Wednesday February 24, 2010
A new report reveals that a significant number of businesses that are incurring VAT on costs in countries where they are not carrying out any taxable activities are having problems recovering this VAT.
According to a survey by the Organisation for Economic Co-operation and Development’s Committee on Fiscal Affairs, many countries will refund the VAT incurred on these costs through specific reclaim procedures or by allowing firms to recover these costs through direct VAT registration or the zero-rating of supplies to foreign business.
However, the complexity of the reclaim procedures and in some cases, the lack of any recovery system altogether, means that many businesses simply cannot always recover VAT on these costs.
Nearly three-quarters (72 per cent) of companies surveyed said they found foreign VAT relief procedures difficult, while more than one in five firms said they are unable to recover any foreign VAT whatsoever.
Of the businesses that manage to recover VAT on costs incurred in foreign countries, a quarter said that they could only claim less than 25 per cent of VAT.
The survey’s researchers said the findings point towards the urgent need of a greater level of harmonisation and standardisation of VAT relief procedures, which would improve the speed and efficiency of these repayment systems to the benefit of ordinary firms.
The study also shows that businesses would like to see better communications with tax administrators in order to improve VAT relief procedures. The Committee on Fiscal Affairs said it will continue to help countries enhance their VAT relief systems whilst still protecting them against fraud.
In 2006, the OECD countries agreed the principle “that the burden of value added taxes themselves should not lie on taxable companies except where clearly provided for in legislation”.
Thursday January 21, 2010
An expert has advised businesses to focus on VAT compliance of new European Union regulations.
Quentin Pain, founder of software company Accountz, urged small businesses who may not already be aware of changes to the EU VAT system to take action now to ensure they comply with the appropriate rules.
He explained that the VAT changes, which took effect on January 1st 2010, affect all businesses involved in supplying or receiving cross-border services, as well as those who are reclaiming VAT incurred in another EU country.
“Companies need to take action now and the fastest route to ensuring compliance is through the use of flexible and intuitive IT solutions,” Mr Pain said.
“Applying the wrong VAT treatment could result in increased administrative costs and require the issue of credit notes, refunds of incorrectly charged VAT to customers.”
Stephen Alambritis, of the Federation of Small Businesses, recently told the Times that the government needs to look at the new regulations to make sure it is not “gold-plating” European requirements.
Thursday January 14, 2010
The reputation of a company to deliver good products and VAT services is one of the most important considerations for financial advisers when making recommendations.
According to a poll conducted by Zurich, 29 per cent of advisers said status is quite important when advising customers on a particular product, while 25 per cent placed more importance on product diversity.
In light of the unstable economic climate, more than a third (36 per cent) of advisers questioned said financial strength is the most important factor when recommending a product to clients.
The survey also revealed a preference for firms who are in touch with the latest technological developments, with 28 per cent of respondents ranking e-capability as the fourth most important factor when considering the merits of a financial firm.
Richard Howells, intermediary sales director at Zurich UK Life, said: "In these uncertain times it’s more important than ever that advisers can put their faith in companies…to deliver propositions which meet their clients’ financial planning."
Click to see our VAT services
Tuesday January 5, 2010
UK firms supplying services to Europe are now liable to extra costs due to new rules that came into place at the beginning of this month.
Under the EU VAT package, services providers must now submit quarterly sales lists outlining the value of the services supplied to each VAT-registered customer, whereas previously this requirement was only necessary for goods providers.
According to experts, the new changes will not only make VAT compliance more challenging, but will add to the already hefty burden of paperwork many firms currently have to contend with.
The regulations are aimed at preventing businesses from relocating just to try and reduce their VAT bills and are being introduced by all tax authorities within the EU.
Stephen Alambritis, of the Federation of Small Businesses, told the Times: "We would urge the government to look at this regulation and make sure that we are not gold-plating the European requirements."
Karen Barrett, chief executive of Unbiased, recently pointed out that 60 per cent of firms already believe their tax burden is "unfair" or "very unfair".
Find out more about VAT compliance
Wednesday December 9, 2009
Companies have been advised to avoid "panic buying" in the lead up to the UK VAT rate increase at the end of the year.
IT firm Computacenter said rushing to make large transactions in order to benefit from a cheaper VAT rate could cause firms to make mistakes which could cost them more money in the long run.
Terry Walby, director of solutions and technology at Computacenter, urged businesses to exercise caution in all their short-term financial dealings.
He explained: "In the rush to take advantage of the lower tax rate, it is vital that businesses maintain their rigorous procurement procedures and not drop due diligence for the sake of a last-minute financial saving, which could prove costly later down the line."
Firms planning to make imminent purchases were also advised to talk to their trusted suppliers immediately on how to take advantage of the current VAT rate with investments that are right for them.
A recent study commissioned by fuelGenie found that UK firms lose out on a collective £1.18 billion by not reclaiming VAT on fuel.
Click to see our VAT services
Wednesday December 2, 2009
A new VAT regulation by the European Commission could cost IT firms in the UK hundreds of thousands of pounds, industry figures have warned.
Most technology firms have a classic group structure of a pure holding company that stands above various subsidiaries. These firms usually group holding companies with subsidiaries, which allows them to recover VAT.
However, the new EC stipulation will make this type of grouping illegal, which means VAT incurred by a pure holding company will be an additional cost.
Business advisory firm Grant Thomas pointed out that this will drastically raise companies’ costs at such a critical economic period.
Niki Dixon, partner at the company, explained that if a holding company were to raise capital of £5 million, the advisors’ fees would be around £500,000, which would mean a VAT bill of £100,000.
"[This] will increase the real cost of raising money at a time when every penny counts," she said.
The UK and six other EU member states have been given until January to comply with the regulation.
Tuesday December 1, 2009
UK building firm Rok has called on the government to reduce VAT on property repairs.
Garvis Snook, chief executive of the company, wrote to chancellor Alistair Darling asking him to cut VAT on property repairs to five per cent in order to protect contractor jobs.
As part of its Repairing Britain Campaign, Rok commissioned Teesside University Business School to study the effects a tax cut would have on the economy, reports H & V News.
The report calls for tax cuts on repair work in line with the VAT exemption on building new properties and concludes that the reduction would save tens of thousands of jobs.
According to the report, VAT tax cuts on repairs would cost the Treasury £2.6 billion in lost tax revenue but would increase demand for property repair services by ten per cent.
"The Teesside University report supports the campaign’s assertion that a VAT cut on repairs would bring down unemployment, protect skills and apprentice programmes and improve the quality and efficiency of UK housing stock," Mr Snook said.
The Scottish Building Federation also recently called for the government to reduce VAT for the industry to help stimulate business.
Tuesday November 24, 2009
Financial directors have had plenty of notice about the VAT rate change so they should have the processes in place to comply with the regulations on time, an expert has suggested.
Gary Harley, head of indirect tax at KPMG, said that having already gone through one rate change, companies should have no major problems adjusting to the 17.5 per cent VAT rate when it is implemented in January.
Speaking to Financial Director, he urged firms that are still not fully prepared for the imminent changes to ensure they are ready by the end of the year.
"If they haven’t asked for system changes already, they will need to make sure the organisation has a robust manual workaround for that period between the new rate coming in and any upgrade to their system," Mr Harley said.
Bill Dodwell, head of tax policy at Deloitte, pointed out that the VAT rise is still likely to pose a major problem for bigger retailers who will have to amend large numbers of price tickets and advertising.
Friday November 20, 2009
The recent decision to remove UK postal operator Royal Mail’s VAT exempt status does not extend to its direct mail services, it has been revealed.
Royal Mail has been told that it will soon have to charge VAT for many of its services but this will not apply to direct mail because its delivery is price-controlled and subject to regulation.
However, David Robottom, a consultant and former head of postal affairs at the Direct Marketing Association, told Marketing Direct Magazine that the ruling is not far-reaching enough.
"The HMRC proposal doesn’t address certain Royal Mail products used by direct mail that are priced-controlled, such as downstream access," he said.
Royal Mail was informed of its obligation to start charging VAT by tax authority HM Revenue & Customs following a ruling by the European Court of Justice in a case brought by TNT Post.
Other postal services providers operating in the UK including UK Mail, DHL and TNT Post currently have to charge VAT at the standard rate, which is due to increase on January 1st 2010.
Thursday November 19, 2009
A VAT cut on property repairs could save thousands of jobs, a new report suggests.
According to a study conducted by Teesside University Business School on behalf of the Repairing Britain Campaign, reducing VAT on repairs to five per cent will minimise the black economy and allow a better use of existing building stock.
The report found that the cost to the government of reducing VAT on repairs would total £2.6 billion but demand for these services would go up by ten per cent.
If unemployment continues in the construction industry, there could be a skills shortage in the future and resultant inflationary wage rises as the recovery arrives, the study said.
Garvis Snook, chief executive of Rok plc and spokesperson for the Repairing Britain Campaign said: "We welcome the findings of this report which give validity to our arguments that a change in tax on property repairs could be cash neutral."
The Scottish Building Federation recently called on the government to reduce VAT for the industry to help stimulate business during the recession.
