VAT Registration

The present threshold for compulsory registration is £85,000 and the threshold for voluntary deregistration is £83,000.  As a rule, if at the end of any month, the value of your taxable supplies for the last 12 months has gone over the registration threshold, you are required to register.

However, if you can satisfy HMRC that the value of your taxable supplies will not exceed the deregistration threshold in the next 12 months, then you may not have to register.  If you believe that you can satisfy HMRC that your future turnover will not exceed £83,000, you could apply for an exception from registration.  A VAT1 form need not be done; the request should be made in writing to the Registration Unit setting out your turnover figures and the reasons supporting the request.

It is worth mentioning here that where a business exceeds the registration threshold on the forward look, where it is expected that it will exceed the threshold in the next 30 days alone rather than on the cumulative backward look, then the exception is not allowed.

Whether registering or applying for an exception, the normal 30-day time limit applies for notifying HMRC that he has exceeded the threshold.

Once granted the exception from registration, a person does not become immune from a liability to register in respect of the supplies they continue to make, and neither does the granting of exception from registration form a cut-off date for monitoring turnover.  If the exception is granted, you should continue to monitor the value of your taxable supplies on a monthly basis to determine if a further liability arises by exceeding the registration threshold.  However, HMRC will not require you to re-apply for the exception where the liability arises because of the earlier one-off contract.

The conditions for applying this concession are that:

  • The turnover in any subsequent month is less than one-twelfth of the deregistration threshold at that time, and
  • The trader has no reason to believe that they will exceed the deregistration threshold in the then following 12 months.

If a further liability arises and those conditions are not met, the trader will have to either register or re-apply for the exception.


Annual Tax on Enveloped Dwellings (ATED)

There are a number of changes which will impact the returns for the 2018-2019 period to cover the ATED year which runs from 1 April to 31 March.

Every dwelling owned by a non-natural person (a company, a partnership with a company member, or a collective investment scheme) at 31 March 2017 MUST be revalued at 1 April 2017. Therefore, a property that was valued at say, £400,000 in 2012 may have been outside of the scope until now, however, if the taxable value is more than £500,000 on 1 April 2017, or at acquisition if that was later than 1 April 2017, then it will be subject to ATED.

1 April 2017 brought about the first 5-yearly revaluation date for ATED and this revaluation will be needed for 2018-2019.  There are reliefs and a relief declaration return would be completed where applicable.

The ATED is calculated using a banding system.  The annual chargeable amount for 2018-2019 has also risen to £3,600 (up from £3,500) for dwellings ranging from £500,001 to £1m.

From 1 April 2018, all online ATED returns must be filed using HMRC’s new ATED digital service. The new online service before the 2018-19 filing window opens on 1 April 2018. The online service can be used for both chargeable returns and relief declaration returns.

It’s worth noting that a return must be filed by 30 April for that year if the property was held on 1 April.

Divorce and property

For example;  As part of the divorce settlement, it has been agreed that you will transfer your share of the marital home to your wife once she has raised the finance to buy you out. This might take long time, or you may have to sell the house.  How can this affect your PPR claim?

Normal PPR relief would allow you to relieve the gain on the sale of this property, which had been your residence, for the period that you actually lived there and the last 18 months for any other reason. Depending on when your ex-wife manages to raise the finance this later period of absence may well be covered by these basic rules.

However, TCGA 1992 s225B legislates for the right to receive PPR on disposals in connection with the end of a marriage or civil partnership, where a partner ceases to live with their spouse or civil partner in what was their only or main residence. This gives you some leeway in that you can still be classed as accruing, and so make a claim for, PPR on the ex-marital home that you no longer live in due to the separation. There are no time limits given in the legislation for how long this PPR can accrue but conditions have to be met.

One of the conditions is that your disposal is part of the agreement on dissolution or annulment of the marriage or civil partnership, where separation is likely to be permanent or by order of the court.

Another condition is that your previous partner must also have this property as their only or main residence from the period that you move out to when you transfer your interest to them. This is also a key point that sometimes gets missed when the house is put up for sale and sold to a third party. To enable this claim, if you do decide to put the house on the market, you must transfer your share to your ex-wife before it is sold to a third party. Otherwise, you fail as you haven’t transferred your share to your ex-partner who is still living in the house.

The other pitfall is electing another property as your main residence in the period between moving out and transferring your interest to your ex-wife. If you buy a main residence in the interim you may fail the claim under s225B.

Managing the gig economy

The so-called “gig economy” is starting to change the way we think about our workforce. As the world of work becomes more flexible, an increasing number of professionals are opting to become independent contractors who market their skills to businesses, for as long as they are required.

This new type of employee creates a new set of challenges for businesses to manage. These professionals tend to want more flexible working arrangements and work-life balance. They are agile and don’t want to be tied to the traditional 9-5 working day. As such, employers need to change how they think about their HR policies.

Plan ahead
If you want to use contractors and flexible workers you should create a plan for how you intend to allocate costs associated with them. In addition, you should agree a process by which you can set objectives and track deliverables and achievement of key milestones.

Work with the right partners
If you are going to use a recruitment agency to help you to employ contract workers, look for agencies that truly understand the flexible employment market. Do your due diligence and make sure they have experience of working with firms in your industry.

Cost drivers
Contract workers can help you to lower talent costs. As well as employment agencies, there are various online resources available such as Freelancers and Upworkers that allow independent contractors to pitch to your firm to work on your projects. This can help give you access to some of the best talent around but at a lower cost.

Utilise technology
Technology plays a key role in managing a flexible workforce. Contractors will need to access your systems and data. Consider whether they will use their own computer or whether its best that they are allocated a company-owned laptop / device for the duration of their contract. You should also consider security and ensure that company data held on any contract worker’s devices can be managed remotely if required.

The firms that are best able to tap into this growing talent pool will be able to access skills that may previously have been inaccessible to them. For example, some contractors may have broad experience gained from working on projects at multinational firms that can be of great benefit to your firm.


Mobile Device Management

Bring your own device (BYOD) policies have become increasingly popular in the last number of years. However, this has meant small and medium sized businesses have faces new challenges in terms of how to manage company data held on the personal devices of employees.

In addition to security concerns, BYOD makes it very difficult for businesses to maintain consistent standards across various devices and platforms. As such, updating company software can become a challenge. Large enterprise-level businesses manage these logistical challenges through high-level Mobile Device Management (MDM) solutions. However, until recently, these systems were prohibitively expensive and were generally out of reach for small to medium sized businesses.

Recently, major tech companies have moved to bring MDM solutions within reach of smaller businesses. For example, VMware recently joined forces with Dell in order to bring is class leading MDM services to small and medium sized businesses. For firms that don’t have in-house IT support, Microsoft has recently launched a new version of Microsoft 365 Business, which has built-in MDM features that are easy to set up and don’t require much on-going maintenance.

These solutions offer key business tools such as the ability to remotely wipe lost devices, instantly roll out updates across numerous devices and manage permissions across your company’s network.

Self-employed? Or an employee?

Most of the people working for organisations such as such as Uber, Amazon, Hermes and Deliveroo are not on the payroll, have limited workers’ rights and are paid for each delivery or “gig”. The Committee recommended a default assumption of “worker” status, rather than “self-employed”. The economist Mathew Taylor was also asked to produce a report on the status of such workers and suggested that a new category of “dependent contractor” should be established.

HMRC and the Treasury have now published a consultation into a thorough review of employment status.

Consultation on employment status
HMRC published a consultation on employment status on 7 February as a follow up to the Taylor Review of Modern Working Practices. Individuals and their employers have to know which employment status applies to ensure the right protections are applied – from the National Minimum Wage and holiday pay, to unfair dismissal protection and statutory redundancy pay.

Employment status also affects the taxes that an individual and their employer pay. It is therefore essential in maintaining a clear and effective tax base, with individuals and employers knowing what rates of tax and National Insurance contributions (NICs) are applicable to everyone in their organisation.

The existing legislation defining an employee for both tax and employment rights ultimately relies on whether a contract of service exists. No further definition or clarity is provided in the legislation.

As a result, over time the courts have interpreted the legislation and developed tests to determine an individual’s employment status. These tests are contained in a number of key precedent cases, including a mixture of employment rights and tax judgements.

A possible solution suggested is to legislate a more detailed definition of employment incorporating the irreducible minimum core tests established by case law:

  • Mutuality of obligation
  • Control over the individual
  • Personal service

Difference in VAT recovery between petrol, diesel or electric cars?

There is no difference in the VAT recovery position for the purchase, or indeed the lease, of electric, diesel or petrol fuelled vehicles.

For most businesses input tax recovery on the purchase of a car is blocked; there are however a few exceptions.

VAT incurred on the purchase of a car is only recoverable in the following limited circumstances:-

  • Where the car will be used exclusively for a business purpose i.e. is to be used only for business journeys and not available for private use of employees or anyone else.
  • On the purchase of a qualifying car intended to be used primarily as a taxi, driving instruction car, or self-drive hire car
  • Where the car is a stock in trade of a motor manufacturer or dealer

Further details on the above points can be found in Section 3 of VAT Notice700/64   Motoring Expenses.

There is a common misconception of the phrase ‘qualifying car’, even among some car dealers, as we have heard anecdotally. A qualifying car is a car that has not been subject to the full input tax block; not a car that qualifies for input tax recovery. HMRC consider that a car is available for private use “when there is nothing preventing you or your employee from using the car for private use.” The fact that a car is bought for the purpose of a business is not the only requirement; the business needs to have taken steps to ensure that the car is not made available to anyone for private use, and there is significant case law on this matter.

Where a business leases a qualifying car, 50% of the VAT on the leasing charge is blocked (and therefore irrecoverable) to cover private use of the vehicle. The limited circumstance detailed above, i.e. exclusive business purpose, stock in trade, qualifying taxi/self-drive hire use etc. apply in the same way to leased cars as to the purchase of a car, and where these apply, VAT is recoverable in full on the leasing charge, subject to the normal rules.

Where a separate charge is made for the maintenance of the leased vehicle, the VAT on that element is not included in the 50% block, and is therefore recoverable in full.

For completeness, the definition of a car for VAT purposes from section 2.1 of the Notice is reproduced below-

“A car for VAT purposes is any motor vehicle of a kind normally used on public roads which has 3 or more wheels and either:

  • is constructed or adapted mainly for carrying passengers
  • has to the rear of driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows

Section 2.2 however advises that the following exceptions are not cars for VAT purposes:

  • vehicles capable of accommodating only one person or suitable for carrying 12 or more people including the driver
  • caravans, ambulances and prison vans
  • vehicles of not less than 3 tonnes unladen weight
  • special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles
  • vehicles with a payload of one tonne or more

NB. The payload exception is the one that allows double cab pick-ups meeting that condition to be treated as commercial vehicles for VAT purposes rather than cars.