and paying any tax owed to HMRC is 31st January each year for company directors or a sole trader.
9. How do I pay National Insurance (NIC) as a director?
Directors are in an enviable position since they can control how and when they are paid.
This means that if their NIC was calculated using the “standard technique,” they could pay their entire annual wage in one week and pay a lot less NI than a regular employee who was paid the same amount for the tax year.
The Director’s NIC is calculated using a new procedure known as the “directors’ method” to combat this.
In general, this works in the same way as PAYE in that past earnings from the same tax year’s employment are taken into account for computing the NI owed, i.e. on a cumulative basis.
10. Do I have to pay NI contributions on my income?
Employees are required to pay NI contributions on their earned incomes. Directors do not have to pay NI on their salaries until their total earnings reach £7,956.
by Jay Redman | Jul 22, 2021 | UK Updates
TITLE: Tax Certificate UK: How to Apply for Tax Certificate in the UK
What is a Tax Certificate?
A tax certificate is typically used by a registered business for tax purposes to prove that it is located in the UK. If a person pays tax on their overseas income in the UK and has a certificate of residency, he or she can claim tax relief in another nation.
You can apply for a tax certificate under the following conditions;
- If you are living in the UK
- If there is an agreement on double taxation with the concerned country
- If you already paid tax and are applying for a refund
As an individual or company who might be working or living in another country, the income you earn is subject to tax. Regardless of the activity, you are engaged in, it is important to have a tax certificate or certificate of residence to prevent you from paying taxes in two separate locations. A tax residency certificate is a document issued by Her Majesty’s Revenue and Customs (HMRC) that proves your residency in the United Kingdom and allows you to claim tax relief in other countries.
For overseas authorities to validate your claim, HMRC must confirm that you are a UK resident.
If it is proven that you are a UK resident after verification, you will be entitled to a claim on your tax services under the double taxation agreement, unless HMRC refuses to give a certificate of residency.
Under the double taxation agreement, you should be able to claim taxes paid in another country. The concerned overseas authority chooses whether or not to offer relief from foreign taxes.
Tax Certificate in the UK: What Information does HMRC need?
When you apply for a certificate of residence, you must tell HMRC why you need a certificate of residence as well as any information about double taxation agreements under which you wish to make a claim. You equally need to provide information about the following;
- The relevant income for which you wish to make a claim.
- The period for which you require the certificate of residence is equally referred to as the tax certificate.
If the double taxation agreement requires it, you must prove that you are the beneficial owner of the income for which you are filing a claim and all income for which you are claiming is subject to UK tax.
If you require a Certificate of Residence in the United Kingdom for a period beginning on or after April 6, 2013, and you have not yet submitted a self-assessment tax return for that period, you must inform HMRC of the following:
- How many days in the UK did you spend during the tax year? (For how many days do you need a Certificate of residence).
- If you stayed in the UK for less than 183 days during the tax year (Pass the statutory residence test to get the tax residency certificate).
- Your arrival or departure date in the United Kingdom.
- If you entered or left the UK during the tax year, you’ll require a certificate of residence for the date you started or stopped being a resident.
How to Apply for a Certificate of Residence?
There are a variety of ways to apply for a certificate of residence, depending on your type of business. The methods for obtaining a certificate of residence differ from one company to the next.
1) Individuals and sole traders can apply for a certificate of residence in one of two ways:
- Use your Government Gateway user ID and password to apply online.
- Send a form by email. You must create a new User ID if you do not already have one. You must equally follow the same approach if you are an agent applying on behalf of an individual or single trader.
- If you receive a form from another government asking you to certify your residency status, you must send it to this address BX91AS HMRC.
2) Businesses: Companies must use the RES1 form for letter requests.
You must send this letter request to your customer compliance manager who is in charge of the company’s tax affairs, or you must make the identical request to the corporate tax services office if you are in charge of the company’s tax affairs.
3) Partnerships: For letter requests, you must also utilize form RES1 in the case of a partnership firm.
If your partnership firm has a customer compliance manager or customer coordinator in a large company, you should email requests to them rather than to the address shown below — pay as you go and self-evaluation BX91AS HMRC.
Points to remember for Certificate of Residence
- No certificates of residence can be granted for dates in the future.
- Legally admissible documents are scanned forms and certificates of residency letters issued and transmitted to a foreign jurisdiction by HMRC.
- In the HMRC’s information manual INTM162020, you’ll find all of HMRC’s criteria.
- The authentication form or apostille is obtained by paying a nominal charge to the Financial Conduct Authority (FCA) by the customer (person filing the claim). It’s simple to do on the government’s website.
- The primary goal of obtaining a certificate of residency is to take advantage of double tax treaty benefits.
- The foreign authority may seek confirmation of duties other than company tax, such as VAT.
Frequently Asked Questions
How Long Can the Assessment Take?
Due to COVID-19 restrictions, the assessment can take 2-3 weeks depending on the complexity of the application.
