Ejected Farmers Could Be Entitled To Compensation

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Farmers who HMRC have ejected from the Agricultural Flat-Rate Scheme (AFRS) may be entitled to a repayment or compensation.

An opinion from the advocate general to the European Court of Justice has led to the belief that many who feel they have been unfairly removed from the VAT simplification scheme may be able to make compensation claims or ask to re-join the scheme.

The AFRS is a simplified scheme under which farmers with qualifying agricultural forestry or fishing activities do not have to submit VAT returns. Instead they receive a flat rate compensation of 4% on the value of their sales. It is thought to be used by several hundred UK farmers.

In some years some farmers will gain a net benefit and in other years they may suffer a net loss. HMRC take it upon themselves to withdraw farmers’ AFRS certificates if the compensation they receive from the scheme results in a farmers gaining a greater benefit than he would under a normal VAT registration.

The opinion of the advocate general felt that farmers cannot be excluded for reasons other than specified under the European VAT directive. Instead it could be deemed that the withdrawing of certificates is an indication that HMRC are failing to properly implement and regulate the scheme.

While the European Court does not always agree with the opinions of its advocate generals, if it were to do so in this case, many farmers wrongly removed from the scheme would be entitled to a VAT refund or some other form of compensation.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

HMRC Not So Merry With Wedding Venues

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Farmers hiring out land and buildings for wedding ceremonies may have to pay back thousands in back tax following a failed VAT appeal earlier this year.

Blue Chip Hotels failed in their appeal to overturn more than £50,000 in VAT. The company argued that, as it didn’t offer room hire for civil wedding ceremonies as part of its package, VAT was not due.

However the upper tribunal ruled that, to meet wedding license regulations, the hire would not qualify as tax exempt ‘passive renting of a room’ and would therefore be liable to VAT for the whole amount, totalling more than £50,000.

The case demonstrates that the hire of any room for similar purposes is unlikely to be VAT exempt when there are a number of regulations that a commercial provider is required to meet.

It also raises a number of considerations for farmers planning organised events on their property such as wedding receptions, or concerts held on their grounds. If HMRC challenge a VAT return, farmers could be liable to pay up to four years’ worth of back tax.

If you have any queries it is always best to check with your adviser. Green & Co have a dedicated VAT department who can advise on a whole range of VAT matters. To speak with one of the team contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

VAT Payable On Full Cost Of Temps

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Farms and rural businesses who hire temporary staff through an agency must continue to pay VAT on the wages of those workers, and not just on any commission that is due.

A tribunal has ruled that VAT at the standard rate is due on all amounts charged to a client for the supply of temporary workers’ services, which could include salary, national insurance and pension contributions.

It follows an unsuccessful challenge by global HR staff provider Adecco, who tried to argue that VAT should only be charged on the part of the payment that related to its commission for introducing the worker to the business using them.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Rasmus Thomsen at FreeDigitalPhotos.net

Accounting For VAT On Contras

ID-100291909Transactions paid by contra can be confusing, but it is important that you treat them correctly in your records, particularly as you need to ensure you treat the VAT element correctly.

Some common errors are listed below:

  1. Whenever you sell at auction – be it livestock, machinery or produce – commission and levies will be charged against sale proceeds before the net amount is paid to you. These charges attract VAT but are often overlooked when completing VAT returns and remain unclaimed.  Even small amounts can add up over the year, so they are well worth looking out for.
  1. If you purchase new plant or perhaps a commercial vehicle, and put an item in part-exchange, you must declare the output VAT included in the part-exchange allowance.  The full amount of input VAT can then be claimed on the new item. Your supplier should issue you with adequate paperwork showing the separate amounts of input and output VAT.
  1. Sometimes you might settle an outstanding debt by, for example, providing some of your own labour without charge to your supplier. You must remember that, even though you may not raise an invoice, the value which is set against the debt will include standard rate output VAT, which you must declare.    This applies even if there is no input VAT charge included in the amount you owed the supplier.

If you need more help or advice on dealing with contra entries and the associated VAT please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Pong at FreeDigitalPhotos.net

Happy Holidays From Green & Co

20151218_133025232_iOS.jpgAs we take our Christmas break at the end of another productive year, we would like to take this opportunity to thank you, our loyal blog readers! Whether you are already a client, a prospective client, or just like to read our informative articles each week, it is you who keeps this blog going.

Working with our clients in 2015, has also helped to grow Green & Co’s services, allowing us to assist our clients in both setting and achieving their goals. Our services span from general accounts to business goal setting and much more…

  • Year-end and management accounts
  • Tax returns and tax planning
  • Auditing
  • VAT and bookkeeping
  • Payroll (Including Auto Enrolment)
  • Construction Industry Scheme (CIS)
  • Sage Training
  • Business forecasting and goal setting
  • Exit strategies
  • Profit improvement
  • Profit extraction
  • Corporate re-structuring
  • Inheritance tax review and estate planning
  • Virtual office services

Green & Co also specialise in accounting for a number of fields:

  • Doctors
  • Property developers
  • Independent financial advisors
  • Solicitors
  • Insurance brokers
  • And of course, farming!

If you would like to know any more about any of the above, please give our friendly team a call on 01633 871122 once we are back from our Christmas break – refuelled and recharged to combat another year together!

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Farmers Targeted In Latest VAT Scam

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Welsh farmers are being warned to be extra vigilant and not to respond to communications supposedly coming from “UK Data Control” asking for details of missing VAT numbers and other business details.

The letters look official enough, but by signing and returning the form, the signatory agrees to pay an amount of £790 for the publication of their details on a website, as per the small print.  Farmers, in particular, are being targeted and FUW is worried that its members will be fooled into thinking this is a genuine government communication.

Anyone receiving such a request should contact their local trading standards office. If you are in doubt about the validity of any communication from any Government Department, contact HMRC direct or ask your tax advisor for help.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Road Fuel Scale Charges From 1st May

fuel-gauge-163728_1280The VAT Road Fuel Scale Charges have been amended with effect from 1st May 2015. The new rates can be found here.

If a business is VAT registered and purchases road fuel for business use, but there is also private use of a vehicle, then an adjustment needs to be made to ensure that VAT is not reclaimed on the private element of the fuel consumed. To simplify this process, a business may use Scale Charges to add back a fixed sum to account for this private use. This can be done monthly, quarterly or yearly.

As is the same with fuel and car benefit, CO2 banding of the vehicle is used to dictate the amount of the Scale Charge to be applied.

However, for some businesses, claiming input VAT on fuel and then having to apply the Scale Charges may not be financially beneficial.

To see whether this would be applicable for you, contact us at Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

The Dairy Farming Crisis

www.greenandco.com Milk producers in Britain have been dealt a number of blows over the last year.

Like oil, world milk prices have come down in response to an imbalance of supply and demand attributed largely to economic slowdown in China and Russia’s ban on EU dairy products in response to sanctions against them.

These two countries account for 30 percent of the global dairy market and as such have caused a significant impact on prices. In fact, milk prices have dropped 25% since last year, to around 20p per litre, whilst analysts believe the average cost of producing milk to be around 28p per litre.

On top of this, milk producers were dealt a blow earlier this month, when First Milk told its 1,200 dairy suppliers that they would be delaying their payments by a fortnight, leaving dairy farmers trying to figure out how they will find the money to pay their bills.

The Prime Minister during the Prime Ministers questions on Wednesday stressed that more should be done to support Britain’s dairy farmers.

Whilst we are happy to let the government deal with the wider issues involved, Green & Co are actively working to help support our dairy farmers.

We understand that with the 31 January deadline looming, a number of farmers may be struggle to pay their tax bills having being affected by low prices and the two week delay in First Milk payments.

Options for helping with cash flow problems include:

  • Reducing tax payable on 31 January by reducing payments on account.
  • Providing any information needed by banks to help you extend overdraft limits to help you through short term problems
  • Tax and VAT planning to help reduce your tax bills

If you are having problems with tax payments contact Green and Co so that we can try and make your lives a little easier.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Catch Up With Returns Before HMRC Catches Up With You!

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The question is, should Farmers submit VAT Returns on time? As most farmers have repayment VAT returns, it is usual practice, especially when busy with planting, harvesting, lambing etc, to wait until they have a few quarters-worth of VAT to submit.

However, be aware!

Prior to the new penalty arrangements in 2012, late repayment returns did not attract a financial penalty although the surcharge period did extend.

Since 2012, however, there are penalties for late filing in addition to late payment penalties. Therefore, it is possible to have a late filing penalty, even if the return is for a repayment.

We still haven’t seen HMRC issue a penalty for late filing, possibly because their systems can’t cope! However, we are now seeing assessments raised for farmers who haven’t submitted returns, even though they usually have a repayment return.  We’re sure this will be closely followed by penalties.

The penalties for late filing of quarterly returns are:-

  • First late return     – £100 penalty
  • Second late return – £200 penalty
  • Third late return    –  £300 penalty
  • Fourth late return  – £400 penalty

Therefore if you’ve held on to your VAT returns for a year, you could possibly incur a total penalty of £1,000!

If you submit monthly returns, the penalties are £100 for the first 6 late returns and £200 for subsequent returns.  Again, submitting 12 returns late could incur a total penalty of £1,000!

Our advice is catch up with the returns before HMRC catches up with you!

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Barn Conversions And Tax Planning

 

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There has been much publicity about the current Housing Crisis, and the Government has recognised the need to encourage new housing development. In England ‘permitted development rights’ have been extended to allow more development of farm buildings for residential use. This is a positive move for house buyers, the rural economy and land owners.

However, any property development has substantial tax implications that must be considered at an early stage. These include:

  • VAT – this can range from 20% to 5% to Nil
  • Income tax – this will depend on who owns the property
  • Capital Gains Tax (CGT) – a liability of up to 28% can arise if the property ownership is not planned correctly.
  • Inheritance Tax (IHT) – this can be 40% if the property ownership is not planned correctly.

The type of situation we often see is a family farm owned by a father and farmed in partnership with his son. The farm includes a barn which is going to be converted and occupied by the son. Changing the ownership of the barn to the son before the development could:

  • Reduce the VAT cost from 5% to Nil
  • Reduce any future CGT charge from 28% to Nil
  • Avoid the house forming any part of father’s estate which could reduce the IHT charge from 40% to Nil.

In almost all situations time spent on planning before the development starts will substantially reduce the cost of the development.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.