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Within the UK VAT system there are situations that can happen where businesses will have to pay VAT to HMRC before they have been paid by their customer. This can be an disaster for cash flow within a business. This is where bad debt relief can really help a business out. Where the business has accounted for the output VAT and paid it over to HMRC, but not yet received payment from the customer, it can claim a reimbursement for the outstanding amount. Small businesses really ought to be utilising this as they could be out of pocket for no good reason.
There are of course some conditions for bad debt relief to be able to apply to a business and to make it as easy as possible for you we have listed these conditions below.
Making the claim is not a huge task and it is in many respects relatively straight forward. On the VAT return form you need to enter the amount you wish to claim back into Box number 4 (as input tax) as if it were a purchase for the business. It should be noted that any business wishing to make a claim must keep the relevant records for at least 4 years from the date of the claim to convey the above points to HMRC. It is important to ensure you claim it as a bad debt and record it as such within your accounting records rather than issue a credit note. A credit note is only acceptable if there is a genuine change in the consideration of the supply. In addition, you want to notify that it is a bad debt as opposed to reversing the service/ commodity. After a claim has been made the business should ensure that it keeps a track of any of these debtors if they pay up as the output tax would then need to be paid over accordingly.
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Parties can be a tax-efficient way of rewarding employees. This is because, according to the HMRC, employees and their partners do not pay tax and national insurance on any parties they attend if the cost to the business is less than £150 per head in the tax year (starting 6th April). The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head. The event must be made available to all employees or (if you have more than one location) all those at a location. There are some things you need to be aware of though. If the cost per head of a single party is greater than £150, then the whole amount would be subject to tax and NI. For example, if the cost of a party averages out to £175 per head the employee is taxed on the full amount (and if they have a partner then they would be taxed on a benefit of £350). In another scenario if the employer laid on 3 parties over the course of the year costing £100 per head then £70 per head then £45 per head, then tax and NI would be levied on the £70 party. Though the £100 and £45 parties would be covered by the £150 annual exemption, the £90 party wouldn’t and so the whole event was taxable. This page http://www.hmrc.gov.uk/manuals/eimanual/EIM21691.htm has further examples of when parties may not qualify for the exemption. http://www.bbc.co.uk/news/uk-16064988
A very interesting title at the same time its something which I think haunts the majority of us, especially individuals where their income is too high to receive any help and too low to actually afford a decent life style…..I think the analysis is accurate in that we live in times of economic turmoil and times where every penny matters, where we are told that our take home pay will most likely decrease but that we are expected to pay more for everything including taxes to help others- who are "others" though: are these the people which our government tells us to support, these are the people that take priority at doctors surgeries because they are vulnerable, perhaps because they are receiving benefits, perhaps they are the people that live in big houses without having to pay rent…etc etc…so instead of "aspiring to others" as one commentator said in response to the article we have to be selfish with our money, be more judgemental and more savvy when it comes to where and what we spend our money on….. and eventually be less likely to help others and actually help ourselves…. Thoughts???? We are living in hard economic times, after all, everyday we read in the papers and listen on radio and TV how retail is slowing down and how every retailer is worried about the future .I’m thinking that there is no need for an educated guess to see how not just retailers are the ones worrying, we all are!
I think now more than ever we customers have to demand the best of everything but most importantly the best of customer care when it comes to any service we require, after all we are expected to deliver the best of service in our business/jobs, this is not a time to cut corners but a time when we should be being proactive, making sure that the money we pay for any service we receive is well spent and worth our hard earned money. |
AuthorLicenced Accountant in Brighton Archives
May 2020
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