I would like to ask about those changes that coming into life next month. It looks like most services companies will be affected....We had that discussion at work regarding our lorry drivers and mechanics. They are at 10% and 8.5% at the moment. Since they do not buy enough 'goods' (as they are described by HMRC), they will have to move up to 16.5%. Do you have clients in this situation?
I am sure there are lots of folk who this will affect, is there a specific question you have in mind Ellie? Or just gauging numbers?
Sledge hammer is about right - HMRC left a wide open loophole and now their 'simple' VAt scheme will become a wee bit more complicated for folk to work in certain areas, but it will stop all those who have unfairly (but I cant blame them at all) benefitted.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I work with lots of lorry driver who are not happy about that. It looks like they all will have to be moved onto the new rate. They hardly make any purchases that would qualify
Is it worth them being on the scheme at all? Providing they are under the threshold I would imagine the extra bookkeeping costs make it uneconomical.
eg £40000 + VAT is £48000 VAT to pay £7920. Thats a £64 benefit (after tax) for the privilege of filing out a VAT return 4 times a year
Mine has no choice as he is over the VAT threshold anyway but he does at least have fuel and the odd plant hire he can claim back when I switch him to standard rate.
Hi Joanne
Lorry drivers can come under IR35 already, it depends on the contract. Like you, I don't know how legal these contracts are, maybe that's next on HMRC's list?
Whilst I know lorry drivers generally go Ltd, I was surprised that mechanics do, as I would have thought that is a more clear cut employee case?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Is it worth them being on the scheme at all? Providing they are under the threshold I would imagine the extra bookkeeping costs make it uneconomical.
eg £40000 + VAT is £48000 VAT to pay £7920. Thats a £64 benefit (after tax) for the privilege of filing out a VAT return 4 times a year
Mine has no choice as he is over the VAT threshold anyway but he does at least have fuel and the odd plant hire he can claim back when I switch him to standard rate.
Hi Joanne
Lorry drivers can come under IR35 already, it depends on the contract. Like you, I don't know how legal these contracts are, maybe that's next on HMRC's list? Its just that, by all accounts, its not something HMRC have focussed on fully as yet, but they will get around to it at some point with a much harder line than has been taken so far. Although I think they acknowledged they needed to overhaul the definitions - isnt that why the 'test' tool as withdrawn some months back?
Whilst I know lorry drivers generally go Ltd, I was surprised that mechanics do, as I would have thought that is a more clear cut employee case? Mechanics is an interesting one! Be interested to hear from Ellie if these are just mobile ones who work for themselves.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Lorry drivers can come under IR35 already, it depends on the contract. Like you, I don't know how legal these contracts are, maybe that's next on HMRC's list? Its just that, by all accounts, its not something HMRC have focussed on fully as yet, but they will get around to it at some point with a much harder line than has been taken so far. Although I think they acknowledged they needed to overhaul the definitions - isnt that why the 'test' tool as withdrawn some months back?
It's back again. https://www.tax.service.gov.uk/check-employment-status-for-tax/setup
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
hi, mechanics - yes, mobile ones that work for themselves. I did have a situation where someone approached me saying their agency told them to set up a limited company (as a mechanic), but they will be working for the same client. They were supposed to be moved from umbrella payments to limited company.
no Joanne, not for the same person, it wouldn't be mobile then, would it? We're not talking mobile as the way to get to the workplace. The other ones that were asked by some recruitment agency to set up limited company but still work for the same client would fall into IR35, and that's what I told them.
-- Edited by Ellie16 on Wednesday 15th of March 2017 12:40:36 PM
no Joanne, not for the same person, it wouldn't be mobile then, would it? No Ellie, of course not but some of the scenarios suggested on this forum over the years, and indeed other forums have been just as far fetched.
We're not talking mobile as the way to get to the workplace. Clearly not as a way to get to ONE workplace, otherwise everyone would have the word 'mobile' in front of their job title!!!!
The other ones that were asked by some recruitment agency to set up limited company but still work for the same client would fall into IR35, and that's what I told them. Given the description in your earlier post was in the same paragraph I thought the mobile mechanic was the same as the one looking to set up as a limited. Clearly now you have corrected that understanding.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I currently have around 40 clients that use the FRS - several are choosing to deregister following the changes (even to just avoid the extra admin of needing to do the "relevant goods" check each quarter) but some are of course stuck being registered and now having to account for VAT at the new 16.5%. The worst affected I've seen is a "sub post office" currently using 4%, now having to jump to 16.5%! The guidance has also been updated as recently as yesterday to specifically exclude stamps as goods, so advising them to stock up on those has gone out the window!
I can completely understand why HMRC have changed the rules, though, as I know a lot of people wouldn't even have considered registering but did so because of the FRS cash benefit in some cases.
In reply to someone's question above about lorry drivers - I believe their vehicle expenses would be ok to count towards the 2%, because the FRS sector they use currently would be the 'Transport' one. Notice 733 says "relevant goods don't include vehicle costs UNLESS you're operating in the transport sector using your own or a leased vehicle".
Heard something a bit worrying in the Q&A of a HMRC webinar last month also, being that the goods vehicle mechanics buy in order to repair cars do NOT count as relevant goods towards the 2% check, because vehicle mechanics come under the 'Repairing Vehicles' FRS category and not the 'Transport' one. How can this be right!!
It just feels like HMRC have not thought it through, even now (4 days after the change has already been implemented) they are still updating the guidance to exclude/add specific things.
Heard something a bit worrying in the Q&A of a HMRC webinar last month also, being that the goods vehicle mechanics buy in order to repair cars do NOT count as relevant goods towards the 2% check, because vehicle mechanics come under the 'Repairing Vehicles' FRS category and not the 'Transport' one. How can this be right!!
I currently have around 40 clients that use the FRS - several are choosing to deregister following the changes (even to just avoid the extra admin of needing to do the "relevant goods" check each quarter) but some are of course stuck being registered and now having to account for VAT at the new 16.5%. The worst affected I've seen is a "sub post office" currently using 4%, now having to jump to 16.5%! The guidance has also been updated as recently as yesterday to specifically exclude stamps as goods, so advising them to stock up on those has gone out the window!
Can't you put those that have to be registered with HMRC on the standard scheme? That way, they can count anything that's VATable against the sales, whearas on FRS they can't.
With regards to the Post office, how on earth can stamps not count as goods? Sounds like HMRC are making the rules up to suit themselves.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I believe it's something to do with how the business is a "sub post office" their income comes from raising weekly/monthly standard rated invoices to the actual post office so the stamps aren't exempt income to them specifically... (I can't remember how it was set up but an external VAT person did check it out at the time).
Yes John it will be an option of course to come out of the FRS and switch to a standard method, think this will probably be the best thing for a large majority of them.
Thanks for the links Joanne - I can't find anything in the legislation about business who buy vehicle parts as their cost of sales which is the worrying part, just keep coming across the 3)a)i) section about vehicle parts being relevant goods ONLY if you're in the transport sector. Also I did see that accounting web article last week but was a bit concerned about relying on one HMRC officers "it should be alright" response!! Not really much to go on if it got down to a court case to argue it, heaven forbid... :(
Hi Faye
I'm being a wee bit lazy here, where was the part about the HMRC officer?
Must view the 3)a)I section again later when brain fully engaged. Too many double negative in there for another morning read. Plus first time I was lazy again (lot of that going on this week as I'm just too damned busy!!!) but I only skim read it as my lot are not on the FRS.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi Joanne - it was in that link from accountingweb, although apologies, I read it as "when we phoned the tax helpline" and not "when we phoned the tax helpline operated by our fee protection provider" so it wasn't from HMRC but an independent firm (still, not much to go on).
I agree, too many double and triple negatives everywhere in the legislation - my head swims after trying to translate them to "normal" english!
Oh yes I recall the fee protection provider line. Not sure if you are aware but Les is THE man - VAT expert. HMRC using 'normal' English - lol, they might as well use Swahili!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
