USE YOUR ALLOWANCES FOR 2020-21

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Limited window for using your 2020/21 tax allowances

Individuals are entitled to a number of allowances each year. However, many of them are lost if they are not used in the tax year to which they relate – it is not possible to carry most unused allowances forward. The 2020/21 tax year comes to an end on 5 April 2021. With the end of the tax year approaching, now is the time to review your allowances and consider whether there is anything that can be done to prevent those allowances being wasted. Remember, any Covid grants that you have received in 2020/21 are taxable and will need to be taken into account when assessing your income.

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Government Support for All Businesses – COVID19 Virus

We are sure that you are aware of the support that the Government have put in place during the current COVID19 virus to date, however we want to ensure that you are fully up to date and aware of support available to you. We write to let you know that we are posting updates as they come in on our Facebook Page ‘BFMS Accountants’ and will also be updating our website www.bfmsltd.co.uk ‘latest news’ page.

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MAKING TAX DIGITAL FOR VAT

The start date for Making Tax Digital (MTD) for VAT is fast approaching. If you are a VAT-registered business with turnover in excess of the VAT registration threshold of £85,000, you will need to comply with the requirements of MTD for VAT from the start of your first VAT accounting period beginning on or after 1 April 2019. If you are VAT registered but your VATable turnover is below £85,000, you can choose whether to join in, but if you do there is no going back and once in MTD for VAT you will need to stay within MTD for VAT as long as you remain VAT registered.

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VAT Flat Rate Scheme Changes 01.04.2017

Limited cost traders

The VAT flat rate scheme aims to simplify the tax affairs of smaller businesses by allowing them to work out the VAT that they pay over to HMRC by applying a flat rate percentage to their VAT-inclusive turnover, rather than working out the difference between the VAT that they have charged and the VAT that they have incurred.

Prior to 1 April 2017 the flat rate percentage depended only on the sector in which the business operated. From 1 April onwards it is also necessary to work out whether the business is a ‘limited cost trader’. This is a business that spends less than 2% of its VAT inclusive turnover on relevant goods or one that spends more than 2% of its turnover but less than £1,000 per year on such goods.

For periods of less than one year, the £1,000 figure is proportionately reduced and thus equates to £250 a quarter.

Relevant goods exclude capital expenditure, food or drink for consumption by the business or its employees, vehicles, vehicle parts and fuel (unless the business operates in the transport sector), goods for hire or resale unless that is the business’s main business activity, goods for disposal, such as promotional items, and all services.

A business that meets the definition of a limited cost trader must use a VAT flat rate percentage of 16.5% rather than that for its business sector.

If you use the VAT flat rate scheme, it is advisable to discuss with your tax adviser whether these changes affect you. This is likely to be the case if you supply labour-only services. Your adviser will be able to discuss whether it remains beneficial to stay within the scheme. Businesses making taxable supplies in excess of the VAT registration threshold, set at £85,000 from 1 April 2017, must be registered for VAT.

VAT Registration

From 01.04.2012                                        £

 

Registration threshold                           77,000

 

Deregistration threshold                        75,000

 

 

A few more – New VAT Rules

Storage

Supplies of self-storage will be standard rated (at present they are exempt unless the supplier has opted to tax the relevant building)

This is mainly aimed at businesses which offer lock-up units in purpose-built or converted buildings but it will also apply to any defined space which is let for the storage of goods (i.e a spare room or freestanding shipping container).

The above does NOT apply to charities when rented for non business use

Hairdressers

Chair rentals in salons are always standard rated.

Caravans

The sale of a holiday caravan will be standard rate, even if it is too large to be towed on the road lawfully. Zero rating will be restricted to caravans conforming to BS 3632 – the standard for caravans suitable for continuous year round occupation.