Startups

VAT MOSS: A new VAT MeSS for ambitious digital, tech & creatives

Posted on January 13, 2015 by Global business 0

Unless you’ve been hiding under a rock someplace, you will have heard the screeches of uproar regarding the new VAT rules introduced from 1 January 2015 in relation to the supply of ‘electronic services’.

Coined a #VATMESS on Twitter, this is all part of an exercise to ‘harmonise’ EU VAT rules to prevent unfair competition where some companies may be selling from lower VAT jurisdictions – if only harmonisation could be so simple!

Given that the changes apply to the supply of ‘electronic services’, the key companies and businesses that have been hit by these changes are tech companies. Simon Briton has written a good summary on the impact of the VAT MOSS rules for tech companies.

In summary, the new rules require businesses to determine whether their customers are businesses themselves (B2B) or ‘consumers’ (B2C) – if its the latter, sellers are required to apply VAT at the consumer’s local rate of VAT…. yes, you read that right: businesses that are exporting their electronic services (e.g. software as as service (SaaS), apps, plugins, downloads, ebooks etc) are required to identify the status of each customer and then apply local rate VAT to the sale if it is to a non-business customer (B2C).

Now it would be too much to expect businesses to register for local VAT in each country so the UK – and other EU territories – are offering a Mini One Stop Shop (MOSS for short) whereby you can register with HMRC and file (yet) another VAT return for MOSS on a quarterly basis and HMRC will distribute the cash to the relevant territories.

What about small businesses that are not registered for VAT because they fall under the VAT threshold? There was a minor climb down by the UK Government in allowing such companies to side-step paying VAT on UK sales but this is only a half way house. Don’t forget, it is not just EU companies that are impacted by these new rules – here is the view of a US digital services provider who is having to change his business model following the advent of these new VAT rules.

Before we get mired in the admin burden of VAT MOSS, we need to know whether or not our customers are in fact businesses? Identification and evidence of their VAT registration number (or local equivalent) is the primary determinant (to give seller’s ‘certainty’) although the rules afford some flexibility – at the seller’s risk – if the customer can prove in other ways that they are a business. There are penalties that can be levied by the local countries and can be applied over a 10 year period….

Even if you establish that they are consumers (B2C), the fun doesn’t stop there as you need to know which country’s local VAT rate to apply – what if the customer is using a mobile device when they purchase whilst on their travels…?

Some think that we are making too much fuss over the #VATMESS and think that more could be made of the carve-out for ‘human intervention’ but this surely loses scalability and requires potentially uncommercial changes in business practices which cannot be a good thing.

There are some emerging technologies to help companies address these changes, however, many companies will have to view this as part of a wider process to ensure they are correctly identifying existing as well as new customers.

Are you still with me….? If so, well done.

If you wish to dive deeper, these resources should help:

Rachel Andrew provides an excellent summary of the horrible implications

Excellent Github summary of new VAT rules (with links to further info) started by Rachel Andrew

Enterprise Nation have championed small businesses on this issue – here is a webinar recording

EU guidance – pour yourself a large, strong coffee

HMRC interpretation

Useful HMRC flowchart

For specific VAT MOSS queries contact HMRC on their dedicated 2015 EU VAT email: vat2015.contact@hmrc.gsi.gov.uk

I don’t think we’ve heard the end of this and I expect further refinements and (hopefully) relaxations as the UK Government realises the negative impact on enterprise and export by UK smaller companies – the exact things they want to encourage…

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Get a great new car like a Tesla Model S and save tax too!

Posted on September 25, 2014 by Investing in equipment 0

I have been salivating over the new Tesla Model S that has recently been introduced in the UK. It carries a fairly hefty price tag but given its space-age interior, high performance and ‘cheap as chips’ running costs (its 100% electric) its hard to ignore.

The good news for company owners is that there are some nice tax incentives that can sweeten a deal in getting your mits on one of these cars.

Ordinarily it rarely stacks up from a financial perspective to acquire a car through the company as the driver gets stung for high benefit in kind income tax charges and the company gets sloooooow tax relief in the company. 9 times out of 10 it makes more sense to acquire the company personally and take advantage of the Approved Mileage rates to claw back some of the running costs on business mileage. But there are a handful of exceptions – and this is one of them.

The Government wants to encourage people to invest in low Co2 emission and electric cars so they offer tax incentives. A Tesla Model S ticks all the boxes (for now…)

  1. As it is electric, you can get a 100% write-off against taxable profits in the company. This is huge. A £70k P85 Tesla Model S bought through the company (either outright or via HP) would save corporation tax of c£14k!
  2. There is 0% benefit in kind charge – watch out, this is scheduled to run out on 5 April 2015
  3. No road tax
  4. No London Congestion Charge

There have been tax incentives like this around for a while for low emission cars but, to be frank, these cars have been fairly uninspiring.

The Tesla Model S is a bit of a game-changer in this respect and hopefully opens the doors for more innovative performance cars that both help the environment whilst being functional and fun too (oh and tax friendly!).

What is a Company Annual Return?

Posted on January 14, 2014 by Shares 0
What is a Company Annual Return?

Every UK company is required to file an Annual Return.

This is not to be confused with the annual statutory accounts or annual corporation tax return. The Annual Return is a snapshot of the foundations of the Company at the made up date so it includes details such as:

  • Company Name
  • Registered Office
  • Directors / Company Secretary
  • Share Capital
  • Activities

It is due every year (the clue is in its name!) and it is often on an odd date as it runs to the anniversary of the date of incorporation of the company – so unless you incorporated your company on say 31 December then you’ll no doubt have some random odd date as your made up date. You can change it although Companies House do send you a reminder via fairly formal looking letter in advance.

You have 28 days from the made up date to file the return. It is a criminal offence not to file the return on time and, although I’ve never seen formal proceedings initiated where returns are late, the most likely impact is that your company will be unilaterally struck off! So say a month after the due date you mind find that your company is being listed in the Gazette as formal notification that it is due to be struck off and then a couple of months later you may no longer have a company! (Don’t quote me on exact timings but I would suspect this is in the right ball-park.)

You should file your annual return online if possible by visiting the Companies House website and filing it through the portal there. You will need your log in details including authentication code so make sure you have all your paperwork together. It is also cheaper to file it online (£13) compared to filing on paper (£40).

If you are having any problems, I suggest you get your accountants to help you as part of the annual service.

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Buy 10x more equipment and get 100% tax relief!

Posted on January 17, 2013 by Investing in equipment 0

Not overly helpful to the majority of fast growing UK companies but the annual investment allowance for expenditure on machinery, equipment, furniture etc went up from £25,000 to £250,000 with effect from 1 January 2013.

This means that you could purchase (in theory!) £250,000 of laptops, tablets, desks, chairs etc in a financial year and receive a 100% tax deduction against your taxable profits.

So just imagine, you could splash out on:

and receive £250,000 tax relief!

Not very likely – but still, nice to know….

Watch out for financial accounting periods that straddle the 1 Jan 2013 introduction date as you’ll need to calculate how much qualifying spend is eligible under the ‘old’ £25,000 limit to 31 Dec 2012 and how much falls within the new much higher limit from 1 Jan 2013.

As ever, timing is everything!

(And no, cars do not qualify for relief under this Annual Investment Allowance (AIA) )

 

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You know your key business performance numbers – right?

Posted on May 10, 2012 by Business Performance 0

Every business has its own particular key numbers. Mine has them. Yours has them. But do you know what they are and, if so, how are you measuring them?

Keys.

Keys. (Photo credit: Bohman)

If you are seeking to build a sustainable business you must hunker down and look at the numbers. Many business owners despise the thought and try to limit any sort of financial review to the year end but in today’s economic climate this is simply too risky – if you are fortunate enough to make it to your year end, the damage to the financial health of your business by that point may be too severe. You may already be in intensive care (and not even know it)!

I was sitting down with a client of mine last week who has a handle on his numbers. He has the benefit of using an online cloud based accounting solution (Xero) that allows him to drill down into his sales and costs in realtime. This allows us to have a richer conversation about exactly where his business is now and plans for the future.

He has an online business so his key costs are marketing and the salaries of the development team. We talked about his key numbers that are:

  • Cash in the bank
  • Number of new registrations / expressions of interest / leads
  • Cost per new customer acquisition i.e. conversions
  • Organic v purchased registrations (purchased mainly comprising Google Pay Per Click)
  • Profit margins per service offered

The business is still at a relatively early stage and therefore most of the focus is on customer acquisition and developing the service and therefore this business owner’s key numbers are primarily around lead generation, conversion and then up-selling additional higher margin services.

He has been tinkering with marketing costs (the beauty of Google Pay Per Click is that you can quickly and easily turn the tap on and off) and he knows that his development team is down to its bare bones and that he needs to keep investing in his IT platform to stay ahead of the competition. By his own admission, this business has yet to get fully to grips with relative margins between service lines although we discussed an exercise to get to grips with this sooner rather than later – as he doesn’t want to find 6-12 months down the line that he’s been leaving much needed cash on the table by up-selling the ‘wrong’ services.

We discussed condensing the key business information (beyond what’s available on the Xero dashboard) onto a single page that could be reviewed at least monthly – preferably weekly.

There’s no need to be put off by fancy acronyms like KPIs (Key Performance Indicators) and financial jargon, this is your business (your future) so you need to get a handle on the performance measures that matter so that you can take quick and decisive action if and when the need arises.

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10 tax tips for fast growth companies seminar

Posted on February 21, 2012 by Tax Tips 0

I am looking forward to co-hosting a seminar at lunch-time today on:

10 tax tips for fast growth companies

The seminar is pitched at companies from startups through to more established companies as we walk them through the sorts of tax issues and opportunities they should consider as they seek to grow profitable companies.

We will be holding the event at Manchester Science Park (MSP) Innovation Centre in Salford and a key focus will be on cash preservation which is a key issue for growing companies – as cash is the lifeblood of every successful business.

The sorts of issues we will cover include:

  • Pros and cons for founders in funding their companies via share subscription v loan
  • How to attract business angel investors and take advantage of investment tax relief like EIS and the forthcoming Seed EIS
  • Why paying key staff salaries and bonuses is expensive and a better more cost effective all-round solution
  • How a potentially lucrative tax incentive might benefit your company and how HM Revenue & Customs (HMRC) might even pay you for the privilege of claiming it!
  • How to pay yourself tax efficiently
  • Heads up on a new tax incentive that is on the horizon and could save your company £££s in tax if you get your ducks in a row now
  • A simple way for start-ups to slash your employee wage bill
  • How VAT could actually make you some money!
  • How you could save a theoretical £1.8m if you are growing your business for sale in the near future

We will run through these points over lunch today and it would be great to see you there. The event is free. Yup, free.

Happy to run this event elsewhere or online vian a webinar if this is of interest.

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Pitching for Management – Manchester – 12 October 2011

Posted on October 4, 2011 by Employing staff 0

Do you want to take your business onto its next stage of growth? Do you need to find some senior talent to help you do this?

We are partnering with AngelNews for its latest Pitching for Management event in Manchester on 12th October. This will be the perfect event for exciting businesses to find senior people to help them build their teams at no cash cost and for executives to identify interesting early stage businesses that would value their expertise.

Pitching for Management is a live event series which runs in 18 cities across the UK. It will be held at Brown Shipley’s offices in Spinningfields from 4.00pm to 7.30pm. As well as the pitches there are plenty of networking opportunities at the event and canapés and drinks will be served during the evening.

The Pitching for Management concept is simple. Make a short pitch to an audience of senior executives who have come to see if they can offer their services to help you.

These executives are willing to work for sweat equity, bonuses, commissions and/or share options. So pitching companies do not need to pay high salaries until they are delivering the results you require.

You can read all about Pitching for Management at www.pitching4management.com.

We are expecting between 30 – 50 relevant senior executives will attend the event. Past events in the series have shown that pitching companies have a good chance of finding someone that suits.

AngelNews is holding a competition for the best pitch of this series of Pitching for Management. The winning pitch at the Manchester event will go through to the final in Bristol on 13th December. The winner of the final will receive a £2,000 cheque.

To find out more about this opportunity, please call Caroline Sage at AngelNews on 01761 452 248 or email her on caroline[at]angelnews.co[dot]uk or contact me.

You can find booking details here.

Hopefully see you there!

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5 tips for securing funding – Bill Morrow: Angels Den

Posted on March 29, 2011 by VC Funding 0

Bill Morrow, founder of the Angel Network, outlines 5 top tips for entrepreneurs seeking funding from VCs:

  1. Make sure you can explain your business quickly and succinctly. If it takes you more than 5 minutes, then you’ve yet to get it nailed. Back to the drawing-board for you!
  2. Outline the pain that your product or service will solve.
  3. Explain how your business will solve this pain.
  4. Enthuse investors with the opportunity for growth and how you will achieve this – how will your business scale to achieve the 5x + return on investment for your investors?
  5. Set out clearly how you will spend the money that you are requesting.

Morrow also explains how it helps for entrepreneurs to “humanise” interactions with potential investors, where possible. If you can build rapport by indulging in a bit of chit-chat about the cricket or football etc then this helps build relationships beyond business.  After all, you may have to work with each other over a number of years, so its important that you can get on outside of business-talk.

Good advice. Listen to this podcast in full over at Smallbiz pod.

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Crowdcube: A useful funding option for UK startups and fast growth companies?

Posted on March 28, 2011 by VC Funding 0

Crowdcube presents an interesting angle on an idea I’ve been pondering for a while:

“How can we open the door for armchair investors to (partially) fill the funding gap suffered by UK startup businesses whilst providing a more interesting and varied investment opportunity compared to say traditional pension or ISA investment offerings?”

Business angel investor networks are well established, however, these are normally aimed at high net worth individuals (broadly those with income of £100,000+ and/or significant assets) who are willing to write cheques for more sizeable sums than those accepted by crowdcube – in fact crowdcube is willing to accept investment cheques from just £10.

Zopa already provides an innovative peer-to-peer banking exchange for individuals e.g. to pay off credit card debts, buy a new car etc from individual lenders who can lend in small parcels of cash (typically no more than £20 per borrower) to minimise the credit risk. By cutting out the middleman (aka banks), Zopa can pass on cheaper interest rates for borrowers and higher income for lenders – a win-win.

Can Crowdcube pass this on for small business?

The answer right now is I’m not sure. But I’ll be keeping a close eye on it and may well try the service to see how it works.

Here are some initial observations:

  • The site clearly needs more investment opportunities but this should come over time.
  • I like the idea of implementing video presentations etc in the future to give added depth to the pitches (more like the Dragons Den experience).
  • I am unsure about the forthcoming trading exchange for exiting investments as its not really in keeping with the nature of private company investing – its a medium term play at best and short-term thinking is the sort of mentality that’s got us into the recent financial mess. Still, if it gets more individuals interested in supporting small, private companies then this can only be a good thing.
  • I would like to see more on the tax benefits of EIS brought into the investment process – especially given the recent announcement in the Budget 2011 – although the mechanics of applying this in practice could give its own challenges given the low levels of some investments, tracking / admin plus education and support required.

Overall, I think that Crowdcube is a great and welcome addition to the funding network for start ups and fast growth UK companies. I look forward to seeing how this service unfolds over the coming months.