As you will have seen on the news, the rate of VAT in the UK is to change from 17.5% to 20%.
VAT is an amount added by the supplier of most goods and services to what they sell, and which they must by law pay to the government. As individuals are usually not VAT registered, what we buy includes VAT, and is not reclaimable as it is to most businesses.
Offers by shops to cover the rise in VAT mean that they keep the sale price the same, but reduce the amount they get to keep after deducting the VAT they owe to the government. For example, if you buy a sofa before the increase for £500.00, the VAT due by the seller is £74.47; after the increase, the seller has to pay £83.33 to the government, meaning they are £8.87 worse off.
To most of us, the increase will mean very little, as the impact of adding 2.5% to the cost of a purchase is pretty small. For example, assuming no other changes to its price, an item costing £100.00 in the shop will be re-priced at £102.13. To incur, say, an extra £20.00 per month as a direct result of the extra VAT would mean you were spending £940 per month.
As an individual, it’s doubtful you will feel a financial impact from this change.
So although an increase from 17.5% to 20% sounds a lot, the only real winner will be the government. Some things never change.
If you use your own car for business purposes, you should be claiming expenses to offset the costs that you are incurring. As well as the fuel you use, you are allowed to claim for running costs such as repairs and maintenance, MOT, tax and insurance.
There are a couple of ways you can calculate how much you can claim. The simplest is to work out how many miles you drive, and use the official rates provided.
It doesn’t matter of you are self employed, or working for a company, as long as the miles you travel are for the business, and are not personal. The exception to this is your regular commute. You cannot claim for the miles driven to and from work, if you work at the same place most days. However, trips to the post office to buy stamps, to visit clients or suppliers, to visit business partners, or attend meetings are all allowable.
You may not know this, but you can also claim reimbursement if you use a bicycle to get around for business. A few years ago, the government introduced a mileage rate if you use your bicycle for business. A great way to stay fit, help the environment, and claim a tax deductible expense!
If you are VAT registered, you will need to collect VAT receipts for your fuel (not necessarily for the actual fuel you use), ensuring that the receipts are dated within your claim period.
I have created a very simple spreadsheet to help you calculate how much you can reclaim as expenses if you use your own car (or bicycle!). If you would like a free copy, please call or email me, and ask me to send it to you.
December 21st, 2010 |
So you've read what I think - Ed Hart of Your Financial Business Support, otherwise known as YourFBS.
If you'd like to know want I can do for you and your business, take a look at What I Do, email me, or call me on 07913 895798.
Your Financial Business Support Ltd is an approved supplier on the Business Link West Midlands Select Supply database and is also an East Midlands Brokerage Quality Assured Business Link Advisor.