At last HMRC have agreed to accept emails but only for VAT queries. What are the limitations and benefits of using this service?
Good Communication The government continues promoting its online services but until now HMRC has resisted pressure to use email as a means of communication allegedly for security reasons.
Addressee only If HMRC send you a letter it usually contains personal or confidential information. As the envelope is addressed to the business owner or individual concerned HMRC can be reasonably sure it will be opened by the addressee.
Similarly, HMRC's security checks when you phone them ensure they do not disclose your personal details unwittingly to a third party.
Email addresses, however, are not so secure and can be shared or even accessed by others. HMRC have to find ways round this.
Security 1) HMRC have restricted email enquiries to VAT only, as thrse are least likely to contain personal information.
2) Rather than have a general email address, HMRC have set up a secure online email service accessible through the HMRC website only here .
When you use this service, the response may not be in the same format. HMRC say where they will reply contains confidential information, they will write by post instead.
Advantages 1) You will have immediate confirmation of receipt of your communication.
2) The stencil Emails HMRC provide will help you frame your question by prompting you for relevant information.
However, your enquiry is limited to a maximum of 2,000 characters and there is no easy way of keeping an electronic copy.
TIP Use a PDF printer to keep an electronic copy. There are plenyy of free ones downloadable from the web. Try here .
Showing posts with label HMRC. Show all posts
Showing posts with label HMRC. Show all posts
Tuesday, 17 January 2012
Sunday, 15 January 2012
Avoiding registration by splitting
So your business is growing. You want to avoid having to register for VAT. The golf club gossip is that you can avoid registration and save VAT by splitting your business. Is this true?
Close to VAT threshold A common problem for a small business dealing directly with the public and approaching the VAT registration threshold (currently £73,000), is how can they pass on the 20% VAT charge without losing business or reducing profit by absorbing the additional cost themselves.
Example V Gogh is a one man band painter and decorator dealing largely with private individuals. Lately, he's also been winning some commercial contracts and this pushes him close to the registration threshold. If he registers, he'll have to put up his prices to domestic customers by 20% or absorb it. Can he avoid VAT registration?
Split the business He could split the business in two, one part dealing with commercial contracts and the other with work from private individuals. How can he achieve this without upsetting HMRC?
TIP If he's going to split the business, it must be real and not just on paper. He needs to set up a limited company or partnership to deal with the commercial contracts while continuing to run the domestic side as a sole proprietor. Each side - commercial and domestic - has its own bank account, accounting records and purchases are all made through the correct legal entity and NOT by having a common stock for both businesses.
What can HMRC do? If he does all this and continues doing it, HMRC can only issue him with a direction ( a disaggregation direction) to treat the businesses as one from a current date.
TIP If he splits the business properly. he can still save all the VAT up to the time HMRC issue him with a direction.
Beating HMRC If he can show HMRC the two businesses are not economically connected, he may avoid registration altogether (assuming both businesses remain below the registration threshold). For example Wilf, a sole proprietor runs a gas fitting business and sells used cars on the side. The combined turnover of both businesses counts towards his VAT registration threshold. However, if he puts one into a limited company or partnership the turnover of each business will be looked at separately and HMRC cannot direct them to be treated as one.
WARNING If Wilf gets it wrong....doesn't have separate bank accounts etc, HMRC will say there never were two business and compulsorily register him from a much earlier date. Wilf will then have to account for all VAT on all the turnover of both businesses from the day their combined turnover exceeded the VAT registration threshold, plus penalties and interest.
TIP This type of VAT planning is common in the licensed trade where, typically, the wife runs the food side as a separate, unregistered business. If you are doing something similar (sharing premises) make sure you charge rent to the unregistered business in exactly the same way as you would to a third party.
Close to VAT threshold A common problem for a small business dealing directly with the public and approaching the VAT registration threshold (currently £73,000), is how can they pass on the 20% VAT charge without losing business or reducing profit by absorbing the additional cost themselves.
Example V Gogh is a one man band painter and decorator dealing largely with private individuals. Lately, he's also been winning some commercial contracts and this pushes him close to the registration threshold. If he registers, he'll have to put up his prices to domestic customers by 20% or absorb it. Can he avoid VAT registration?
Split the business He could split the business in two, one part dealing with commercial contracts and the other with work from private individuals. How can he achieve this without upsetting HMRC?
TIP If he's going to split the business, it must be real and not just on paper. He needs to set up a limited company or partnership to deal with the commercial contracts while continuing to run the domestic side as a sole proprietor. Each side - commercial and domestic - has its own bank account, accounting records and purchases are all made through the correct legal entity and NOT by having a common stock for both businesses.
What can HMRC do? If he does all this and continues doing it, HMRC can only issue him with a direction ( a disaggregation direction) to treat the businesses as one from a current date.
TIP If he splits the business properly. he can still save all the VAT up to the time HMRC issue him with a direction.
Beating HMRC If he can show HMRC the two businesses are not economically connected, he may avoid registration altogether (assuming both businesses remain below the registration threshold). For example Wilf, a sole proprietor runs a gas fitting business and sells used cars on the side. The combined turnover of both businesses counts towards his VAT registration threshold. However, if he puts one into a limited company or partnership the turnover of each business will be looked at separately and HMRC cannot direct them to be treated as one.
WARNING If Wilf gets it wrong....doesn't have separate bank accounts etc, HMRC will say there never were two business and compulsorily register him from a much earlier date. Wilf will then have to account for all VAT on all the turnover of both businesses from the day their combined turnover exceeded the VAT registration threshold, plus penalties and interest.
TIP This type of VAT planning is common in the licensed trade where, typically, the wife runs the food side as a separate, unregistered business. If you are doing something similar (sharing premises) make sure you charge rent to the unregistered business in exactly the same way as you would to a third party.
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