Summer 2009 Newsletter Content Pot and kettle No more stealth Pensions hit A place in the sun Ready or not... Nice motor Making allowances Good times, bad times Tax-free checkup Three square meals Funny question Dividend rules OK? Too good to be true? Pay my friend Early EIS Mind the halfpennies Just the ticket Flat rate changes Foreign Service This year, next year Partial exemption Penalties Compliance checks Under their eye Howzat? Know your rights Discipline Don't be mean Redundancy Two sorts of absence Warranties

Flat rate changes The VAT Flat Rate Scheme (FRS) is a simplification for small businesses - sales of up to £150,000 a year - which can also save you money. Instead of claiming input tax on your expenses, you keep a bit of the output tax you charge your customers - how much you keep depends on the type of business you are. Most people use the scheme because they keep more than the input tax forgone, but it is also genuinely simpler not having to worry about all the input tax rules. HMR&C have been looking at the rules and they've published an updated guide. There are some helpful changes on the rules for leaving the scheme, but also clarification of some of the disadvantages of using it. A FRS trader has to pay VAT to the taxman even on income that's normally exempt - where no VAT has been charged to the customer. The flat rate is supposed to take into account the average amount of exempt income that different types of trader are likely to have. HMR&C have now made it clear that rental income is treated as chargeable to the FRS if it is owned by a VAT-registered trader, even if it's a buy-to-let residential property that has nothing to do with the rest of the business. There's no problem if the VAT registration is separated from the rental income, for instance by holding one of them in a company. If you operate the FRS, it's worth making sure that you are doing what HMR&C expect - it is featuring more in their enquiries these days. If you want to check, we will be happy to advise you.