Unravelling VAT for hospitality

Most hotel and guest house proprietors will be aware that the majority of supplies in the holiday industry are subject to VAT at the standard rate. There are, however, important exceptions.

A deposit taken at the time of a booking is treated as advance payment for the supply, and VAT is therefore due at the time when the payment is received. However, if a prospective guest then cancels a booking and in doing so forfeits a refundable deposit, the VAT which was declared when the deposit was received can be reclaimed from Customs.

A booking fee charged by the hotel is treated as a deposit.

If an extra charge is made for customers who pay by credit card, VAT at the standard rate must be accounted for on the whole transaction. The supply of the goods/services and the merchant fee cannot be treated as two separate transactions for VAT purposes. Note, however, that the Government banned all card surcharges with effect from 13 January 2018 so now you can only charge your guest the actual cost of the merchant fee and no more.

If a cancellation charge is levied on someone who cancels a booking, no VAT is due on that charge as it is considered to be a payment of a compensatory nature: as there has been no supply of services, the payment is outside the scope of VAT.

A charge for ‘non-arrivals’, for example against a confirmed booking, is treated as standard-rated.

Hotels and guest houses offering guests a packed lunch for an additional charge can treat this income as zero-rated. This is as long as the packed lunch is made up of zero-rated cold foodstuffs such as sandwiches etc. and is consumed off the business premises.

Where guests stay for more than four weeks, then VAT is only due on the value of meals, drinks, service charges and facilities. The charge for the room becomes exempt from VAT after the 29th day of stay.

Gift vouchers with a face value supplied for a consideration which carries the right to receive goods or services at a future date are subject to VAT when the voucher is redeemed rather than at the time the voucher is sold. Obviously, it is important to keep adequate records of vouchers issued and redeemed.

H M Revenue and Customs will be looking to see that VAT has been properly accounted for on the different income streams when they get data via the submission of digital tax returns [compulsory for VAT registered businesses from 1 April 2019] so it is worthwhile checking now that you have got it right. Indeed, you could even save yourself some money!

Call our Tourism & Leisure Specialist Cyndy Potter on 01228 534371 for more information.

Farming – RDPE Countryside Productivity Scheme Grants – deadline fast approaching

With the Small Grant Scheme opening in early February, and a tight application window ending at noon on 14th March 2018, if you are considering buying smaller pieces of equipment for your farm and are hoping to receive some of the grant funding, you should apply as soon as possible. Many farmers at this time of year look to buy equipment in spring. If you are looking at this, but also want to apply for the above grants for the same equipment, then caution is needed. Applicants must apply by 14th March, and will be notified via email if the application is successful. If you are successful, the equipment can only be bought after the grant funding is offered. For tax purposes, the equipment must be delivered by the end of the financial year you are hoping claim tax relief in, hence delivery will need to be factored in. This could mean that the equipment will get tax relief in the 2018/19 tax year rather than 2017/18.

It should be noted that once an application has had email confirmation that the grant is successful, you can either accept the grant offer, buy and pay for the equipment within 150 days, and claim the grant funding, or alternatively if circumstances change, you can notify RPA that you no longer require the grant offer. Note again, you should not buy the equipment before the grant offer email arrives. If you no longer require the grant funding, you should tell RPA as soon as possible, as failure to do so may bar you from further grant applications. Evidence of purchase and invoice payment are also required, and hire purchase is not permitted.

The type of equipment eligible for grant funding is dependent on the type of farming, however, the list is reasonably substantial. The full guidance is available at https://www.gov.uk/guidance/countryside-productivity-scheme#small-grants. The funding is 40% (Cornwall & Isles of Scilly 50%), with a minimum of £3,000, maximum £12,000, meaning equipment cost of £7,500 to £30,000, with the grant being based on standardised costs.

Generally, examples of the funding available are for;-

Cattle – handling facilities, weighing, auto shedding, calving/heat detectors, hoof care, cluster flushing, automatic feeders, specialised troughs, cow brushes, milk dispensers.

Sheep – handling facilities, weigh scales with EID compatibility.

Pigs – handling facilities, weigh scales with electronic data system compatibility, creeps and heat mats.

General – GPS, EID readers and tools, yield mapping and measuring, GPS and flow meters, slurry application, heat recovery systems, cover crop seed drills, automatic silage pushers and scrapers, humidity and grain conditioners, weather stations, wireless and optical networking systems.

If you would like to discuss any of the above in more detail, or need any assistance with the application, please don’t hesitate in contacting any of our farming team or your usual Saint & Co contact. Our office contact details are available on www.saint.co.uk

Beware the HMRC Voicemail Scam

Beware the HMRC Voicemail Scam

It’s around about this time of year when fraudsters start contacting people claiming to be from HMRC, in an attempt to convince them that they have outstanding taxes and debts due for payment.

And recently, a voicemail scam has hit the headlines.

This particular scam involves leaving unsuspecting victims an automated voicemail message, claiming that the recipient owes HMRC unpaid taxes. When the victim calls the number provided in the message, they are then told there’s a warrant out in their name, and if they don’t pay up, the police will arrest them.

Typically, these callers try to encourage victims to give up bank account information or trick them into paying these phoney taxes and debts with Apple iTunes gift cards. Why iTunes cards? It’s simply because these cards can be redeemed and sold on without the physical card; the scammers just need the victim to read out the serial code on the back of the card.

Via this method, people are being duped out of between hundreds and thousands of pounds each and every day. And while elderly and vulnerable people are the clear target for these scams, they’re not the only ones who fall into these traps.

Think You’re Too Smart to Be Scammed? Take the Test

Other Types of Scams

The voicemail scam isn’t the only one currently in use by fraudsters. A variety of methods are being utilised in an attempt to convince victims that they owe HMRC money, or will be subject to an HMRC lawsuit if they don’t settle their non-existent debt.

Here are a few more scams of which you need to be aware:

1. The Text Message Scam

It’s true that HMRC will occasionally send text messages, however, personal or financial information will never be requested. These text messages are always informational, encouraging you to take action elsewhere.

If you receive a text message claiming to be from HMRC, and that message mentions a tax refund in exchange for your bank details, you can safely ignore it. And if a message arrives in your inbox with a link, do not click on it!

2. The Email Phishing Scam

If you’re unfamiliar with the concept of ‘phishing’, it refers to a type of email designed to look as if it has been legitimately sent from a real organisation. Contained within are links or attachments that will take you to a web page that will look like your bank’s. Alternatively, these links or attachments will install a virus onto your computer to extract personal and financial information.

Nearly one in four people still open phishing emails, exposing themselves to all sorts of fraudulent activity.

A recent email scam involved the promise of a tax refund from HMRC, with recipients advised to download a PDF attachment as part of the process. The attachment contained a link to a phishing site, which in turn requested personal or financial information.

HMRC will never contact you in such a manner, and any emails matching this description should be deleted immediately.

Here are a few examples to look out for: HMRC Phishing Email Examples

And keep an eye out for the following phoney email addresses:

  • service.refund@hmrc.gov
  • secure@hmrc.co.uk
  • taxrefund-notice@hmrc.gov.uk
  • taxrefund@hmrc.gov.uk
  • refund-help@hmrc.gov.uk
  • refund.alert@hmrc.gov.uk
  • refunds@hmrc.gov.uk
  • rebate@hmrc.gov.uk
  • HM-Revenue-&-Customs@ztoro.com

3. The Social Media Scam

It seems no platform is safe from fraudsters, with social media accounts now being used by criminals to scam people into giving up sensitive personal and financial information.

There have been numerous examples of people receiving direct messages on Twitter and Facebook purporting to be from HMRC, offering tax rebates or requesting personal information. However, HMRC will never use a social media channel to contact you, and if you ever receive such messages, you can safely ignore them.

How to Protect Yourself

As a government organisation, HMRC is very particular about the ways in which they contact you. They will never, ever use text messages, emails, or social media platforms to request information or inform you of rebates or penalties.

Where it gets a little trickier is when you receive phone calls or voicemails. In such instances, you need to be vigilant, and to educate yourself on the clear signs of fraud.

It’s therefore a good idea to familiarise yourself and your staff with the excellent resource, Take Five to Stop Fraud.

You Can Never Be Too Careful

If you’re ever contacted by HMRC, and you feel uneasy about the questions you’re being asked, you are well within your rights to hang up the phone.

Call 0300 200 3300 to make sure you are legitimately speaking to someone from HMRC.

And if you’d like to discuss tax returns, rebates, penalties, and generally dealing with HMRC, our friendly team of tax partners are only ever a click or a phone call away.

Contact us here

Did you get a big tax bill and now want some back?

Many of you will have just paid your 2016/17 tax bill before the 31 January 2018 deadline, and some of you will also have paid 50% of next year’s tax on account. Here are a couple of tax planning ideas that can help you obtain a tax refund.

Invest in EIS or Seed EIS qualifying companies

Before 6 April 2018, individuals may invest in companies that qualify under the Enterprise Investment Scheme (EIS) and treat that investment as having been made in 2016/17. The tax relief is 30% of the amount invested.  So a £20,000 investment can reduce the 2016/17 tax liability by £6,000. Investing in a Seed EIS qualifying company is even better as there is a 50% tax relief.  Such companies tend to be riskier than EIS qualifying companies. You should therefore obtain specialist advice from an IFA if you are considering such investments.

Investing in an EIS qualifying company can also enable you to defer capital gains tax. In order to do so you must reinvest the amount of the gain within the 3 years following the date of the disposal giving rise to the gain. (The investment could also be within 12 months prior to the disposal).

Increase your Pension Savings before 6 April 2018 to reduce payments on account

Unfortunately investing more in your pension now will not reduce your 2016/17 tax liability, however if you invest before 6 April 2018 that payment can be taken into consideration in computing your 2017/18 liability and hence you might be able to claim to reduce your payments on account, if you make them.  The maximum pension contribution is generally £40,000 each tax year, although this depends on your earnings. It is also possible to add to this any unused relief brought forward from the previous three tax years.

Forthcoming Event – Xero Drop In Day – 27 February 2018 at our Carlisle Office

Going for Xero Gold

Xero Drop In Day

Tuesday 27th February 2018


Saint & Co, Sterling House, Wavell Drive, Rosehill, Carlisle, CA1 2SA

9.00 am – 6.00 pm

Are you an existing user of Xero Cloud Accounting Software?

Do you need help using the software or would you like to learn more about how cloud accounting could boost your business?

Saint & Co are Xero Gold Partners.   Thanks to our newly acquired gold status more of our partners and staff are “Xero” certified.

Why not join us on our “Xero Drop In Day” and chat to our friendly staff who will be on hand all day to help with any queries or questions you may have about using the software.    Tea and coffee available.

If you do not currently use Xero, why not book onto one of the half hour demonstrations and let us introduce you and your business to this cloud accounting software which is becoming more and more popular with our clients

Visit our events page for more details.



What level of salary / dividend post 6 April 2018?

From 6 April 2018, the dividend allowance reduces from £5,000 to £2,000.  Shareholders/directors should consider how they can best maximise the tax relief available and we can help you in making that decision.

Dividend income that exceeds the dividend allowance will still be taxed at lower rates than salary and there is no class 1 national insurance (NI) to pay on dividends.  Thus, extracting funds in the form of dividends is likely to be more tax-efficient than salary, where the company has sufficient distributable profits.

However many directors will take a small salary to ensure that they continue to have credits for national insurance purposes thus increasing their entitlement to state pension.  Such salary payments will be eligible to tax relief in the company at 19% but will be taxed in the individual’s hands at 20% or more.

In certain circumstances it may not be tax efficient to take a salary to obtain credits for national insurance towards your state pension.  If you have already accrued 35 years of national insurance credits then you will already be eligible to receive the full flat rate of state pension when reaching state pension age.

You can check your own national contributions history by logging on to your personal tax account (PTA) at  www.gov.uk/personal-tax-account.  Alternatively you can apply for a state pension forecast at www.gov.uk/check-state-pension.

If you are already entitled to a full pension then, provided your company has sufficient distributable profits, you could draw these as dividends rather than taking a salary.

If you don’t have sufficient contributions, perhaps because you have had years when you haven’t worked or you have contracted out of the state pension, then it is likely to be beneficial to draw a small salary to accrue the NI credits.

If you would like more information or assistance in deciding what level of salary to take from April 2018 please contact us.

Does your accounts system comply with Making Tax Digital (MTD) for VAT?

making tax digital

Making Tax Digital (MTD) for VAT is scheduled to start in April 2019 which means that your VAT information needs to be submitted to HMRC digitally.

On 18 December 2017, HMRC published draft legislation together with examples of how the business account records might link with the HMRC computer in order to comply with MTD for VAT. The legislation specifies that “functional compatible software” must be used to record and preserve prescribed VAT related data.

What are Digital records?

“Functional compatible software” must be used to calculate the VAT due, report the VAT figures (as per the current VAT return) to HMRC, and to receive information back from HMRC.

VAT related data for each sale and purchase made by the business includes the time of the supply, the value and the rate of VAT charged, or in the case of purchases, the amount of input VAT allowed.

There is no requirement in the draft regulations that the electronic recording of this data must be done at the time the supply is made, or when the purchase is received. As long as the data is recorded electronically by the earlier of the date that the VAT return must be submitted, or is actually submitted.

Digital Links in the Trail
The business can use more than one piece of software to keep its digital records, but those separate software programmes must be “digitally linked”. HMRC provides examples of what it means by digitally linked in the draft notice.

One example is a business which uses one piece of accounting software to record all sales and purchases, this software then calculates the return and submits it to HMRC. As well as the records in the accounting software the business uses a spreadsheet to keep track of a fleet of cars and work out its road fuel scale charges. The draft guidance suggests that the business can type the adjustment into its accounting software.

We can of course work with you to make sure that your accounting systems will comply with the new VAT rules before they start in 2019.  Note that MTD for VAT will not be mandatory where turnover is below the VAT registration limit, currently £85,000 per annum.

Contact us if you need any help with any of the above.

Pension planning

For most taxpayers the maximum pension contribution is £40,000  each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current, but then lapses if unused. Note also that for higher rate taxpayers the net cost of saving £10,000 in a pension is only £6,000 but this higher rate relief may not last for ever.

Relief from additional 3% stamp duty land tax


stamp duty land tax

Much of the focus in the Autumn Budget on Stamp Duty Land Tax (SDLT) concerned the abolition of the duty for first time buyers of property up to £300,000. There was also welcome news for those involved in other property transfers where the 3% supplementary SDLT charge potentially applies when an interest in a second property is acquired.

The 3% supplementary charge will not now apply where a court order issued on a divorce or dissolution of a civil partnership prevents someone from disposing of their interest in a main residence or a spouse buys property from their spouse. There are a couple of other situations where the 3% supplement does not apply. This is something to check with your solicitor.

Less than one week to submit 2017 Self Assessment Tax Returns to HM Revenue and Customs

Ensure you submit your Self Assessment Tax Return online to HM Revenue and Customs for the tax year ended 5 April 2017 by the 31 January 2018 to avoid any penalties and interest.

You also need to make your Self Assessment  balancing payment for tax year 2016/17, and make the first payment on account to HM Revenue and Customs for tax year 2017/18 by 31 January 2018.