Autumn Statement 2016: What this means for your income tax

TheCyclingProgrammer

deejaybee wrote: »

Thanks TCP
To be honest i had a skim read through info in your link, but i dont really understand it. Will have to ring the help line.

Currently i receive 20% VAT on top of my invoices ( from Hermes )
and my VAT rate is 10% ( for couriers ) - am i likely to be affected by the planned changes ?

That depends on if you meet the definition of a "limited cost" trader.

If you spend less than 2% of your VAT inclusive turnover a year on goods in the course of running your business, or less than £1000 on the same, where goods excludes food and drink and capital purchases, then you would be deemed a limited cost trader and would have to pay 16.5% of your gross turnover instead of 10%.

In effect you would go from paying HMRC £12 of every £20 VAT you charge to £19.80!

If you have no other overheads this might not be a problem but if you do have expenses that are services, not good, it's going to cost you money.

deejaybee

So presumably "goods" would include the petrol / servicing and maintenance / parts etc for my van that i use for courier work ?

TheCyclingProgrammer

deejaybee wrote: »

So presumably "goods" would include the petrol / servicing and maintenance / parts etc for my van that i use for courier work ?

Yes. Vehicle costs are normally excluded according to the technical note but I think it would still count in your case the vehicle is used for your business.

chrismac1

I have a feeling HMRC are going to get themselves in a mess over this. After all they have form, often manage to screw things up totally. In this case, over the last few years I have publicly stated that all they had to do was define the sectors better.

I mean, how hard is it to write "Engineer" !!!!!!???

So instead of an easy peasy common sense change in the definition of the sectors, we get this extra layer of complexity. Yet again adding to the longest tax code in the EU and probably the world.

Not only that, given that it is probably a bunch of clueless wallies who'll be drafting the legislation, there is every chance they'll muck it up and some of my clients will carry on making up to £10,000 per year profit from VAT.

FOOLS!

Pennywise

deejaybee wrote: »

Thanks TCP
To be honest i had a skim read through info in your link, but i dont really understand it. Will have to ring the help line.

Currently i receive 20% VAT on top of my invoices ( from Hermes )
and my VAT rate is 10% ( for couriers ) - am i likely to be affected by the planned changes ?

It depends, full details not yet known and it's still in the consultation stages (although with HMRC it's just a formality that won't change it as they've already decided they're doing it!). You may be better going to the normal scheme where you claim your actual vat on actual costs like fuel etc. HMRC havn't thought about "service" based industries where there are no physical goods involved - they've just seen contractor-based professions and instead of changing the rates for certain business sectors have knee-jerked into something far more complex! Pillocks as usual. But it looks good in the media to make out they're going after tax avoiders!

chrismac1

Here is my prediction, in the hope that at least some of the HMRC numpties are reading this and will be able to make a commonsense sector change instead of yesterday's utter drivel:

If you go ahead with this nonsense, there will be a sudden increase in the number of businesses whose expenditure on goods is 2.01% each year.

Honestly you really despair at these wallies!

Pennywise

chrismac1 wrote: »

Here is my prediction, in the hope that at least some of the HMRC numpties are reading this and will be able to make a commonsense sector change instead of yesterday's utter drivel:

If you go ahead with this nonsense, there will be a sudden increase in the number of businesses whose expenditure on goods is 2.01% each year.

Honestly you really despair at these wallies!

Indeed, my first phone call of the morning was from an IT contractor who wondered whether there was any benefit in setting up a small Ebay shop through their company to buy just enough stock and sell it either at break even or a small loss, so that she could stay on the flat rate scheme.

The Treasury/HMRC staff dreaming up this drivel havn't a clue have they? I'm convinced this is just to get some good media publicity about clamping down on so-called tax avoiders. They could far more easily have solved the problem by adjusted the percentages for certain trade sectors - but that wouldn't have got the media luvvies excited would it?

koru

Pennywise wrote: »

I'm convinced this is just to get some good media publicity about clamping down on so-called tax avoiders. They could far more easily have solved the problem by adjusted the percentages for certain trade sectors - but that wouldn't have got the media luvvies excited would it?

I think this is far too technical to generate much media excitement. In my view, this is a classic case that they can't be bothered to design a nutcracker, so they just drag out a sledgehammer. They might as well have introduced rules saying that small services businesses cannot use the FRS, because that it pretty much the effect.

polymaff

I can imagine FR VAT registered businesses pairing up to "sell" each other £nk of goods each year.

Draft legislation is promised for 5th December.

chrismac1

To illustrate just how stupid this is I have an example from my own client base. This is an engineer with sales of just over £100,000 on the 12% rate who currently makes a profit of just under £10,000 out of VAT.

My suggestion - which has been posted up on public websites many times - is to create a category "Engineer" on say 15% VAT. So just over £3,600 of extra revenue for the Treasury as my sales figure was net of VAT.

His current purchases of "goods" are £1,000. So these are of course now going to increase to £2,500. That extra £1,500 of spend is going to deliver a saving of 4.5% of £120,000 = £5,400 so it is a no brainer to buy extra stationery and so forth.

SURELY SURELY someone in HMRC has at least 1 brain cell and can see this? How hard can it be to just put on that website:

"Engineer 15.0%"

Idiocy and incompetence beyond belief!