The domestic reverse charge is a change to how VAT is collected in the construction industry.

The implementation date was originally October 2019, however HMRC subsequently postponed this until October 2020 to give businesses a year to prepare for the changes to be implemented.

 Because of the effect of coronavirus on the building and construction industry, the implementation date has now been postponed again to 1st March 2021.

What is the Effect? 

It means that sub-contractors providing services to VAT-registered suppliers will no longer have to account for the VAT themselves. Instead, the customer will account for the VAT because it's input VAT.

This means that the payment received by the sub-contractor will be for the cost of the work done, with any materials used added as usual, net of CIS deductions (taken for tax and National Insurance), and with no VAT that would otherwise be charged.

Who Does the Reverse Charge Apply To?

The reverse charge applies to building and construction supply transactions already reported through CIS, where the contractor and the sub-contractor are both VAT registered.

HMRC say that the reverse charge does not apply to sub-contractors unless there is a positive answer to all the below questions:

-        Are any of the supplies you make within the scope of CIS?

-        Is the supply standard or reduced rate?

-        Is your customer VAT registered?

-        Will your payment be reported under CIS?

-        Are you sure the customer is not an end user? (for more information on end users click here).

If your project begins before the reverse charge and ends after it, whether the reverse charge applies will depend on the tax point. The tax point is the date the VAT invoice is issued, or the receipt of payment if this is received first.

The exception to this would be if there is no invoice, or the invoice is issued over 15 days before the work is finished. In this case, the tax point will be the date the work was finished.

Therefore, if the tax point falls before 1st March 2020, current VAT rules apply, but if the tax point falls on or after, then the reverse charge will apply.             

The Government has announced changes in the VAT treatment of certain supplies as a response to the effect of coronavirus on businesses.

This change focuses on those whose businesses have been adversely affected by forced closures and social distancing measures.

The changes come into effect from 15th July 2020 and apply to supplies made between 15th July 2020 and 12th January 2021.  

Who does it apply to? 

VAT registered businesses with supplies relating to:

-          Hospitality

-          Hotel and holiday accommodation

-          Admissions to certain attractions

VAT registered businesses that provide supplies in these areas can temporarily apply a reduced VAT rate of 5%.

Hospitality

Businesses who supply food and non-alcoholic beverages for consumption on the premises will be able to reduce the VAT rate from the standard rate of 20% to 5% on supplies made during the period 15th July 2020–21st January 2021.

The reduced VAT rate will also apply to supplies of hot takeaway food and hot takeaway non-alcoholic drinks.

Hotel and Holiday Accommodation

Businesses who provide the following will also benefit from the temporary reduced rate:

-          Sleeping accommodation in a hotel or similar

-          Certain supplies of holiday accommodation

-          Caravan pitches and facilities

-          Tent pitches and/or camping facilities

Admissions to Certain Attractions

Businesses charging a fee for admission where VAT would ordinarily be the standard rate will also qualify for the temporary reduced-rate VAT, however where these supplies are exempt this overrides the recent rules and they will not qualify for the reduced rate.

Some attractions that this may apply to include:

-          Shows and theatres

-          Amusement parks and fairs

-          Museums

-          Other cultural events and facilities.

For the full list please see the government guidance here.

Those using GoCardless will soon start to see VAT applied on their charges.

From 1st September 2020 GoCardless will start to charge VAT on all their fees that they charge for services.

The change has come after HMRC updated their guidance in April, stating that the fees GoCardless charge will no longer fall within the scope of VAT exemption.

Although the change was made in April, GoCardless are absorbing the VAT costs for any of their existing customers until September because of the impact of Covid-19.

VAT will be charged at the UK Standard Rate, which is currently 20%.

Impact for VAT Registered Businesses

If you are VAT registered, GoCardless need you to provide them with your VAT number. The changes will have minimal impact to you, as you will be able to reclaim the added VAT cost in your VAT returns.

The VAT that you can claim will include the period from when the change came into effect, which means that you can claim from 14th April to 31st August, as well as the periods following 1st September when the charges come into full effect.

Impact for Exempt Goods/Services or Non-Registered Businesses

If you are not VAT registered, or supply goods/services which are VAT exempt, you will not be able to reclaim the VAT costs from the GoCardless fee.

Because of the impact this could have on businesses which have already been affected by Covid-19, GoCardless are setting up a VAT relief fund which will help to offset the impact of these changes.

This relief fund is something that you need to apply for if you wish to take advantage of it. Please click here to go to the GoCardless website and find out more about applying for this relief fund.

If you are defined as a Micro-Enterprise in your agreement with GoCardless, you can terminate this agreement immediately without any charges.

Alternatively, if you continue to use GoCardless after 15th August 2020, this will be counted as acceptance of the changes.

When you run a business, it’s essential that you make everything as transparent and traceable as possible. This is something that many business owners fail to understand, as they think that it’s better to sweep little issues under the rug, hoping that everything will blow over. In reality, doing things by the book is an integral part of having a sustainable and long-lasting business that will thrive in the future.

Read more: 3 reasons why you should keep accurate business financial records.

If you are an owner of a small business, it's important to keep track of your finances. The smallest mistake can lead to significant issues. Larger companies and corporations can cover these small mistakes, but if you are smaller, you will need to be more careful.

As you grow, you want to save where you can and what better way to do that than with keeping track of your accounts? You want to avoid financial damage in any way possible in order to prepare for the future of your business.

This is why bookkeeping is crucial and should be done by a professional. A bookkeeper will help you build a foundation with solid accounting support.

Business decisions

If you do not keep up with your finances or don't hire someone to do so for you, there are many accounting tasks that won't be addressed, but that will need to be. Any business decisions you make will affect your profitability and will also affect the cash flow of the company. Too many bad decisions can lead to the downfall of your company if you are not careful. This is why you need to make sure that you are being responsible with your money. The only way to know if you are is by having a professional watch your finances for you. They will be able to provide you with daily, weekly, monthly financial reports that will detail your revenue, help you consider loans or payments, calculate taxes, whether or not you can buy new equipment or hire more people, and many other business decisions that you will want to check finances for before making a decision.

With a professional bookkeeper, they will be able to give you the information you need to figure out whether or not you can take these actions, allowing you to make a smarter decision. These reports are not just for fun things like buying a new piece of equipment for your shop, but you will need them for important things like upcoming payments and taxes. Bad bookkeeping practices will leave you in debt and with overdrawn accounts because you spent money that you didn't have.

Bookkeeping issues

If your company is not serious about engaging in good bookkeeping practices and is procrastinating financial tasks, leaving your accounting to an inexperienced accountant in order to avoid paying too much, you could be creating extra time intensive tasks unnecessarily. With efficient, effective bookkeeping practices, this could be minimised so you want to make sure that you are managing your staff well. Any staff handling transactions should be taught good techniques and make sure that everyone is following the same practices to ensure consistency.

Long-term implications

Smaller issues might not be a big deal in the beginning, but in the long run, it can really mount up and lead to major problems that will affect you in some way or another. If you want to be successful in the future, financial tracking is crucial and planning is a critical part of the long-term success of your business. Failing to keep up with your financial issues will be something you will end up having to pay for in the future. Find yourself an experienced professional that will be able to help you with the financial side of your business.

If you’re looking for a Bookkeeper or accounting professional in Cambridgeshire or Cornwall, Fordham Finance is your best option. Get in touch with us today to see how we can help.

It’s imperative for each of us to closely monitor our financial status and ensure that we can put ourselves in a financially sound position, regardless of what happens to our lives. For this reason, having a financial adviser on your side can be the best thing that you could do. Many people are put off by the idea of hiring a financial adviser as they believe the payoff may not be worth the cost. Therefore, you need to understand what exactly you need an adviser to help you with so that you can choose one with the right payment plan for whatever you’re trying to achieve.

Listed below are the typical payment plans that most financial advisers will follow:

Commission-based fee

From 2013 onwards, financial advisers cannot receive a commission on pensions, investments or retirement income products such as annuities.

However, on certain products such as mortgages or Insurance, commissions may still be used.

The charging structure should be given upfront in an initial disclosure document and be agreed in advance. Where not paid through commission and the adviser is paid directly by the client this can take several different forms:

An initial fee

When undertaking work on pensions, investments or retirement income products advisers will usually charge an initial fee which can be derided either as a percentage on the value of funds to be advised on or by hourly rate.

An ongoing fee

Many advisers will offer ongoing review services on investments. This typically includes at a minimum an annual review to ensure that you’re on track to meet your financial goals. This is typically done on a percentage basis of your overall portfolio but can be done as an hourly rate if preferred.

Now that you understand the payment types, the next thing you need to think about is how to choose one that fits your needs. With that said, here are six things you need to keep in mind when looking for a financial adviser:

1. Their philosophy / culture

You need to know everything there is to know about the adviser’s culture, as that will make a massive difference in the working relationship. If your adviser’s goals and philosophy don’t match yours, how do you expect to make the most out of your arrangement? Therefore, you need to understand and agree with the adviser that you’re closely aligned to

2. Their location

You typically want your adviser to be as close to you as possible, as that will allow you to contact them whenever you need their service.

3. Their service delivery

Some financial advisers will only give you consultations over the phone while others offer all-inclusive services. In general, the more they do, the more they will charge. Therefore, you need to make sure that you know what you need so that you don’t go overboard with the budget.

4. The person doing the work

Some financial advisers work as part of a team to provide their services. This could involve para-planners undertaking admin work, or specialists on particular topics becoming involved in a case where necessary. This is taken into account when providing a quote as to what level of skills will be needed to offer you the right advice.

5. Their qualifications

Each financial adviser will charge different rates based on the demand for their skills, so you will need to look for the qualifications to see if they’re the best fit for you.

5. Their specialism

Different firms excel at different types of work You should always check with your adviser that your case is something their firm has the skills to cover. For example, later life / care fee planning, school fee advice, or complex tax planning.

If you’re looking for a fixed fee financial adviser in Cambridgeshire, Fordham Investment Services is your best option. Get in touch with us today to see how we can help.