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VAT Benchmarking
Newsletter issue - February 2015
HMRC are currently writing to around 7,500 furniture retailers and car repair businesses asking the owners to check the figures reported on their VAT returns. If you receive one of those letters, don't panic. HMRC do not believe your VAT return is wrong, they are just asking you to double check your sales and purchase figures.
The HMRC letter asks you to work out your VAT mark-up ratio by comparing the difference between your sales and purchases (i.e. gross profit), as a percentage of the total of the purchase costs as reported on your VAT return.
HMRC then asks you to benchmark your VAT mark-up ratio to the standard ratios for your business sector, which are provided in the letter. It suggests you should calculate the VAT mark-up ratios from VAT returns submitted in the last 12 months, and compare those to the standard mark-up ratios for your trade sector. If your VAT mark-up ratio falls outside the standard range, you should review the figures to be included in boxes 6 and 7 on your next VAT return.
This all sounds very complicated, and it is. HMRC are trying to bamboozle you with ratios and percentages. In fact you are not obliged to do anything in response to HMRC's letter. It does not ask for a reply and it is not part of a tax investigation.
If you would like us to double-check the amounts reported on your VAT returns we would be happy to do so. Sometimes it is a good idea to do a random check that no sales or purchases have been left out accidentally.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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