A raft of changes to VAT regulations – do they affect your business?

As announced in the 2012 Finance Bill, there have been a number of important changes to VAT rules, which it is important clients are aware of.

1. VAT and Academy schools

We have recently come across a number of academies who have applied for VAT registration without taking proper advice in relation to the implications and without weighing up the pros and cons of what VAT registration means for them. It is actually possible for schools with academy status to reclaim VAT incurred on non-business activities without the need for VAT registration and all the complications that come with it.

For the vast majority of academies, claiming VAT without VAT registration will be the most efficient and simplest way to reclaim any VAT. However, if you are already VAT registered, all is not lost and nor is it if you have already submitted a VAT Return – you can simply change to the much simpler method of reclaiming the VAT suffered.

In the majority of cases, our VAT experts can get you onto the correct and most efficient method and put in place a system to ensure you do not fall foul of the VAT Registration rules going forward. The charge for this service is  £450 (plus VAT of course), which we believe is money well spent if you compare this to the time, worry and drain on resources if you continue to claim VAT back via an unnecessary and complicated VAT registration process. Contact us for a free no obligation discussion.

2. On-line Filing of VAT returns

From 1 April 2012, all VAT-registered businesses must submit VAT returns online and pay any VAT due electronically. This applies for all VAT returns filed for accounting periods beginning on or after 1^st April 2012.

This might seem like an administrative headache but there are actually benefits to filing online. These include:

–       automatic acknowledgement that your return has been received;

–       a check to ensure the calculations are correct; and

–       e-mail reminders when your next return is due.

3. VAT is now payable on salary sacrifice arrangements

VAT changes to salary sacrifice schemes became effective from 1^st January 2012, and these could increase the overall cost of the scheme. Note that apart from the VAT changes, HMRC have confirmed they do not intend to make further changes to the tax treatment of salary sacrifice schemes.

The rule change means employers must account for VAT on deductions for supplies that are subject to VAT. There is an upside to this for employers because they will be able to recover the VAT incurred, which in the past was not possible in all cases. Childcare vouchers are not affected because they are VAT exempt anyway.

In cases where salary sacrifice arrangements were either agreed before 27^th July 2011 or where they extend beyond 31^st December 2011, organisations will still be able to avoid accounting for VAT on amounts of salary exchanged for taxable benefits. This rule will apply until either the agreement expires or is fulfilled, an employee’s annual salary/benefits review is conducted, or any other situation occurs which affects benefits provided by way of a salary sacrifice.

If you have any VAT related questions or would like further advice on any of the above matters please contact Paul Webb by emailing pw@rjp.co.uk.