The taxman at HMRC has issued updated guidance on the operation of the VAT Flat Rate Scheme.

By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.

The scheme allows taxpayers to calculate the VAT payable by applying a flat rate percentage to their VAT inclusive turnover, rather than netting off output and input VAT due on sales and purchases.

The revision in the guidance follows a number of unsuccessful visits to the First Tier Tribunal (FTT).

HMRC has issued a revised version of VAT notice 733 Flat Rate Scheme to update their guidance in accordance with the FTT decisions.

The previous version of the notice listed a number of trades and professions (at paragraph 4.4 of the guidance) and indicated the relevant sectors and percentages that these types of business should choose.

These had a higher percentage than the 12% rate which applies to ‘business services not listed elsewhere’.

The FTT was critical of HMRC in their rigid interpretation of their own guidance.

Although this section of the guidance has not been removed, taxpayers are now advised to ‘use ordinary English’ and choose the sector which ‘most closely describes what your business will be doing in the coming year’.

The new guidance confirms that HMRC will not change a business’s choice of sector retrospectively as long as the choice was reasonable.

Please contact us at Clay Shaw Butler if you would like any advice on VAT matters.

Internet link to the advice: https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses

Meanwhile, new company car advisory fuel rates have been published which took effect from 1 June 2016.

The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’.

The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 June 2016 are:

Engine size                                          Petrol

1400cc or less                                     10p

1401cc – 2000cc                                  13p

Over 2000cc                                        20p

Engine size                                          LPG

1400cc or less                                     7p

1401cc – 2000cc                                  9p

Over 2000cc                                        13p

Engine size                                          Diesel

1600cc or less                                     9p

1601cc – 2000cc                                  10p

Over 2000cc                                        12p

The guidance states that the rates only apply when you either:

• reimburse employees for business travel in their company cars
• require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

If you would like to discuss your car policy, please contact us at Clay Shaw Butler.

Internet link: https://www.gov.uk/government/publications/advisory-fuel-rates

PAYE, Student loan and CIS deductions are due for the month to 5th June, 2016.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions.

Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.

Where the payment is made electronically the deadline for receipt of cleared payment is 22nd June 2016.

In year interest will be charged if payment is made late.

Penalties also apply.

You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) –

http://www.clayshawbutler.com/news/latest-news-for-business

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The team at Clay Shaw Butler can be contacted on 01267 228500.

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