Tax and VAT Changes 2012

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Download the full "Leap into 2012" Business Guide Here.

In this short guide, Tim Adcock, Specialist Tax Partner and Colin Corder, VAT Expert at Mitchell Charlesworth outline key Tax and VAT changes expected to take effect in 2012.

Areas covered include: Corporation Tax, Enterprise Zones, Online VAT registration and VAT Cost Sharing Exemption.

Tax Changes in 2012

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From April 2012, Corporation Tax will be 25% and will be reduced to 23% by 2014. Many businesses will have hoped for greater reductions in Corporation Tax but, given the current economic climate and the large constraints on the government purse, this was always unlikely to happen.

Amongst the difficult current economic climate, there is some good news for start-up businesses with the introduction of the Seed Enterprise Investment Scheme. By the rules of this scheme, investors will be able to claim 50% income tax relief on investments of up to £100k in companies which have assets of less than £200k.

What's more, potential investors would benefit from a capital gains tax exemption on any assets disposed of in 2012-2013 where this money is reinvested in SEIS companies. The bad news is that the maximum which can be raised by the investee company as part of the scheme is limited to £150,000.

There will also be further relief for small businesses with the extension of the small business rate relief holiday that is currently in place. This will be extended for a further 6 months from 1st October 2012

In order to encourage Enterprise and Innovation, 100% capital allowances will be available in a certain Enterprise Zones. Further announcements will be made with regards to extending other Enterprise Zones later in the year.

More specific details about Tax changes in the year ahead will be published in the Chancellor's Budget on Wednesday 21st March. For more information about any aspects of Tax (either business or personal), contact Tax Partner, Tim Adcock, on Tel: 0151 255 2300 or email: Tim.Adcock@mitchellcharlesworth.co.uk.

VAT Changes in 2012:

1. Online Registration:

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From 1 April 2012, all VAT-registered businesses - including those registered for VAT before 1 April 2010 and with a VAT-exclusive turnover of less than £100,000 will have to submit VAT Returns online and pay any VAT due electronically.

If your business does not currently file its VAT online, according to HMRC, you should switch as soon as possible, to avoid the last minute rush nearer the deadline and to gain the benefits of online filing which are:

  • An automatic acknowledgement that your return has been received;
  • A handy arithmetic checker to help make sure you've done your sums correctly; and
  • An email alert to remind you when your next online return is due (as, after April, HMRC will stop sending out paper returns to customers who are now required to file online).

There are also some additional incentives to move to online VAT returns before April 2012. Specifically; you will gain an additional 7 days to submit and pay the VAT return which can be augmented by a further 3 days should you choose to pay by direct debit. This means that money will not come out of your bank account until the 10th day of the month.

2. Cost-Sharing Exemption:

From late July, there will potentially be a big change to VAT legislation that will affect certain organisations such as; charities, universities, further education colleges, banks, housing associations, and insurance companies.

Fundamentally, the cost-sharing exemption legislation will make the provision of services between certain organisations not subject to VAT, provided certain conditions are satisfied.

The purpose of this legislation is to allow these organisations to share services which will help them achieve economies of scale which are beneficial to everyone, particularly in current market conditions.

An example of this legislation might be charities sharing call centres for dealing with helpline queries or housing associations sharing property maintenance services on each other's behalf.

However, there are potential issues concerning the proposed changes which could detract from the potential benefits, for example, the potential for high levels of administration and costs.

Another question that remains to be answered is the VAT treatment of 'contributions' of staff and other resources by members to the Cost Sharing Group. As the cost sharing exemption requires the exact reimbursement of costs, it must be questioned whether members would be able to gain an advantage from any efficiency savings if 'contributions' by members to the Cost Sharing Group are still considered as 'externally supplied services' and hence, subject to VAT.

Download a printable version of this guide here.

For more information:

For more information about whether your organisation might be eligible for this VAT exemption, contact Mitchell Charlesworth's VAT expert, Colin Corder on tel: 0151 255 2300 or email Colin.Corder@mitchellcharlesworth.co.uk.

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