Founded 35 years ago, Mechatronic was one of the first in the UK to introduce ‘off the shelf’ robotics, launching its Robopod system in 2014. This system, now a significant revenue driver, offers solutions for automating repetitive tasks such as assembly, ultrasonic welding, glueing, dispensing, inspection, laser marking, and machine tending. The Robopod can be adapted and reconfigured for various applications, making it a versatile tool for manufacturers.

Tony Parker-Watkins of Mechatronic Production Systems commented on the growing role of robotics: “Robots can now easily take on simple repetitive tasks within factories, improving efficiency and freeing up humans to focus on more skilled and productive work. With labour shortages and growing awareness of the potential for automation, our solutions are attracting interest from companies throughout Europe. We currently have a strong order book and record sales pipeline. The funding will enable us to expand our production capacity.”

Jody Tableporter, director at the British Business Bank, highlighted the fund’s impact: “The Midlands Engine Investment Fund II invests in innovative, solution-driven businesses across the Midlands. With a clear commitment to providing bespoke solutions for clients in various sectors, Mechatronic Production Systems will use the funding to meet growing demand and create local jobs – showcasing the fund’s impact in the region.”

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Common Examples of Non-Coded Income

Non-coded income can come from various sources, including:

• Investment Income: Interest from savings, dividends from shares, or rental income from property are often not included in your tax code, especially if they are significant amounts.
• Freelance or Self-Employment Income: If you earn money from freelance work or run your own business in addition to a PAYE job, this income is typically considered non-coded.
• Untaxed Earnings or Benefits: Some types of income, such as benefits-in-kind (like a company car or medical insurance), or income from casual work, might not be included in your tax code.
• Foreign Income: Income earned abroad that is not taxed at source in the UK often falls into the non-coded category, requiring you to declare it separately.
• Pension Income: If you receive a pension not included in your tax code, it will be treated as non-coded income.

How Is Non-Coded Income Taxed?

Non-coded income is usually taxed in one of the following ways:

• Self Assessment: You may need to file a Self Assessment tax return if you have significant non-coded income. This process involves declaring all your income, calculating the tax you owe, and paying it directly to HMRC.
• Adjustment to Tax Code: In some cases, HMRC may adjust your tax code during the tax year if they become aware of additional income that hasn’t been included. This adjustment may increase the amount of tax you pay through PAYE to account for the non-coded income.
• Voluntary Payment: If you realize you have non-coded income that hasn’t been taxed, you can voluntarily pay the tax owed through HMRC’s online payment system.

Importance of Reporting Non-Coded Income

Correctly reporting non-coded income to HM Revenue & Customs (HMRC) is crucial for ensuring that you meet your tax obligations. Failing to report this type of income can lead to underpayment of tax, which could result in penalties or interest charges. These penalties can add up quickly, making it even more costly to rectify the situation later on. By staying on top of your tax responsibilities, you can avoid unnecessary financial burdens and ensure that your tax returns are accurate and complete.

In addition to avoiding penalties, keeping accurate records of all your income sources is essential for maintaining your overall financial health. Proper documentation allows you to track your earnings, identify any discrepancies, and ensure that you are fully aware of your taxable income. This is especially important if you have multiple income streams, such as investments, freelance work, or rental income, which may not be automatically included in your tax code. By diligently recording and reporting all non-coded income, you can ensure that your tax affairs are in order and reduce the risk of unexpected tax liabilities.

Conclusion

Non-coded income is any income not accounted for in your tax code, meaning it hasn’t been automatically taxed through the PAYE system. This includes income from investments, freelance work, untaxed earnings, foreign income, and more. To stay compliant with tax laws, it’s crucial to report non-coded income accurately and ensure that any tax due is paid on time.

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VAT on Vans: The Basics

In the UK, VAT is typically charged at a standard rate of 20% on the sale of most goods and services, including vehicles. VAT is usually added to the sale price when you purchase a new van from a dealership. The seller then passes this VAT to HM Revenue & Customs (HMRC). However, the situation is not always straightforward, and there are scenarios where a van might be sold without VAT or where VAT is not reclaimable.

Second-Hand Vans and VAT

One of the primary reasons why some vans are sold without VAT is because they are second-hand. The VAT rules for second-hand vehicles differ from those for new ones. If a van is sold by a private individual or by a business that is not VAT-registered, then no VAT will be charged. This is because VAT was already paid when the van was originally purchased, and it is not applicable again in subsequent sales unless the seller is VAT-registered.

Margin Scheme for VAT

Another scenario where VAT might not appear on the sale price of a second-hand van is when the seller is using the VAT Margin Scheme. This scheme allows VAT-registered businesses to pay VAT only on the profit margin made on selling a second-hand vehicle rather than on the full sale price. As a result, the buyer may not see a separate VAT charge on their invoice, though the seller still accounts for the VAT.

Vans Sold as VAT-Exempt

Certain types of vans may be sold as VAT-exempt, meaning no VAT is charged on the sale. This could be the case if a VAT-exempt organization, such as a charity or a government body, is selling the van. Additionally, vans that are sold for export outside of the UK may also be exempt from VAT, depending on the circumstances and the destination country’s VAT rules.

Business and Personal Use

Whether VAT applies to a van can also depend on how the van is intended to be used. If you are buying a van for business use and your business is VAT-registered, you will typically be charged VAT on the purchase, but you may be able to reclaim this VAT through your VAT return. On the other hand, if the van is being purchased for personal use, VAT may still apply, but it cannot be reclaimed.

VAT Reclaim on Vans

If you are a VAT-registered business purchasing a van, you can reclaim the VAT paid on the purchase as long as the van is used solely for business purposes. However, if the van is used for both business and personal use, you can only reclaim a portion of the VAT proportionate to the business use.

Conclusion

Not every van has VAT; understanding why can help you navigate the purchasing process more effectively. The presence or absence of VAT on a van depends on several factors, including whether the van is new or second-hand, the seller’s VAT status, and the intended use of the van. By being aware of these factors, you can make more informed decisions and potentially save money when buying a van for your business or personal use.

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Understanding the VAT Turnover Threshold

The VAT threshold is when a business must register for VAT and start charging it on their sales. The threshold is based on the total turnover of taxable goods and services supplied within the UK over a rolling 12-month period. Once your business crosses this threshold, you must legally register for VAT, charge VAT on your sales, and submit VAT returns to HM Revenue & Customs (HMRC).

The Idea of Forming a Second Ltd Company

The concept of forming a second limited company to avoid the VAT threshold might seem appealing. The idea is to split your business operations across two separate legal entities, each with its turnover. By keeping the turnover of each company below the VAT threshold, you might think you can avoid VAT registration altogether. However, this approach is fraught with legal risks.

HMRC’s View on Artificial Separation

HMRC is well aware of the practice of forming multiple companies to avoid VAT registration, and they refer to it as “artificial separation.” If HMRC believes that two or more businesses have been deliberately separated to stay below the VAT threshold, it can treat those businesses as a single entity for VAT purposes. This means that HMRC can combine the turnover of both companies and require them to register for VAT.

Indicators of Artificial Separation

HMRC looks at several factors to determine whether businesses have been artificially separated, including:

• Common control: Suspicion is raised if the same individuals or closely related parties control both companies.
• Shared resources: If the companies share premises, staff, equipment, or other resources, it may indicate that they are not genuinely independent businesses.
• Interdependence: If one company’s business relies heavily on the other, it can be seen as evidence of artificial separation.

If HMRC concludes that businesses are artificially separated, they will backdate the VAT registration, and your business could face substantial penalties and interest on unpaid VAT.

Legal and Practical Implications

Forming a second limited company is not illegal, and there can be legitimate reasons for doing so. However, if the primary purpose is to avoid VAT registration, you could find yourself in a difficult position. Not only could HMRC enforce VAT registration, but they might also investigate your business practices, leading to fines and damage to your reputation.

Moreover, operating multiple companies comes with additional administrative burdens, such as maintaining separate accounts, filing multiple sets of accounts with Companies House, and managing payroll and taxes for each entity. These complexities can outweigh any perceived benefits of staying below the VAT threshold.

Conclusion

While the idea of forming a second limited company to avoid the VAT turnover threshold might seem tempting, it is fraught with risks and potential legal consequences. HMRC takes a dim view of artificial separation, and if they suspect that businesses are being split solely to avoid VAT registration, they will act decisively. Rather than trying to find loopholes, it is often better to focus on growing your business and managing VAT compliance responsibly. If you are unsure about your VAT obligations or considering forming a second company, it is advisable to seek professional legal and tax advice.

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Understanding VAT and Its Importance

Value Added Tax (VAT) is a consumption tax levied on most goods and services businesses in the UK provide. It is an important source of revenue for the government, helping fund public services. Businesses with a turnover above a certain threshold must register for VAT and charge it on their sales, passing the tax collected to HM Revenue & Customs (HMRC). The current standard VAT rate in the UK is 20%, although there are reduced rates for certain goods and services.

Quoting Prices Without VAT: What the Law Says

In the UK, whether or not you can quote prices without VAT largely depends on who your customers are. The law distinguishes between business-to-consumer (B2C) transactions and business-to-business (B2B) transactions.

Business to Consumer (B2C) Sales

If your business primarily sells to consumers (B2C), the law requires you to include VAT in the quoted prices. Consumers are generally not VAT-registered; therefore, the price they see is the price they expect to pay. Failing to include VAT in quoted prices when selling to consumers can be considered misleading and could result in legal action or fines. The prices must be clear and transparent, showing the full cost of the product or service.

Business to Business (B2B) Sales

You can quote prices excluding VAT for business-to-business (B2B) transactions where your customers are other VAT-registered businesses. This is because businesses can usually reclaim the VAT they pay on their purchases as part of their VAT return. However, it is still important to clarify to the customer that the quoted prices are exclusive of VAT. This transparency helps avoid confusion and ensures that both parties know the actual cost.

Best Practices for Quoting Prices

To stay compliant and maintain good business practices, consider the following guidelines:

• Always clarify whether VAT is included: Make it clear whether the prices you quote are inclusive or exclusive of VAT. This can be done by adding a simple note such as “Price excludes VAT” or “Price includes VAT at 20%” next to the quoted amount.
• Tailor your pricing communication: Adjust how you present prices depending on whether you deal with consumers or businesses. For B2C, ensure VAT is included; for B2B, you may quote prices excluding VAT, but always state this clearly.
• Keep records: Ensure you have proper documentation for how prices were quoted and what was communicated to the customer. This can protect your business in case of disputes.

Conclusion

In the UK, quoting prices without VAT is legal, but it comes with conditions depending on the nature of your customer. VAT must be included in the quoted price for consumer sales to ensure transparency and compliance with the law. For business customers, it is permissible to quote prices excluding VAT, provided this is clearly communicated. By adhering to these rules, businesses can avoid legal complications and maintain customer trust.

The post Is it Legal to Quote Prices Without VAT in the UK? appeared first on Midlands Business News.

Understanding VAT Qualifying

VAT qualifying refers to whether a product or service meets specific eligibility criteria for VAT treatment. This means that a transaction can either be subject to VAT, benefit from VAT relief, or be exempt from VAT. The term determines how VAT applies to various goods and services.

Key Aspects of VAT Qualifying

VAT Registration

For a business to qualify for VAT, it must register for VAT with HM Revenue & Customs (HMRC). VAT registration is a requirement for businesses that exceed a certain turnover threshold, which varies depending on the country and specific regulations. Once registered, a business can charge VAT on its goods and services and become eligible to reclaim VAT on its business-related purchases.

VAT Relief and Exemptions

Certain goods and services may qualify for VAT relief or exemptions. These reliefs and exemptions are designed to reduce the tax burden on specific sectors or activities. For example, many medical supplies and services, educational materials, and charitable donations are exempt from VAT. This means businesses involved in these areas do not need to charge VAT on their products or services, and in some cases, they can reclaim VAT on related purchases.

Business Expenses

For businesses, VAT qualifying is essential for managing VAT on business expenses. When a company makes a purchase used for VATable activities, it can usually reclaim the VAT paid on that purchase. To qualify for VAT reclaim, the purchase must be related to the business’s taxable supplies and include a VAT invoice with the necessary details. This process helps companies to reduce their overall operating costs by reclaiming VAT on their expenditures.

How VAT Qualifying Affects Your Transactions

For Businesses

Understanding VAT qualifying is crucial for effective financial management if you run a VAT-registered business. Knowing which transactions are subject to VAT and which are exempt and how to handle VAT on your purchases can help ensure compliance with tax regulations. Properly qualifying transactions also allows businesses to optimize their VAT reclaim, improving their financial efficiency.

For Consumers

For consumers, VAT qualifying may only directly impact if they buy items for business use. Personal purchases are generally subject to VAT on eligible products and services. However, if you’re buying for a business, understanding VAT qualifying helps ensure you correctly manage your purchases and have the correct documentation for reclaiming VAT if applicable.

How to Determine If Something Is VAT Qualifying

Check VAT Status

If you are a business owner, ensure that you are VAT-registered and familiar with the VAT regulations that apply to your purchases and sales. You can consult HMRC guidelines or seek advice from a tax professional to determine if your transactions qualify for VAT.

Review Exemptions and Reliefs

Different industries and sectors may benefit from specific VAT reliefs or exemptions. It is essential to review these exemptions to understand if they apply to your business activities. For example, charities and educational institutions often benefit from VAT exemptions on certain goods and services.

Consult Documentation

When making purchases, verify that your invoices or receipts include the necessary VAT details if you need to reclaim VAT. Ensure that the documentation provided by the seller is VAT-compliant and consists of all required information.

Conclusion

In summary, “VAT qualifying” refers to whether goods or services meet the criteria for VAT treatment. For businesses, it’s crucial to understand how VAT applies to your transactions to ensure compliance and optimize VAT reclaim. Consumers generally encounter VAT in personal purchases, but understanding VAT qualifying can still be valuable for managing business-related expenses. If you have any doubts, consulting with a tax professional or referring to HMRC guidelines can provide clarity and help you navigate VAT requirements effectively.

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What is VAT?

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of production or distribution. It is a widely used tax system in many countries around the world. The idea behind VAT is to tax the incremental value that is added at each step of the supply chain, from the initial production to the final sale to the consumer.

How Does VAT Work?

VAT is implemented at various stages of the supply chain. For instance, when a manufacturer produces goods, they pay VAT on the raw materials they purchase. When these goods are sold to a retailer, the retailer pays VAT on the purchase price. Finally, when the consumer buys the product from the retailer, they pay VAT on the final sale price. At each stage, businesses can often reclaim the VAT they’ve paid on their purchases, ensuring that the tax burden ultimately falls on the end consumer.

What Does ‘Plus VAT’ Mean?

The term “plus VAT” indicates that the price quoted for a product or service does not include the Value Added Tax. It is a way for businesses to communicate that the listed price excludes VAT, and the actual amount payable will be higher once VAT is added.

Example:

• Price of a product: £100
• VAT rate: 20%
• Total price (including VAT): £100 + (£100 * 0.20) = £120

In this example, the product’s price is £100 plus VAT, which means the consumer will pay a total of £120.

Why Use ‘Plus VAT’ Pricing?

Transparency: Listing prices as “plus VAT” allows businesses to show the base price of goods or services separately from the tax. This is particularly useful for business-to-business (B2B) transactions where companies can reclaim their paid VAT.

Comparability: It helps in comparing prices across different markets or suppliers. By knowing the base price and the VAT separately, businesses and consumers can better understand the cost structure and make informed purchasing decisions.

How to Calculate VAT?

If your business sells products or services subject to VAT, understanding how to calculate and display prices is crucial. Here’s a guide to help you apply the correct VAT rate and present it on receipts or invoices.

20% Standard Rate of VAT

For products or services subject to the 20% standard rate of VAT:

• Add 20% to the price you charge for the goods or services.
• To do this, multiply the original price by 1.2.

Example:
If you sell sports equipment for £50, multiply £50 by 1.2. The total VAT-inclusive price is £60.

On the receipt or invoice:

• Item Price: £50
• VAT: £10
• Price including VAT: £60

5% Reduced Rate of VAT

For products or services subject to the 5% reduced rate of VAT:

• Add 5% to the price you charge for the goods or services.
• Multiply the original price by 1.05.

Example:
If you sell radiators for £50, multiply £50 by 1.05. The total VAT-inclusive price is £52.50.

On the receipt or invoice:

• Item Price: £50
• VAT: £2.50
• Price including VAT: £52.50

0% Zero Rate of VAT

For products or services subject to the 0% zero rate of VAT:

• Add 0% to the price, which means the price remains unchanged.
• Multiply the original price by 1.

Example:
If you sell a magazine for £5, multiply £5 by 1. The total VAT-inclusive price is £5.

On the receipt or invoice:

• Item Price: £5
• VAT: £0
• Price including VAT: £5

Understanding these rates ensures that you apply the correct VAT to your products or services and present this information clearly to your customers.

VAT Rates Around the World

VAT rates vary significantly across different countries. For instance:

• United Kingdom: 20%
• Germany: 19%
• France: 20%
• Australia: 10%
• Japan: 10%

Understanding the VAT rate in your country is crucial for accurate pricing and budgeting.

Conclusion

In summary, “plus VAT” is a term used to indicate that the price quoted for a product or service does not include the Value Added Tax. This approach offers transparency and comparability, especially in B2B transactions. By understanding how VAT works and how to calculate it, both consumers and businesses can make more informed financial decisions. Whether you are buying or selling, being aware of VAT implications ensures you are well-prepared for the actual costs involved in any transaction.

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