The VAT annual accounting scheme is open to most businesses with a turnover of up toRead more
Whilst the majority of businesses charge VAT at the standard rate of 20% there are a number of different VAT rates and exemptions that businesses should be aware. There are actually three separate VAT rates, the standard rate of 20%, the reduced rate of 5% and a zero rate. The reduced rate of VAT applies to the supply of certain goods and services.
In this article we will look at situations when the reduced VAT rate can apply to the conversion of a premises. This can happen where the number of dwellings in a property, after a conversion, changes from the number of dwellings before the conversion. For example, the conversion of a non-residential building into residential property is eligible for the reduced rate. (e.g. converting a restaurant into a house, or a warehouse into a block of apartments).
The reduced VAT rate of 5% will apply to qualifying services provided as part of a property conversion. These might include:
- Repairs and maintenance (such as redecoration), or
- Improvements carried out to the fabric of the building (such as the construction of an extension or the installation of double glazing).
Services within the immediate site of the premises being converted can also be at the reduced rate if they are in connection with the:
- means of providing water, power, heat or access;
- means of providing drainage or security, or
- provision of means of waste disposal.
However, HMRC’s guidance is clear that all other services are standard-rated. For example, you must standard-rate:
- the installation of goods that are not building materials, such as carpets and fitted bedroom furniture;
- the erection and dismantling of scaffolding;
- the hire of goods;
- the provision of professional services, such as those provided by architects, surveyors, consultants and supervisors.
HMRC operates a simplification measure that allows businesses to claim back VAT from mileage claims using a standardised scale charge to value fuel costs for private use. The scale charge is a fixed amount based on a vehicles CO2 rating.
Most businesses, particularly small and medium sized businesses, which do not keep detailed mileage records covering all journeys, use the road fuel scale charges scheme. This measure saves business car users the chore of keeping detailed records of actual private mileage.
Where the scale charge is used, a business can reclaim all the VAT incurred and then pay the appropriate fuel scale charge for each vehicle. The charge is calculated on a flat rate basis according to the carbon dioxide emissions of the car.
The VAT road fuel scale charges are updated annually. The latest valuation table sets the VAT scale charges for taxing private use of road fuel from 1 May 2018 to 30 April 2019. The new fuel scale charges must be used by companies from the start of their next prescribed accounting period beginning on or after 1 May 2018. The fuel scale rates encourage the use of cars with low CO2 emissions.
If a vehicle is used only for business use, all the VAT on fuel costs can be recovered. HMRC will expect to see proof that there is no private use of the vehicle in question.Read more