Get your kicks from a VAT 66!

If you travel or incur costs in the EU, it is now that time of year to make sure that you claim the VAT back on any of these costs, for example, hotel bills, conferences or exhibitions you have attended.

How do I make a claim? The first thing you need is a VAT 66 certificate from the Grimsby VAT Registration Unit, which can be requested by letter, fax, or email (they don’t provide a number for telephone requests for some reason). You will next need to get a VAT 65 application form, which is on HMRC’s website at http://www.hmrc.gov.uk/index.htm Remember that the VAT65 form must be completed in the language of the country you are claiming the refund from. This can prove difficult, but in a lot of cases, the actual amount of text you will need to write is minimal. Once you have both forms, you can then list all the invoices and VAT amounts, and send the VAT 65 and 66 along with the original invoices to the country’s tax authority. A list of the relevant addresses can be found in Notice 723 or on the HMRC website.

Tip 1 The period of a claim is a calendar year, and you have 6 months to make the claim. This means that you should have sent the claim by 30 June in the following year. Most countries are fairly stiff about the time limits and late claims are normally rejected, so make sure you make your claim on time.

Tip 2 The current paper-based process for reclaiming EU VAT is to be replaced by a fully electronic system from 1 January 2010. HMRC are still consulting on this, so those expecting to make a claim next year will need to keep track of developments over the summer.

When is Paying a Dividend "illegal"?

A dividend may be 'illegal', in that it is contrary to Company Law, when the proper procedures are not followed. If the Taxman examines the paperwork and decides the payment from your company was not a legal dividend he may treat the amount paid as a loan, or even as a bonus payment.

In both cases additional tax may be due from the company and sometimes from you.

To pay a legal dividend it is not sufficient just to write 'dividend' on the cheque stub or against the entry in director's loan account.

We recommend following these steps when paying dividends...

1. The directors should first review the profits available for interim dividends. This is not the same thing as cash in the bank, as you have to take account of other assets and liabilities. Those deliberations should be recorded as a formal board minute, so if the Taxman ever asks, you can prove the profits were there when the decision to pay an interim dividend was made.
2. If the final accounts for the year are complete and show the accumulated profit and loss account is positive, the directors can recommend the profits, which are not required for investment, can be paid out as a final dividend to the shareholders. The shareholders can either accept the directors' recommendation or suggest a lower figure of dividend. Both these decisions also need to be properly recorded at the time they are made.
3. Dividend vouchers need to be prepared when either a final or interim dividend is paid, for each shareholder showing the total due, the tax credit attached to the dividend and the date of payment.
4. The dividend should be paid. The cash can be transferred from the company's account by cheque or bank transfer into the shareholder's own bank account. If the shareholder is a director his account in the company books may be credited with the dividend due to him or her, but this needs to be done as soon as possible after the decision to pay a dividend is taken.

We can help you with all this paperwork, but it is important that the decision to pay a dividend is made in advance of any cash being paid out of the company.

When is a Pick-Up a Van?

Certain pick-up trucks and other commercial-type vehicles are built to very high comfort standards these days, so a pick-up or 'van' can easily be used as the main family vehicle. In which case does the company owned van become a company car?

The distinction is important because the benefit in kind tax charges are far higher for a car than a van (see example). Also vans, but not cars, qualify for the annual investment allowance (AIA), which allows the full cost of the vehicle to be set against profits in the year of purchase, subject to the AIA cap of £50,000.

Example

The Mazda BT-50 2.5 TD double cab pick-up has a list price of £15,063 and a CO2 emissions rating of 244g/km. The table below shows the difference in the taxable benefit for 2009/10 should this vehicle be classed as a car or van.

Taxable benefit of private use: Car:£5,272 Van:£3,000
Fuel provided for private journeys: Car:£5,915 Van:£500
Total taxable benefit: Car:£11,187 Van:£3,500

In tax law a van is a goods vehicle that has a design weight not exceeding 3,500kg. In addition the HMRC guidance specifies that a pick-up truck is a goods vehicle if it has a payload of at least 1 tonne. Payload is the difference between the kerb weight and the gross weight as stated in the vehicle's specifications. So if the pick-up is primarily designed to carry goods rather than people and can safely carry 1 tonne in weight, it falls squarely into the van category.

However, this statement about the 1 tonne payload is not law, it is only HMRC guidance. If you have a pick-up that carries less than 1 tonne it will be a van for tax purposes if you can show that it is either:

• a goods vehicle; or
• a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

It doesn't matter what the vehicle is actually used for, its what it was designed to be used for that counts. The Taxman says in his own internal manuals: "Actual use of a particular vehicle is irrelevant: the statutory test is a test of construction, not use."

For advice on choosing the right vehicle to qualify as a van please contact us.

Free professional help for entrepreneurs

Free professional help for entrepreneurs

A new website has been launched specifically to provide entrepreneurs with free tools, resources, training and guidance from some of the UK’s leading authors, accountants and business advisers.

In June 2009 the Governor of The Bank of England predicted that the UK would face a "long, hard slog" back to recovery, so for the unprepared there will still be a great deal of pain ahead before the recession is really over. Therefore www.recessionresources.co.uk has been designed to give business owners access to all the no-cost help and support they need to avoid that pain, including:

1. A comprehensive diagnostic review of your main opportunities to strengthen your business and personal cashflow – covering everything from improving sales and margins, to working capital management and leading edge tax planning. The findings will be presented in the form of a hard-hitting ‘Key Improvement Possibilities’ report. As part of this you can also request the following:

2. Detailed benchmarking report – This report will reveal how your business compares to others in your industry across 19 key measures. It will identify where your true strengths and weaknesses lie. It will calculate how much higher your profits and cashflow could be if you were able to emulate the results of your more successful rivals. And it will make preliminary recommendations for what the evidence suggests you can do to beat the recession. To help you to develop these ideas further you can also request the following:

3. Suite of multi-media profit improvement software - Since the only sustainable source of non-repayable cash is making more profitable sales, this software uses hundreds of practical UK examples, case studies and video/audio files to help you to develop a detailed action plan, and estimate the financial impact of that plan. And in case that is not enough you can also request the following:

4. Five "How to beat the recession" videos and books - Four of the world’s leading business authors have contributed their key thoughts to the website’s resource bank. As a result you can watch their specially commissioned videos and claim a complimentary copy of what many regard as the most practical anti-recession book on the market, Nicholas Bate’s "Beat the recession".

All of these recession resources, along with the related one-to-one support and guidance from leading professional accountants across the UK, are available free of charge through www.recessionresources.co.uk Together they will help entrepreneurs to develop, fine tune and implement their action plans so that they come out the other side of the recession stronger than ever before.

Entrepreneurs using the service will not have to switch accountant or do anything to upset existing arrangements with their accountants and business advisers. All of the help provided through www.recessionresources.co.uk is intended to sit alongside rather than replace what their existing advisers are doing for them.

Employee Benefit Trust

We are in the process of setting this up for one of our clients.

It was inspired by Mr Cauldwell of Phones4U. Who a year or two back set up a company in Jersey or Guernsey. The company was to provide benefits to Phones4U employees. Phones4U paid £20m to this "Benefit Company" - reducing their corporation tax (CT) bill by £6m (big companies then paid CT at 30% [now 28%]).

Mr Caudwell personally applied to the Beneift Company for an interest free loan of £20m and surprise surprise was granted it.

Result - Mr C got £20m tax free out of his business AND reduced his CT bill by £6m.

There is quite a bit of cost involved in doing this - and you need to have the readies to pay over. so for the benefit to outweigh the costs for our clients, you need to have available profits of £100k.

The other criteria you need is to be happy for the taxman to crawl all over it - it is a registered scheme with HMRC, but that doesn't mean they like it!