Reducing Annual VAT Bill By 20k

I had a new client come over to us as his existing accountant didn’t know what to do with his VAT, he hadn’t done any ATT (Accounting Tax Technician) qualifications which meant he didnt know the in-depth areas surrounding VAT.

My client was an agency and provided sub-contractors to third parties, he originally charged VAT on the whole subcontractor cost and also his fee, but non of his subcontractors were vat registered, so the additional VAT that he had to charge ate into his profits.

I changed his invoicing so that we only took into account his income and not the whole invoice that was given to the third party.

By doing this, his VAT bill annually reduced by £20,000, this also increased his sales by the same value and gave him more funds to take from the company as dividends.

My client and his old accountant didn’t know you can do this.  Its always better to speak to an expert as this is what we do every day.

 

Saving £15K In Sales: You Don’t Always Need To Be VAT Registered!

I had a client come to me, she was growing her business, initially it was cost effective to be a sole trader due to income levels, but as time went by the Busines began to make more profits so we made the decision to incorporate the business to a limited company. After  nineteen more months the business was about to hit the VAT threshold so as a limited company she would have had to register for VAT, but little did she know, she supplied some exempt supplies which meant that if she reverted back to a sole trader she would not have to register for VAT.

It wasn’t in her best interests to be registered for VAT as her clients were individuals and both other businesses who could reclaim the VAT.  If she went VAT registered she would have lost a large number of clients due to the large increase in sales cost.

Reverting back to sole trader saved her around £15,000 in clients based on an activity based costing analysis done in-house.

Saving £15,000 – on sales loss.

Hospital Consultant Travel and Subsistence Expenses

Dr and Mrs A came to Croner Taxwise via their accountant.  For two years, they had been battling with HMRC over Dr A’s travel expenses.  Dr A is a Locum hospital consultant who travels widely on short term contracts with various hospitals.  Due to hospital regulations concerning proximity, he is required to reside near the hospital for the duration of each of these contracts which can vary in length between 2 weeks and 6 months.  Accordingly, his travel and accommodation expenses are substantial.

Unfortunately, HMRC was seeking to apply the terms of Samadian[2013] TC/02533 to all such cases and this case appeared to be heading toward the tribunal. At this point, the accountant asked us to get involved and, after an extensive fact-finding discussion with Dr. and Mrs. A, representations were made which distinguished the client’s position from those in Samadian on the basis that Dr. A was a genuinely peripatetic locum doctor as opposed to Samadian where the appellant worked regularly at only a few hospitals.

In addition, we cited the case of Healy [2015] TC/04425 which was the case involving the actor Tim Healy whose claim for accommodation whilst working in a stage production was denied on the basis that he had more rooms in the rental flat than he actually required and thus his claim failed on the basis of the cost not being incurred wholly and exclusively for the purposes of the trade. That was not the case with Dr. A who only rented single room accommodation to a basic standard.

After a referral for statutory review, HMRC decided not to pursue the case and closed it down.  What was striking, in this case, was that the reviewing officer did not go into any detail concerning the basis for their decision  – possibly because they were using Samadian to close so many other similar cases and did not want to cast any doubt on the validity of their approach.

In the meantime, Dr A continues to operate in exactly the same manner and continues to claim for all of his travel and accommodation.