January Questions and Answers

Newsletter issue â€“ January 2024

Q. The turnover of my business has been no higher than Â£75,000 over a 12-month period since we started but has now crept up to Â£92,000. It reached this point on 5 December 2023. What do I need to do about VAT registration?

A: Once your total VAT taxable turnover for the last 12 months goes above the threshold (Â£85,000), you must register for VAT with HMRC. Although you can voluntarily register for VAT if you're below this amount, it doesn't sound as if your business has taken that approach previously.

But now your turnover is at Â£92,000, you need to register with HMRC within 30 days of the end of the month that you went over the threshold. According to HMRC: "Your effective date of registration is the first day of the second month after you go over the threshold."

So, in your case, it means you will need to have registered by 31 January 2024 and your effective registration date will be 1 February 2024.

For any business which realises it's going to go over the Â£85,000 mark in the next 30 days, you have to register by the end of that period. So, in that example, say your company (previously not VAT-registered) brings in a new Â£150,000 deal on 1 January, with payment coming to you within that same month. You would have to register by 30 January.

Lastly, just to clarify what HMRC defines as turnover. It says this is "the total value of everything you sell that is not exempt from VAT."

Q. I have recently started a carpet fitting business but I'm not sure what the rules on the Construction Industry Scheme (CIS) mean for me? I'm the only employee at the moment. Do I have to register?

A: It is mandatory for constructors to register for the CIS. However, there are a number of exceptions. You will not need to register if you only do certain jobs. And, usefully for you in your case, carpet fitting is one example.

Carpet fitting would come under the category of "finishing " under the scheme. That is work which 'renders complete' or 'finishes off' any construction operations, according to the Government's website. But HMRC says of carpet fitting that it is "the only ".

Statement of Practice 12 (1981) "provides that carpet fitting (but no other floor covering) is regarded as excluded from the scheme. However, if carpet fitting is part of a mixed contract, then all the contract comes within the scheme."

Other examples of exceptions in the CIS where you do not have to register if you only do certain jobs include:

architecture and surveying
scaffolding hire (with no labour)
making materials used in construction including plant and machinery
delivering materials
work on construction sites that's clearly not construction - for example, running a canteen

Q. I'm considering starting a scheme for my employees where they can hire a bicycle as an extra staff benefit. Will this be exempt from tax on employment income?

A: Yes, this new scheme you're thinking of offering would be exempt if certain conditions are met. These are:

All staff are offered the chance to hire the bikes
Employees must use the bike primarily for what HMRC describes as 'qualifying journeys'

It's not just the hire of the bikes that counts within these rules; equipment is also allowed. As is providing a voucher for either hiring a bicycle or related equipment. Electrically assisted pedal cycles (EAPCs) are also covered by the exemption.