With effect from February 1 2014, the existing VAT fuel scale charge is abolished.
From this date, where a farm business pays for fuel used for private journeys made by a self-employed person either sole trader or partner or director of a company, it has four options as to how to deal with the VAT on the cost.
The business can choose not to reclaim the VAT; reclaim VAT only on fuel used for business mileage; reclaim all VAT and repay the VAT in respect of the private mileage; reclaim all VAT on fuel and account for VAT using the new optional flat rate charge. These changes have record-keeping implications. If a business wishes to reclaim all the input VAT on fuel and repay the VAT on private mileage, Revenue & Customs require that detailed mileage records are maintained for six years and available for inspection. If the business wishes to avoid the mileage paperwork, all of the input VAT can be reclaimed and use the new optional flat charge to account for VAT on private mileage.
Details of the new optional flat rate scheme applicable from February 1 2014 are available at www.hmrc.gov.uk/vats
VAT Implications of Renewable Energy
There are many tax aspects to consider when installing a renewable energy project. Capital expenditure on renewable projects should be recorded in the farm records and VAT can be reclaimed on the cost of plant and its installation. The income generated should also be recorded in the income section of the farm records. There is output VAT on electricity exported to the grid which must be paid over the Revenue & Customs as part of the VAT Return. The energy providers who buy green energy from farm generators self-bill farmers for this power, including VAT. There is no VAT on the Feed-in Tariffs income
VAT is administered by Revenue & Customs who require that the farm business maintain records for six years of all farm income and farm expenditure whether there is VAT involved or not. In addition to recording farm income and expenditure, all invoices must be kept for six years and be available to Revenue & Customs.
The acid test of a farm record keeping system is that it supplies to the farmer information as to the trading performance of the farm; the amount of profit for the year to date; the amount of loss and the reason for the loss.
Up to date record keeping enables the farm business to be tax compliant and ensures that VAT refunds are received on time.
(Source – Impartial Reporter – Brian Donaldson – 27/02/2014)