VAT changes for goods sold to EU consumers

On the 1st July 2021, VAT changes were made by the EU which impact UK e-commerce companies who:

• export goods to the EU

• to consumers (not businesses)

• where the parcel has a value under 150 euros

IOSS - what is it?

Import One Stop Shop (IOSS) is a simplification procedure that the EU have brought in to help ease the administrative burden for businesses selling low value items to consumers in the EU.

Instead of having to register for VAT in multiple countries, an e-commerce company can now register for VAT in one EU country and file a single return to cover sales to all 27 EU member states

When registered under IOSS, a single monthly return must be submitted and payment made, to cover all EU states liabilities.

Do I need to register?

If you export goods to consumers in the EU that have a value under 150 euros, then it would be sensible to consider registering for IOSS.

The IOSS also makes the process easier for the buyer, who is only charged at the time of purchase, and therefore does not face any surprise fees when the goods are delivered.

If the seller is not registered in the IOSS, the buyer has to pay the VAT and usually a customs clearance fee charged by the transporter at the moment the goods are imported in the EU.

I only sell through an online marketplace, do I need to register?

If your e-commerce company only sells goods under 150 euros to consumers, through a marketplace such as Amazon, then you do not need to register for IOSS.

In these circumstances the marketplace is the deemed supplier of the goods to the consumer and so they will be registered for IOSS and submit the monthly return.

There is a deemed supply of the goods from your company to the marketplace which is exempt for VAT.

It’s all change and can be a bit daunting at first. As with all complex financial changes, it’s best to discuss your specific situation with your accountant.

New service! Learn about our Virtual FD package and who it's right for.

Roughly 50% of small businesses fail before their 5th birthday.

What a daunting statistic for any new business owner!

Obviously there are many reasons that businesses fail, but one of the most common is not making the wisest financial decisions. Most business owners have a million and one things on their to do list and almost always, analysing financial data falls to the bottom.

What is a Virtual FD and is the Lodestar package right for you?

Do you want to understand the financial side of your business without spending hours trawling through data? Do you lack information to enable you to make informed decisions for business growth?

If you answered yes to these questions, then you need a Virtual FD.

‘A virtual FD is a financial expert who offers insights and advice to businesses.’

Do you want an approachable team who care whole heartedly about the future of your business? Do you need a sounding board and someone to provide financial sanity? Do you use Xero?

If yes, look no further, we’re the ones for you!

What is included in the Lodestar Virtual FD package?

The Lodestar Virtual FD package includes:

* Monthly bespoke management accounts pack to include Xero Profit & Loss report, Balance Sheet and Aged Receivables/Payables where applicable, plus tailored reporting as agreed.

* Monthly KPI analysis

* Monthly Fluidly cashflow forecast report to assess the next 12 months cash position

* Annual budget and forecast

* Monthly meeting of up to 1 hour to discuss:

- business performance and management accounts

- future plans and growth opportunities

- identifying cashflow issues and providing solutions

* Interim meeting of up to 1/2 hour to discuss ad hoc queries

How much does it cost?

A full time Finance Director (FD) will cost a company anything from £50k in salary, plus perks and holiday leave on top. This is out of reach for many SME’s, but why should a small business miss out on the valuable services that an FD can offer. This is where the Virtual FD role comes in!

The Lodestar Virtual FD package, provides all the priceless information to you from only £845 + VAT per month.

Want to know more? Get in touch!

Super deduction, are you making use of it?

For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments.

But what does that mean?

During this period, for every £1 that a company spends on qualifying assets, they will receive a £1.30 deduction from their taxable profit. That’s a tax saving of 25p for every £1 spent!

Why has this been introduced?

Making capital allowances more generous works to stimulate business investment. As a result, these measures can promote economic growth and counter business cycles. In short, this should give a much needed boost to the economy which has suffered greatly during Covid.

What can I claim it on?

The super deduction can be claimed on most new assets that would qualify for the existing 18% writing down allowances, which includes but is not limited to:

• Computer equipment

• Office chairs and desks

• Vans

How much can I spend?

There is no limit on the super deduction.

What happens when I sell the asset?

When the asset is sold, the sales proceeds will be multiplied by 130% and added on to taxable profit to repay the relief on that proportion of the asset.

Does AIA still exist?

Prior to Super deduction being introduced, AIA allowed business to deduct 100% of a qualifying assets value from their taxable profit, up to a maximum limit, which is currently £1m.

AIA will exist alongside the new super deduction until 31st December 2021, this can be used for second hand assets as well as new. This means companies can benefit from a 130% deduction for new qualifying assets under Super deduction and a 100% deduction for second hand qualifying assets under AIA.

Should I invest in qualifying assets?

This is the most generous tax relief that has been given by UK government to companies in recent history and is one of the most competitive reliefs in the world. If you are considering investing in plant & machinery, now is most definitely the time to do it.

As always, discuss any purchasing plans with your accountant to ensure you understand the reliefs they qualify for before purchasing.

Selling on eBay? Make bookkeeping simpler with Linkmybooks.

eBay is a great marketplace for selling your products, but do you find it difficult to account for the income, fees and VAT? You’re not alone.

Fear not, there is a solution available to streamline the process, save time and ensure your income/costs/VAT are accounted for correctly. Linkmybooks.

Some of you may have heard of Linkmybooks before as they offer a similar amazing solution for Amazon sellers. If not, Linkmybooks sits in between eBay and Xero, collating the data from eBay into invoices which are posted to Xero. These invoices can then be matched against the eBay bank receipts. Simple eh!

We’ve helped many clients get set up on Linkmybooks for both Amazon and eBay so if you need help getting started then give us a shout!

Electric cars, should I get one through my business?

At the end of May 2021 there were 260,000 electric cars on the UK roads with 1 in 4 UK households intending to buy electric in the next 5 years.

With a greater range of electric cars on the market and prices coming down, you may be considering going electric and putting it through your business. Let us tell you what the impact of doing this will be.

1. Employee consequences:

Cars paid for by an employer that are available for private use, are a benefit in kind. This means that the employee pays tax on the benefit that they are receiving.

Over recent years, the tax payable on diesel and petrol cars has been rising significantly, making company cars less attractive to employees.

In an effort to increase electric car purchases, the tax for electric company cars was stopped altogether in 20/21. For 21/22, tax is payable on 1% of the list price (compared to up to 37% for petrol cars and up to 41% for diesel!)

For example, if the list price was £50,000, the employee would pay tax on £500. If the employee was a basic rate taxpayer (earned under £50,270) then they would pay 20% tax on this, so tax payable of £100. If the same car was diesel, the tax would be up to £4,100!

It’s easy to see that employees might favour an electric vehicle based on these savings alone.

2. Employer consequences:

As the company car is a benefit provided to employees, the employer must pay National insurance on that benefit. The taxable benefit is still £500 but the employer pays 13.8% NI on this, so a charge of £69. If this was a diesel car, it could be as high as £2,829.

The employer will also benefit from Corporation tax relief. The relief gained depends on whether the car is purchased outright or leased.

If purchased outright, the car could be eligible for first year capital allowances, meaning the taxable profits would be reduced by the cost of the car. For example, the £50,000 car example above would save £9,500 of Corporation tax!

If leased, the company would receive tax relief on the lease payments.

Overall, from a tax perspective, an electric company car is a much more attractive option for both employee and employer (and the planet!). However, there are practical effects to consider such as driving range and charging points when coming to a final decision.

If you’d like any specific advice on the tax effects please get in touch!

More changes to the furlough scheme

Hands up, be honest, how many of you had heard of the word furlough before March 2020?

Neither had we!

Furlough changes from July onwards:

If you are an employer with employees on furlough then take note, more changes are coming over the next few months.

Employees will see no change to the amount received, this will still be 80% up to £2,500, subject to the normal rules.

The change is on the side of the employers who will be required to contribute towards the 80% starting from July 21.

Beneath is a handy table which summarises the changes taking place…unless further changes are announced!

3 top tips to get paid faster by your customers

One of the biggest problems for small businesses is getting paid on time by their customers. Since Covid, this problem only seems to be getting worse as companies are less willing to part with their cash.

Here are our 3 top tips to get paid faster:

1. Send out invoices as quickly as possible:

Once work has been completed for a customer, make sure the invoice is sent out as quickly as possible. This may seem like an obvious point but we’ve seen it lots of time before, work has been completed but not yet invoiced for. Almost always, the reason is that the correct systems are not in place to prioritise the invoice being sent out.

By invoicing for your work as soon as it is completed then you are increasing your chances of being paid on time. Using Xero means you can even send out invoices from your mobile rather than having to wait until you’re back in the office. Win!

2. Use payment providers so customers can pay straight from the invoice:

When sending an invoice from Xero, payment providers, such as iwocapay, Paypal and Stripe can be added to an invoice template so a customer can make payment directly from the invoice. Making it as easy as possible for a customer to pay will speed up the process of them paying. We all like things to be easy!

iwocapay have gone one step further, giving your customers the option to pay now or pay over 3 instalments. Increased payment flexibility means more chance of getting paid and the best bit is, whichever option your customers pick, you get paid up front!

3. Chase your unpaid invoices:

Have a system in place to chase unpaid invoices. In Xero, automated reminders and chase emails can be set up to help do this automatically.

Sometimes a more personal approach can help speed up payment, so don’t be afraid to give your customers a call to check that they have received the invoice and ask when it will be paid. Sometimes business owners find this daunting or just don’t have the time to do this. If this is the case, then your accountant should offer this as a service, it will be called Credit control or something similar, so ask them to assist! If they don’t, we do, so get in touch today and start getting paid quicker.

Trivial employee benefits - a tax free gift.

Our recent blog talked about P11d’s and reporting for benefits provided to employees by their employer.

Here we discuss Trivial benefits, which are outside the scope of the P11D and can be provided to employees tax free (yes, tax free!).

To be a trivial benefit, the gift must satisfy four key conditions:

• it cost you £50 or less to provide

• it isn’t cash or a voucher redeemable for cash

• it isn’t a reward for their work or performance

• it isn’t in the terms of their contract

There is no limit on the number of trivial benefits that can be provided to employees each year, as long as each gift satisfies the above conditions and isn’t a larger gift split into multiple payments.

For directors of close companies, there is an annual cap of £300 on the aggregate value of trivial benefits provided to each director in a tax year.

So go on, treat your team…. just make sure the treat meets these conditions!

P11D's: What are they and do I need one?

Company cars, private medical, overdrawn directors loan account…..

If any of these sound familiar and are things provided to your employees, or provided to you by your employer, then you should be preparing a P11D.

P11D’s are an annual form that is submitted to HMRC by 6th July for any employee receiving company benefits.

The form works out the value of the benefit being supplied to the employee and calculates the Class 1A National insurance that the company must pay to HMRC for providing the employee with those benefits. This must be paid by the 22nd July.

The employee will pay income tax on the value of the benefit, either as part of their self assessment tax return, if they prepare one, or by HMRC adjusting their tax code.

HMRC Online Services - do you have a Government Gateway account?

What is a Government Gateway account?

As a business owner it is important to have visibility over your taxes, whether that is Corporation tax, PAYE or VAT. HMRC Online Services provide this overview using a Government Gateway account. We would recommend that all business owners set up an account., especially since HMRC is working to become one of the most digitally advanced tax administrations in the world.

How do I set up an account?

Firstly, you will need to set up a Government Gateway ID and password. To do this, navigate to the GOV.UK website, click ‘Create sign in details’ and follow the set up process.

Once the Government Gateway ID account has been set up, you will need to add all the relevant taxes for your business including:

• Corporation tax - all Limited companies should add this tax to their account

• PAYE - all employers should add this tax to their account

• VAT - all VAT registered businesses should add this tax to their account

To add taxes to your account, login to your Government Gateway account and click ‘get online access to a tax, duty or scheme’, then follow the steps.

My account is set up and I’ve added the relevant taxes, what now?

Now that you’ve got the account set up, you can use it for so many things, including:

• Checking payment dates for taxes

• Checking references for tax payments

• Making tax payments

• Setting up a VAT direct debit

• Viewing the VAT certificate

• Updating the business address with HMRC

Don’t delay, set one up today!