Explain VAT in 5 minutes is it possible? I’ve been getting a lot of questions recently about basic practicalities of the VAT. I thought I would spend a few minutes to highlight some basics and also throw in a few planning points.
To cover all the complexities of VAT in 5 minutes is plainly an impossibility. I just could not cover all the issues or go into any details but nevertheless, I think you will learn something today. Please bear in mind these limitations when listening to this week’s soundbite and get in touch if you have any questions, that is what we are here for.
Once in a decade!
For the first time in a decade the Bank of England has raised interest rates and the official bank rate has increased from 0.25% to 0.5%. If you look at the media coverage, this seems like a big deal but for some of us, we wonder what all the fuss is about.
Are you one of those people who remembers mortgages at over 16% or the years when interest rates were many times higher than they are now. One-quarter of one percent does not sound like anything to get excited about.
The move reverses the cut made in the wake of the vote to leave the European Union. Some have said that this is to give them somewhere to go in the face of a poor Brexit deal. To be fair it is the only tool they have to counter inflation which is now at 3%. So let us see if this works.
Four Million Households Affected
It is estimated that four million households will face higher mortgage interest payments after the rise. Savers will be a little happier but it is only 0.25%. Annuity rates should also improve, a little.
The main losers will be households with a variable rate mortgage. Bank governor Mark Carney expects banks to pass on the rate rise to savers but said many mortgages, loans and credit cards would not see an immediate impact.
The Bank estimates that almost two million mortgage holders have never experienced an interest rate rise since taking out a mortgage. Some of us are a bit longer in the tooth and can’t get excited by this move.
VAT in 5 minutes!
Is it even possible to do VAT in less than 5 minutes? Yes, if I skip the difficult bits. VAT is a complicated tax and, as each administration takes office they tinker with the edges, usually to pander to public pressure about a perceived unfairness or to support some public policy or other. In this sound bite, I will explain the basics along with some practical planning points.
In next weeks sound bite I will look at how VAT impacts on the life of your business, does it increase or decrease profits, choosing between the different options open to you and some strategies you can use either to save tax or just plain simplify the administrative burden.
As ever, any thoughts or questions on VAT or other aspects of tax planning, please call or email.
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The Long Partnership