The View from No 50
K P Bonney & Co
Chartered Accountants and
Chartered Tax Advisers
Ilkley LS29 6JA
Tel: 01943 870933
Fax: 01943 870925
Have you noticed Amazon bills some of its shipments from Luxembourg?
Have you noticed it adds Luxembourg VAT at the rate of 15%?
If you are not VAT registered I suppose you should be thankful you are paying VAT at 15% rather than the UK rate of 20%.
If you are VAT registered you are not allowed to reclaim the 15% VAT through your UK VAT return. Your UK VAT return is for UK VAT only. If you want to reclaim the Luxembourg VAT you must apply to the relevant authorities in Luxembourg. In practice it isn’t worth the trouble.
But if you are VAT registered you can avoid paying the 15% in the first place. What you must do is notify Amazon that you are VAT registered. Once you have done that they will stop charging VAT on goods bought by you from other EC countries. In the case of purchases from Luxembourg something which cost £115 previously now costs only £100.
Unfortunately that is not quite the whole story. You have to remember to make certain extra disclosures on your VAT return. For a purchase of £100 of goods these would be
Box 2 (VAT on acquisitions from EC) £20.00
Box 4 (VAT on acquisitions from EC) £20.00
Box 6 (Value of sales) £100.00
Box 7 (Value of purchases) £100.00
Box 9 (Value of purchases) £100.00
Unless you are a partially exempt trader (you will know if you are) these entries have no impact on your VAT outcome. They are disclosure matters only.
Result - £15 saved.
If you are a Sage user select tax code T8 when posting these transactions.
Our Advice: To notify Amazon of your VAT registration, go to
Manage VAT registration number
Also think about whether you could achieve similar savings by notifying other EC suppliers.
The online filing of tax returns has become the norm in recent years.
HMRC provides free software for individual tax returns. It doesn’t provide any software at all for partnership returns. Partnerships have a choice. They can file on paper. If they choose to do this they have until 31 October to file. Alternatively they can buy commercial software which enables them to file online. If they choose to do this they have until 31 January to file.
The partnership Galbraith Ceramics filed its 2010/11 tax return on paper on 31 January 2012.
HMRC fined each partner £100 for late filing.
The partnership appealed. They argued it was unfair they should be forced to buy commercial software.
The tribunal agreed and overturned the penalty. It commented that it was “unfair, unreasonable or discriminatory to impose an expenditure requirement before the taxpayer is able to satisfy a statutory obligation”.
HMRC is in a difficult place here.
It is clearly ridiculous to impose a requirement on one group of taxpayers to buy commercial software.
HMRC doesn’t have the resources to develop software for online filing by partnerships.
If it were to provide such software it would undermine the businesses of important private sector suppliers.
Maybe HMRC’s cheapest way out is to appeal the decision and hope the decision goes their way.
I BLAME THE POLITICIANS
Fast on the heels of its mauling of the likes of Amazon and Google, the Public Accounts Committee (PAC) is having field day beating up the Big Four firms of accountants. Apparently it is their fault we have a complicated tax system.
In its recent report “Tax avoidance: the role of large accountancy firms”, the PAC recommended tax law should be simplified. It also called for the Office of Tax Simplification (OTS) to be more radical in its proposals.
Well hooray! The fact of the matter is the professions have been pleading for simplification for decades.
But what happens when we try to put good intentions into practice? The most radical proposal put forward by the OTS recently was the merger of income tax and national insurance. The Treasury had its tenpennyworth and the measure was watered down to the point of uselessness.
Be it taxation, house building, transport or any other major issue we and our MP’s know what is good for the country but when it comes down to the detail and we see the effect at the individual or the local level, we and our MP’s rebel.
Taxation could be simplified. A flat 20% rate. No national insurance. No personal allowances. No pension relief. No ISA’s. No Gift Aid. CGT and income tax combined. No employee share incentive schemes. No entrepreneur’s relief. No Patent Box.
That should free up a lot of talent to do more useful things.
Will it happen?
No. The losers will scream. The politicians will listen to the screamers. The politicians will fear for their seats. Result – no change.
I BLAME THE POLITICIANS (2)
Everybody should pay their fair share of tax.
How many times have we heard that recently?
I don’t work for multi-national or even national businesses. My bread and butter is the small family enterprise. Here is the world I see.
Janet and her husband John make a pre-tax profit of £60,000 per annum in their limited company. They pay themselves modest salaries and they extract the rest of the profit from the company by way of dividend. Their net disposable income is £51,000.
Terry is a sole trader. His wife June looks after the children at home. Terry makes an annual profit of £60,000. After tax and national insurance his family’s net disposable income is £42,500.
George works for a national concern. His salary is £60,000 per annum. His net disposable income is £41,600.
Where is the fairness there?
To rub salt into the wounds of Terry and June and George they lose all their child benefit because their income is considered high. Janet and John get to keep all their child benefit because neither has an income of more than £50,000.
Remind me. Who makes the law in this country?
And is an accountant who advises his clients to do a Janet and John a bad ‘un?
A young man, taken on as an apprentice by a Premiership club, reported for his first day of training. The coach greeted him with a warm handshake and a smile, gave him a broom and said, "Your first job will be to sweep out the changing room."
"But I'm a college graduate," the young man replied indignantly.
"Oh, I'm sorry. I didn't know that," said the coach. "Here, give me the broom, I'll show you how."
Copyright: K P Bonney & Co LLP 2013. All rights reserved. No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers. Disclaimer: The publishers have taken all due care in the preparation of this publication. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.
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