The View from No 50

 

 

 

 

March 2004

K P Bonney & Co 

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston 

Ilkley LS29 6JA

Tel: 01943 870933 

Fax:  01943 870925 

Email: keith@kpbonney.co.uk  

www.kpbonney.co.uk

 

 

 


 

FAIRNESS AND VAT

 

Those of us who are VAT registered know that we cannot reclaim the VAT we pay on our business expenses unless we get a valid tax invoice from our supplier.  So long as we have on file what appears to be a valid tax invoice we have done all that is necessary in order to reclaim the VAT.  Or have we?

 

Gohil and Company Ltd operated in the textile trade.  During the course of a VAT inspection it came to light that a number of invoices, in respect of which VAT input tax had been reclaimed, were false.  The invoices related variously to a company that had ceased trading six years previously, a fake registration number and address, a company that was in the computer business whose VAT identity had been ‘borrowed’ and another invoice which was false.  The VAT on these invoices totalled £2,821.  The company was quite unaware there was a problem with the invoices and Customs acknowledged the companys’ innocence in the matter. Nevertheless, Customs refused to allow the company’s claim for repayment of the VAT.  The company appealed against this decision to the VAT tribunal.

 

With much sympathy for the company, the tribunal found in favour of Customs.  An invoice is only a valid tax invoice if it is issued by a legitimate VAT registered trader.  If the supplier is not registered there is no VAT.  If there is no VAT there can be no repayment claim.

 

Our advice:  When dealing with tax never take it for granted that if something seems fair it must be right.  If you have any doubt about whether a particular purchase invoice is issued by a genuine VAT registered business, telephone Customs’ National Advice Service on 0845 010 9000.  They can verify that a VAT number is correct and that it belongs to the supplier who has sent you the invoice.  Obviously it is better to carry out this check before rather than after you pay the invoice.

 

 

MORE VAT

 

With the Gohil decision fresh in our minds we thought now might be a good time to remind you what disclosures to look out for on a tax invoice.  A tax invoice must include the following information:

 

1        An identifying number.

2        The time of supply.

3        The date of the issue of the invoice.

4        The name, address and registration number of the supplier.

5        The name and address of the person to whom the goods or services are supplied.

6        A description sufficient to identify the goods or services supplied. The following information must be given for each description—

(a)     the quantity of the goods or the extent of the services;

(b)     the rate of VAT; and

(c)      the amount payable, excluding VAT, expressed in any currency.

7        The gross total amount payable, excluding VAT, expressed in any currency. If the invoice specifies any goods or services which are the subject of an exempt or zero-rated supply, the goods or services which are the subject of an exempt, zero-rated or other supply must be distinguished and the gross total amount payable in respect of each supply and rate must be separately stated.

8        The rate of any cash discount offered.

9        The total amount of VAT chargeable expressed in sterling.

10      The unit price of any countable goods supplied.

 

Slightly different rules apply to invoices issued by retailers.  Retailers are required to provide a VAT invoice at the request of a customer who is a taxable person; they are not required to provide a VAT invoice to anyone else (although there is nothing to prevent them from doing so if they so wish).

Where the supply is taxed at the standard or lower rate and the tax-inclusive consideration does not exceed £250, the VAT invoice need contain only the following particulars:

1        The retailer’s name, address and registration number.

2        The time of the supply.

3        A description sufficient to identify the goods or services supplied.

4        The total amount payable, including tax.

5        Each rate of VAT chargeable and the gross amount payable including VAT, and the VAT rate applicable.

Where an exempt supply is made at the same time as a standard or zero-rated supply, the exempt items must be excluded from the invoice.

The Commissioners have indicated that a credit card voucher given to the card holder may serve as a less detailed VAT invoice provided the retailer’s VAT registration number, the rate of tax, and a description of the goods or services supplied are added to the information normally provided (i.e. the retailer’s name and address, the date of sale, and the amount payable).

 

Our advice:  Customs will not hesitate to deny you relief for input tax wherever the opportunity arises.  Make sure you obtain an appropriately detailed invoice whenever you make business purchases.

 

HOMEWORKERS AND BUSINESS RATES

 

We are often asked whether working from home gives rise to a liability to business rates.  Until recently we and many other advisers have been a little vague with our answers.  Fortunately, the land tribunal has now resolved the matter and the outcome is favourable.

 

Eileen Tully, who ironically works for the Inland Revenue, was allowed to work from home for health reasons and was supplied with a computer, desk and other equipment.  The room where she worked was also used for domestic purposes and no work colleagues visited her home for meetings.

 

The Valuation Office Agency sought to re-rate the property as partially liable to business rates. 

 

The tribunal ruled that a property should only be re-rated in these circumstances if it has lost its domestic character and where employees visit the premises.

 

Our advice:  If you do work from home try to preserve the domestic character of the property.  This should ensure you do not have to pay business rates.

 

BAD APPLE

 

A corrupt Inland Revenue worker, with the apt name of John Fiddler, has been jailed for four years.  Fiddler used his position as a tax officer in Bootle to set up and authorise false tax rebates for friends.  He and his friends then shared the proceeds amounting to some £250,000.

 

This is the latest in a long line of Inland Revenue employee defalcations.  The good news from our point of view is that when the Revenue finds instances of employee fraud it always prosecutes.

 

INCREASE IN SMALL BUSINESS THRESHOLD

 

With effect from 30 January 2004, a company is ‘small’ if it meets two or more of the following reqirements:

 

1                    Turnover not more than £5.6m.

 

2                    Gross assets not more than £2.8m.

 

3                    Number of employees not more than 50.

 

Small is good. 

 

Small companies can claim 40% (50% from 1 / 6 April 2004) capital allowances for expenditure on equipment.

 

Small companies are also exempt from having an audit.  The turnover limit of £5.6m applies to years ending on or after 30 March 2004.  Prior to this the limit was £1m.

 

FOOTBALLERS ARE NOT STUPID SEMINAR

 

The host of the seminar announces “We are all here today to prove to the world that footballers are not stupid.  Can I have a volunteer?”  David Beckham steps forward.  The host says to him “What is 15 plus 15?” After 30 seconds he answers “Eighteen”.

 

Obviously everyone is disappointed.  Then the 50,000 gathered footballers start chanting “Give him another chance.  Give him another chance”.  The host says “Well, since we’ve gone to the trouble of getting 50,000 of you here and the world wide press, I guess we should give him another chance”.

 

So he says “What is 5 plus 5?”  After another 30 seconds David eventually says “Forty?”  The host sighs.  Everyone is crestfallen.  Then the 50,000 footballers start to yell “Give him another chance.  Give him another chance”.

 

The host, unsure whether he is doing more harm than good, eventually relents.  “OK!  One more chance.  What is 2 plus 2?”  David closes his eyes and after a whole minute says “Four”.

 

Around the arena 50,000 footballers start yelling “Give him another chance.  Give him another chance!”

 

Copyright  Ó  K P Bonney & Co LLP 2004.  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 publishers.

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