Archive for the 'VAT' Category

Staff Clothes


If you provide clothes for your staff to wear at work you need to be aware of the tax and VAT implications which may vary according to the items provided.

Where the items provided constitute a uniform or protective clothing which is needed to perform the job, the cost is tax deductible for the business and the VAT can be reclaimed. There is no taxable benefit in kind for the employee.

If the clothes are not considered to be a “uniform” and can’t qualify as protective clothing, the tax treatment depends on whether the employees are permitted to keep the items.

Where ownership of the items effectively passes to the employee you should generally treat the provision of the clothes as a sale at cost price, in which case you must account for VAT as if the clothing items had been sold at the cost to you. This can apply when sales staff in a clothing store are given clothes to wear from the store’s range, and are not required to return those clothes if they leave the company’s employment. The value of the clothes provided may also be a taxable benefit for the employee, which needs to be accounted for either on the annual form P11D or as part of a payroll settlement agreement (PSA).

Where the value of the items provided to any one employee is less than £50 in the tax year, the provision can be treated as a business gift by the employer. In this case the employer does not treat the value of the clothes as a sale. The taxman may also agree that the value of the clothes is a trivial benefit which is not taxable on the employee. However, it is best to establish this position with the tax office in advance. We can help you with that.


Flat Rate VAT Scheme and capital expenditure

If you use the Flat Rate VAT scheme then you can, in addition, reclaim the VAT on a single purchase of capital expenditure where the amount of the purchase, including VAT, is £2,000 or more.


This all sounds fairly straightforward. Beware, however,  that if goods are purchased from one supplier at one time then they count as one purchase BUT if they are from different suppliers at different times then they will be separate purchases (even if they are used in conjunction with one another) and each must be £2,000 or more in order to qualify. So, for example, a company installs a new computer system and buys the various components and software from different suppliers then these may not qualify for a VAT reclaim if the individual purchases from each supplier are less than £2,000—EVEN IF the total cost of the computer installation is over £2,000.

HMRC’s VAT Notice 733, para 15.3 provides examples of what qualifies as a single purchase.

Reduced rate of VAT on empty buildings

Here at Balance Accountants we regularly get asked questions about VAT on construction. This is probably because it is such a complicated VAT area. Last week one of our clients asked us if they were correct to charge a lower rate of VAT on the conversion of an empty property. There are a number of matters to take account of but the basic principles are as follows:

1. You can charge the reduced rate (5%) of VAT on the renovation or conversion of a residential building if, in the 2 years immediately prior to the commencement of works, the premises have not been lived in.

2. If you reduced-rate your supply then you may be required to prove that the building has not been lived in during the 2 years immediately before you start work. A letter from the local authority’s Empty Property Officer would be acceptable evidence of non occupancy.

3. Other than installing goods that are not building materials, you can reduced-rate any works of repair, maintenance or improvement carried out to the fabric of the building. You can also reduced-rate works within the immediate site of the dwelling that are in connection with the:

Means of providing water, power, heat or access.

Means of providing drainage or security, or

Provision of means of waste disposal

You can also reduced-rate the renovation or construction of a garage or conversion of a building into a garage provided that the work is carried out at the same time as the renovation or alteration of the premises concerned and the garage is intended to be occupied with the renovated or altered premises.

The above details were sufficient to answer our client’s query but there are additional details that may be relevant to individual circumstances so it always advisable to seek professional advice whenever you are unsure. The full provisions regarding the reduced rate of VAT on empty properties are set out in VAT notice 708, available at

This post was compiled by Ashley Barrowclough.

When Should You Register For VAT?

Most people just setting out in business are aware that at some point in the future they may have to register for VAT, and know that the point at which you must register is based on a certain level of turnover.

Whilst this is true a lot of people do not realise that you can register for VAT voluntarily before your business reaches this threshold, and even fewer people appreciate that there are sometimes circumstances under which it would be advantageous for your business to do so.

Unfortunately, we're not talking about this kind of VAT

Compulsory VAT Registration based on Turnover

The threshold for registering for VAT is currently £70,000, but what exactly does this mean? (NB. Update July 2011 – the threshold is now £73,000)

It means that is your total taxable (zero or standard) turnover over the past twelve months reaches £70,000 (update July 2011 – £73,000)you have to register for VAT.  As your business grows it is good to get into the habit of checking this regularly.  As your turnover edges up towards £50,000 – £60,000 in the past year, it is worth checking monthly.  At the beginning of each month tot up your turnover invoiced in the past twelve months.  If it reaches £70,000, (update July 2011 – £73,000) or if you anticipate reaching that amount in the coming 30 days, then you have to register for VAT. 

If you consider the fact that you’ve reached £70,000 (update July 2011 – £73,000) to be an unusual, one-off occurrence, and that you will not maintain that level of turnover, then you can apply for exception from registration so long as you can demonstrate that although your turnover has reached £70,000 (update July 2011 – £73,000) , in the longer term you will only be operating with a turnover below the de-registration threshold of £68,000 (Update July 2011 – £71,000).

Voluntary Registration for VAT

There are potential cashflow advantages to being registered for VAT, and if your business falls into either of the following categories then it is worth considering applying for VAT registration even if your turnover is below the £70,000 threshold (update July 2011 £73,000).

Does Your Business Make Zero-rated Supplies?

If your business makes mostly zero-rated supplies then it can be beneficial to be VAT registered as you do not have to add VAT onto those sales, but you can claim back the VAT on all business purchases and overheads (subject to certain rules) relating to those sales.  This could mean that you qualify for a refund from HMRC each quarter.

Are All Or Most Of Your Customers VAT Registered Businesses?

The main issue with becoming VAT registered is that you have to add an extra 20% onto your invoices.  If your customers are members of the public this instantly makes you more expensive.

But if your customers are other VAT registered businesses, then they are able to claim back the 20% VAT that you have to charge them, and so ultimately the fact that you might be VAT registered will make no difference to them.  At the same time you are able to claim back VAT on all purchases and overheads you make.

If you have any queries or comments we would be delighted to hear them.  Please contact us or use the comments option below.

Image courtesy of Lyme Bay Winery

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