Tax Relief on Goods and Services
In business there can be times when a reduction or even complete relief on tax is possible when buying goods or commissioning the provision of services – especially if these goods and services are for the initial start-up of your business.
Office or Unit RentalOne of the most important aspects of starting a new business is your premises. If you are an IT specialist, Accountant or Financial Consultant, then an office is going to be your primary place of work and as such needs to be easily accessible to your client base. If you are a retailer, it may be necessary for you to avail of warehousing facilities, all of which cost money and are liable to VAT.
Most cities have what is known as a Chamber of Commerce who – in conjunction with local councils and other enterprise schemes – offer low rate office and warehousing space and also the ability to claim VAT back on rental over a set period of time. Although this is not an instant reduction in tax it does amount to Tax Relief as it is either paid back or reduced from further payments.
Secretarial ServicesSome businesses are small enough not to require any staff other than the owners. With this in mind, it can be best to employ the services of a secretarial agency who will answer telephone calls, send and receive emails, handle any payroll issues and also produce documents on your behalf. This is a cost-effective solution to the issue of employing staff to perform the same duties, especially if there are no business premises to speak of, or if there are no requirements within the current structure of the business.
Such services can allow for a reduction in tax as a business expense and likewise can even be subject to tax relief if the business is in the first year of incorporation.
Stock In and Stock OutUnless your Business Is Registered For VAT (Value Added Tax) you cannot charge your customers VAT on any goods or services invoiced to them. However, this does not mean that during the course of buying such products in to sell that your company – or you as a sole trader – do not incur VAT.
Indeed most items purchased in the market place now have VAT added to them especially if purchased in a retail warehouse environment. If you are purchasing such goods, then you should be aware that you will be required to pay VAT on these items and therefore be liable in the eyes of HM Revenue & Customs (HMRC) to pay subsequent VAT to them if you sell goods with VAT added onto your sales.
If you sell products through your company – or indeed as a registered sole trader – and do not charge VAT because you are not registered then you may claim this VAT back from HMRC. This is called a VAT reclaim and is carried out at the same time as a VAT return.
VAT ReclaimA VAT return is designed to inform HMRC how much VAT you have paid out and also claimed from your customers during the previous quarter and should be accompanied by any accounts to back this up.
If you have sold goods or provided services without VAT but have been charged VAT on goods or services purchased, you may apply for a reclaim which means in short that you will be owed money back from HMRC.
You should be aware in advance however that if you make more than two VAT reclaims then you could be subject to a VAT inspection at which time an Inspector from HMRC will visit your premises and audit your accounts and invoicing system.
For further information you should contact your accountant or financial advisor or alternatively visit the website of HM Revenue & Customs at www.hmrc.gov.uk.