Does Your Small Business Need to Register for VAT?

In most circumstances, businesses must pay Value Added Tax (VAT) if they earn above the relevant threshold by providing goods or services in the UK and Isle of Man. If the taxable turnover of such a business exceeds the threshold – which at present is £81,000 – in any twelve month period, that business must register to pay VAT.  This twelve month period does not have to line up with a single financial or calendar year, but can be any consecutive twelve months.

If you take control of a business that is VAT registered, you will also have to register. Furthermore, if you expect taxable turnover in the next 30 days alone to exceed the threshold, you should register immediately.

Liable Organisations

These rules apply not just to businesses, but to clubs, institutions, charities and trusts as well as virtually any other organisation. However, some organisations may benefit from a reduced rate or even an exemption.

The VAT rules apply to organisations that provide products or services to consumers or other businesses. The definition used for goods and services is quite broad. For example, an organisation that makes its money through charging people for entry to its premises, such as a museum or gallery, will be liable for VAT under these rules.

VAT Rates

The standard rate of VAT is 20%. This is usually added on top of an items price and charged to the consumer as an extra, rather than taken out of a business’ profits. In effect, the business or organisation collects VAT from the consumer on behalf of HMRC.

Some products and services will only be charged a reduced rate of VAT. This rate is just 5%. Among other things, women’s sanitary products, domestic energy, children’s car seats and many residential building works or renovations come under the reduced rate.

A few items or services will benefit from the “zero rate,” which literally means VAT is 0% and is effectively not charged. Children’s clothing and shoes, newspapers or books, and food that is not served in a restaurant or takeaway are just a few examples of 0% goods. Depending on the percentage of sales that fall under the 0% rate, an organisation may or may not be exempt from registering as a result of the 0% rate.

Voluntary Registration

Some organisations choose to register for VAT voluntarily even if their turnover is below the threshold. This is because doing so can actually provide a financial advantage. Barring some potential administration costs, the fact that VAT is added to the standard price of an item means that businesses do not lose out. However, registering makes a business eligible to reclaim VAT paid to other businesses. This can often mean that businesses find themselves better off overall.

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Chancellor Urges More Personal Banking

Chancellor George Osborne has said to the Federation of Small Business Conference that Britain needs a return to a more “face-to-face” banking style. He hailed Metro Bank and Handelsbanken – both comparatively new to the UK market – as examples of a modern banking approach that is more personal than that offered by most high street firms.

Osborne said that banks should be putting more effort into building the relationships they have with customers. These comments came when asked to comment on the recent decision by Lloyds to cut over 1,000 jobs, partly by halving the number of small business advisors it employs.

He said that he thinks “the future lies in more personal banking,” and added that many customers, especially businesses, do not want to conduct all of their banking online. He also singled out Captain Mainwaring from classic sitcom Dad’s Army as an example of a bank manager who understood how to take a personal approach. Mainwaring may have been comically inept as a military officer but, Osborne pointed out, as a bank manager he was “at the very centre of local life, knew all the businesses, knew the people who ran the businesses and was empowered to make judgements about who had a good idea, who maybe had had a couple of failures in the past – but that wasn’t their fault – and had a good idea going forward.”

Metro Bank and Swedish firm Handelsbanken were singled out by the chancellor as modern banks that still used a traditional approach. Metro Bank was launched four years ago by Vernon Hill, a US financier. It was the first new name in banking to hit the British high street in over a century. Handelsbanken, meanwhile, is a well-established banking firm from Sweden. It is the biggest bank in its home country and now has around 170 UK branches as well. Its focus is on “traditional” banking of the sort praised by Osborne, with the bank manager being active in building relationships with customers.

A key factor that led Osborne to praise the idea of traditional banking is that it allows business customers to build relationships with their bank manager, and the manager to make decisions about whether their ideas should be financed. By contrast, Osborne described the approach of many modern banks as one of “computer says no” and said that the role of personal relationships and individual judgement as “all gone.”

Osborne is not the first to call for a return to traditional, face-to-face banking. In previous years, a number of similar calls have been made by both prominent figures and consumer surveys.

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Energy Firms Told to Play Fair With Smaller Companies

Following extensive recent investigations into the “big six” energy firms and their pricing policies, they have now been told to trade in a fair and competitive way that allows smaller companies to compete and new suppliers to get involved in the energy market. If they fail to do so, they could potentially face significant fines.

Under the new plans from regulator Ofgem, the big six energy suppliers will have to publish their wholesale prices. This will be done two years in advance, and should help ensure openness and honesty in their pricing structures. It will also make things easier for smaller companies who wish to re-sell wholesale energy to either domestic or commercial markets.

These prices shall be published daily, and there shall be two windows in the day, each an hour long, in which this must be done. The result is that small suppliers will be able to buy wholesale power in advance, and do so in a more economical way.

According to Ofgem’s Chief Executive Andrew Wright, “Almost two million customers are with independent suppliers, and we expect these reforms to help these suppliers and any new entrants to grow.”

This could result in noticeable savings both for small suppliers and for household users, according to Darren Braham. Braham, of independent supplier First Utility, says that the big six currently use methods to inflate wholesale prices. The result is an increase in costs for small suppliers, and a corresponding increase in home energy bills.

“First Utility’s analysis suggests that this increases costs by approximately £30 per household per year,” says Braham. “If the industry were changed, these reduced costs could be passed on to customers equating to UK wide savings of almost £1bn from energy bills,”

On top of this, the big six suppliers will now have to provide Ofgem with full account audits and more detailed information about their trading practices. This is designed to ensure that trading practices are fair and that bills are not being unduly increased.

However, according to consumer group Which?, who have been among those calling for investigation into energy firms, these new methods of regulating the energy market have simply “scratched the surface” of the issues at hand. Richard Lloyd, Executive Director of Which, has said: “We want a full competition inquiry so that hard-pressed consumers can be confident that the market works well for them, as well as shareholders, and that the price they pay is fair.”

The new rules will take effect at the end of March this year.

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How to estimate the value of a PPI claim

The PPI scam has caused a big furore in the UK for the past few years with more and more people registering complaints against their banks and lenders. The PPI fraud has occurred mainly due to gross mis-selling of PPI policies by banks and other financial providers to the detriment to millions of customers.

Assessing the Amount in PPI Claims

The precise value of the claim amount cannot be calculated easily. A PPI calculator may help in working out the amount of money that you are eligible for in compensation. The amount of the loan with which you had bought the policy along with the duration will be compared with the amount that was repaid. With the amount that is calculated, the cost of interest and the added 8% that the court would include for the compensation will be the total amount of PPI refund you would get.

Arriving at an Estimate

While assessing the claim, the provider should also include the losses you had incurred due to the mis-sold policy like arrear amounts that had arisen due to the loan. You can also use the money to pay off the provider in case you have an outstanding debt. A rough estimate can be made under following incidents.

  • If you know the monthly payment you make for the PPI. This is multiplied by the duration of the loan to arrive at the cost figure.
  • You can also multiply monthly dues by the duration of the loan and subtract 15% from the total amount. Though this is generally the cost of the insurance, it can range from 10% to 30%.

Once you have assessed the value of the claim you will get, you can approach the lender for compensation. It may be a long and possibly frustrating process – therefore remember that you can approach the Financial Ombudsman Service for help if you feel you are getting nowhere (though they do have a long waiting list).  A quicker and easier way to get the compensation is through a reputable PPI claim agency such as the  Such companies do all the work for you though they do charge a percentage of your compensation amount if they win it for you.

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UK Retail Gets Boost

Recent figures have shown that UK retail experienced a boost last month as sales increased. November saw a 0.3% increase in sales, according to the Office for National Statistics (ONS).

November’s growth in UK retail also seems to represent an overall increase when a slightly longer-term viewpoint is taken. The figures also place sales 2% higher than the levels seen a year earlier in November 2012, evidencing overall growth across the past twelve months.

This is obviously good news for British retailers, but many also take it as a positive step for the country as a whole. Retail performance is considered one of the most useful indicators of consumer confidence. As such, the boost to retail is being tentatively accepted as a good omen for the UK economy, and for the financial situations of members of the public.

The increase was largely driven by apparel. Sales of clothes, shoes and textiles grew by 3.8% in the period. This has led many to point towards cold weather as a major force behind the increase in sales. This, it is suggested, encouraged increased purchases of warm clothing, waterproofs, and other winter attire.

This idea has been proposed by the British Retail Consortium (BRC). The BRC pointed out that sales in November were initially slow, but picked up sharply later on as colder weather hit. This would suggest that purchases of warm clothing to cope with seasonal conditions were indeed the key force behind the overall growth in UK retail.

Online retail also saw growth, according to the ONS. It was reported that, when sales of fuel are excluded, purchases made online grew significantly, with 11.9% of all purchases in November being made online. The UK is already the developed world’s most prolific nation when it comes to buying online, but the levels seen last month set a new record. With significant online sales being forecast for December, it remains to be seen whether this record will stand when the next round of figures are released.

According to economist David Tinsley, overall the fourth quarter has shown a drop in sales, but he points out that “this may reflect a pause rather than a downtrend.” Overall, Tinsley took a reserved positive approach to November’s figures, calling the increase “decent.”

Tinsley overall concluded that “a softer retail picture may help assuage some fears that growth is currently just being driven by consumer spending.”



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Three Ways to Splash out That Might Actually Boost Your Assets

We all like to splash out on the odd extravagance. Whether it’s something practical like some work on your home, a little treat like a new car, or the start of a new hobby, it’s nice to have something new that you wouldn’t buy every day. But sometimes it’s possible to splash out on something without completely losing money. True, you won’t have your money in cash or a bank balance anymore, but it might be possible to keep or even increase that money tied up in possessions.

Home Improvements

It’s nice to refresh your home environment or add something new to your property. Some home improvements will increase the value of your property by a greater amount than you have spent. In terms of your net assets, you will therefore have profited. Kitchen remodelling is one enhancement to your home that will almost certainly justify the expense. It is also possible that a remodelled bathroom or simple change of décor will do the same. Any improvement that adds living space is also likely to make up for the cost with increased property value. This could mean an extension, loft conversion or even a summerhouse.

Vintage Cars

If you have a weakness for cars, then it would be nice to treat yourself to a new vehicle. But the problem is that cars are a big purchase, and notorious for losing value as they gain age and mileage. However, vintage and veteran cars are a major exception to this rule. Mileage is virtually meaningless in terms of value, and age will only make them more antique and more collectible. As such, you are not likely to lose your investment and it may well increase. Unlike a property, a car will also be easy to sell if you decide you want the money after all. Buying a vintage car that needs work can make an interesting restoration project and be a sound investment at the same time.

Start a Collection

Starting a collection can be an interesting hobby and a safe investment. Countless different items are popularly collected including coins, stamps, watches, rare vinyl records and vintage electronics. Whatever you decide to collect, as long as you research your purchases to ensure you are getting a fair price you are unlikely to lose your money permanently. There will always be demand from collectors to buy any items you choose to sell. Value can go up and down, but almost always trend upwards as items get older. If you do decide to sell, you have a great chance of making your money back or bringing in a profit. However, if you find prices are low when you want to sell you may have to choose between swallowing a small loss or waiting for values to go up again.

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Renting Out a Parking Space

A popular way to make money is by renting out a room. What many people don’t realise is that they can also rent out spare parking spaces. If you are live in a city, near an industrial area, or in another convenient location for businesses, you might find a professional willing to pay good prices to park in your space.

Why do People Rent Parking Spaces?

In popular locations such as cities, large towns, and industrial areas, parking can be difficult. Even if a business provides parking for its staff, this will frequently not be enough for everybody. Parking on the street and in public car parks becomes highly competitive, and it is often difficult and time-consuming to find a suitable space. For this reason, many professionals are more than willing to pay for the use of a nearby private space. They consider it more than worth the price to solve their parking problems with a single, consistently-available parking place. If you have an allocated parking space or driveway you don’t use, you might be able to take advantage of this. This mostly applies to people whose homes are near business areas, but there can also be demand near train stations, as well as around airports.  Recently, the practice has even earned vocal support from government officials when its practicality seemed under threat, being described as a “common sense” way to earn private income.

How Much Money can be Made?

It is very difficult to put an exact figure on it. It depends on where exactly you live, how high demand is, and the sort of people who will be interested in renting the space. In some of the areas with the strongest demand, spaces can earn upwards of £200 monthly. However, not all areas even approach this level. Nonetheless, if you aren’t using your space then any income from letting somebody else park there during working hours is easy-earned. It is best to see if you can find out whether other people in your area are offering spaces for rent and how much they charge, in order to get a more tailored idea.

How can I Make my Space Available to Rent?

Often, people offer their parking spaces for rental in the traditional way. Local newspapers, notice boards in shops, and online ad boards such as Gumtree are all good places to put a private advert. However, there is also a more modern and specialist option. Dedicated websites have sprung up, devoted to helping match up people with parking spaces to let and those who are interested in renting them. Even if you know which method you want to use, it is useful to look at classified adverts and dedicated websites. This will help you assess what others are charging, and get an idea how much you could make.

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NMW Offenders Will Be Named And Shamed

The government has set up plans to start actively naming and shaming employers who overlook the national minimum wage laws this autumn, the Department for Business, Innovation and Skills (BIS) has announced. The policy is aimed at embarrassing hundreds of companies which pay below the minimum wage of £6.19 for people over 21. It is hoped that the risk of exposure to public scrutiny will force companies to rethink their below minimum wage payments to their employees.

Only last year, 736 employers were found by HMRC who were paying staff wages below the national minimum wage, leading to the recovery of £3.9m in unpaid wages for more than 26,500 workers. Until now, the following recovery process has always remained secret. The HMRC was simply unable to confirm that inspectors have targeted large multinationals and high street chains even when they issue rebates to former staff. Since the rules were first relaxed, back in 2011, to allow authorities to name and shame the worst offenders, only one company has been exposed. Many unions and campaigners praised Friday’s announcement as a step forward but called for further action. The business minister Jo Swinson admitted that the current system of issuing financial penalties has not been successful in deterring companies from denying workers a legal wage. “Certainly the vast majority of those if not all should have been named,” the business minister said. I am introducing these changes to make sure that we do pursue employers that aren’t properly living up to the law and paying their workers a proper wage. And of course it’s quite right that when you have a system, that you review and see if it’s working, and if it’s not working then you make changes and work out what you can do to improve things, and that’s exactly what we’re doing.”

The business minister, Swinson, also added that it was unfair to businesses that respected the law not to penalise those that simply ignored it. “I understand that employers won’t want to be named, but of course we’re only talking about employers that are breaking the law and the vast majority of employers are law-abiding, pay their employees properly, and therefore they shouldn’t be disadvantaged by some of their competitors that might be getting away with paying less than the minimum wage.” Frances O’Grady, the TUC general secretary, expressed her support for the positive move: “It is right to name and shame the minimum wage rogues, so that other employers who think they can get away with paying illegal poverty wages get the message loud and clear that cheating does not pay. At the moment all employers who have been found guilty of cheating workers out of a legal wage have to pay a financial penalty, but as this takes place behind closed doors justice is not seen to be done.”


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Adding £9.9bn to the UK economy: The 2012 Olympics

Research suggests that the 2012 London Olympics resulted in a increase of trade and investment in the UK worth £9.9bn.  A UK Trade & Investment Department (UKTI) report suggests that new contracts, foreign investment and sales were mainly due to the success of the Games. Speaking to BBC Radio, Prime Minister David Cameron stated that ‘a lot of deals were done at the Games’. He went on to state that much of the work for the Olympic park and stadium for the Sochi Winter Olympics in 2014 was ‘designed and built by British businesses’.

The report itself credits the Olympics with creating, amongst other economic benefits, “additional inward investment” worth £2.5bn, 58% of which was outside London. Sales of Olympic related promotions were achieved by the Foreign Office and UKTI worth £5.9bn, and £1.5bn of additional high value contracts overseas (designing stadia in other countries, etc).

Many economists and the Federation of Small Businesses (FSB), whilst welcoming the report, remains skeptical as to the claims. They claim that it is impossible to measure exactly how much foreign investment and economic activity was directly generated from the Games, and call the report ‘far fetched’ and ‘creative accounting’. Outside London, the impact of the Games had been less felt. Indeed, the FSB’s Mike Cherry went as far as to state that outside London “the contracts we were expecting really didn’t materialise.”

The government stands by the report, with Business Secretary Vince Cable, in a speech supportive of the findings, claiming that by 2020 the Games (which cost the UK £8.9bn) would have brought economic benefits of up to £40bn to the UK. Industries and businesses that were involved with the Games, and have seen a subsequent boost to their standing and reputation and business and contracts, are similarly supportive.

Economic advantages or otherwise aside, the sport also highlights the impact of the Games on sport and regeneration. The amazing Games volunteers inspired more people to volunteer in their communities. While the National Council for Voluntary Organisations agrees with this statement, it also highlighted that funding cuts to the voluntary sector would negatively impact on the Games legacy.

Turning to the legacy of the Games, the report found that the expected long term post- Olympic jobs increase for London had failed to materialise, with only a fraction of people going into the predicted jobs.  Many, however, say that the economic value of the Games’ legacy will take many years to be fully achieved, and that the legacy will show long term value and benefits. In this respect, International Olympic Committee president Jacques Rogge said that the Games “have definitively served as a catalyst for development and improvements, both tangible and intangible, which would otherwise have taken decades to achieve.”

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Make Money, Rent a Room

The government’s new rent-a-room scheme allows you to earn income by renting out a spare room to a tenant. This is a great way to make extra money, even if you split it with your partner. It is also a good business venture to make profit by seeing it as rental income. You will not be charged tax up to £4250 per year but over it you will need to declare it as income tax.

The landlord cannot claim council tax, insurance or basic expenses from the tenant. Also, annual fire and boiler safety checks must be taken out. The room must be well equipped but needs to feel part of your home with a communal kitchen, dining and washroom facilities.

Before you rent a room you should ensure that your mortgage lenders are aware of your intention to rent and make sure that you have adequate home insurance with both contents and building covered, however this may increase the price of the insurance depending upon your insurer.

There are different types of tenants however it is worth bearing in mind that some are more reliable than others. Lodgers may include students travelling abroad who are looking for a homely atmosphere, young employed people unable to get on the property ladder who work nearby so it is more convenient for them and also people who go to festivals or concerts. Make sure you check your lodger for any criminal records, which is why it may be an idea to obtain a reference to check for this prior to letting the room out, as any criminal record may affect your insurance cost. Carrying out these background checks ensure that you are not liable in the future.

Renting a room is a great way of making money but it can be seasonal so you should not depend on it as a main source of income.

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