Mixed Supply sales and purchases by Opticians and Hearing Aid Companies.
The way Optical Businesses are treated by HMRC is very different from most other retail concerns and failing to respond to the requirements of the sales tax law on partially exempt businesses can have devastating effects on profitability.
Opticians since winning a notable victory against the imposition by the EU and later by HMRC of vat on spectacles and contact lenses have remained in the sights of many local HMRC inspectors.
It used to be considered the effect on tax take for HMRC by checking small businesses made it unrealistic to consider random visits.
Since the formulation of small business HMRC teams that has changed.
Also the nature of optical businesses has also changed since the days when I co-wrote the Full Cost Apportionment Methodology for Opticians with an Ernst & Young Consultant at HMRC headquarters.
Optical practice income has become much more fee based with exempt and apportioned vat levels on the sales. This has a direct effect on the reclaimable vat on exempt and non-attributable purchases as well as affecting the fraction used to calculate whether the partial exemption de minimis level has been broken.
Check list of what you should be doing to reduce vat costs in sales and ensure fullest reclaims of vat on purchases.
Make sure you account for your sales under the right sales categories.
Agree and have in writing with HMRC an accurate cost apportionment % for specs and c/ls
Apply this % to as much as you can, to repairs, weekly/monthly cl sales and account for refunds under the correct category.
Separate your purchases into exempt, attributable and non-attributable categories. (i.e. what the purchase of the goods or services are used for, not whether they have VAT attached.)
Calculate your sales split. Fees, apportioned and taxable
Calculate your de minimis position before every return or purchase of equipment and goods
Consider ways of purchasing equipment and refits and don’t bunch up lease packages with mixed purchase types
Plan your purchases across the year to spread vat by leasing.
Look for leasing plans that provide capital allowance claims. (See Optilease by Snowbird)
Leaving these calculations to your bookkeeper or accountant months after the year end is very risky.
At Eros Business Consulting when we provide an appraisal of an optical business VAT position we check all the above points and reviewing previous sales and purchase accounts take forward where beneficial a new apportionment rate to local HMRC officers.
Often resulting in back payments of overpaid VAT. At the very least our clients gain peace of mind knowing that they are compliant with tax law and have the best deal to work with.
If you have concerns, we can help.
If you have an agreed and up to date apportionment figure for CLs and Specs or jointly we can provide automatic spread sheet ability with the Eros Auto Vatcalculator.
We leave this with all our clients to make life and little easier each return and it also checks your de minimis level automatically.
You can purchase this for your own use and we will apply your current apportionment percentages within the structure. Supplied on line as an Excel Download all you will need to do is type in your sales figures for the return as well as your totals of the 3 purchase types.
Hey presto your return information is displayed on the last work sheet ready to input to HMRC as well as the auto de minimis check.
The package is available for a one off fee of £50 per practice plus vat usable until vat rates change or your apportionment rates are altered. For a small fee amendments can be made should circumstances change. You can choose either a quarter return or annual return spreadsheet. Mutiple practice groups can choose a programme per branch or can request to have all branches individually itemised for sales purposes with consolidated purchases and one final vat return result.
Composite multi branch sales programmes cost £50 per practice plus an additional set up fee of £100 for 2 - 5 branches and £200 for over 5 branches. All quoted figures attract vat at the standard rate.
Just email email@example.com requesting Eros Auto Vatcalculator. Requesting annual or quarterly format. Single or multi practice use. (If multi state number of practices within same vat group.
Specialist progammes can be prepared where needs are exceptionel.
If required sales category types and their order can also be changed to suit your epos system to allow cut and paste or easier input. (Cost according to time for amendment in software.)
How it works
Type in sales under correct catagories as well as refunds.
The system automatically separates sales into sales types for exempt, part exempt and fully vatable goods.
Instantly and automatically the vat split is calculated and the de minimis reclaim restriction is pre calculated in case de minimis is over shot.
You then type in your three purchase type totals and the vat they incurred.
This area highlights whether de minimis has been breached
Either by exempt and non attributable vat being too high
or by exempt input being > than 50% of all input tax.
On the final worksheet the programme provides the complete result including de minimis calculation and the amounts to record in the HMRC box for the on line return.
Purchase Eros Auto Vatcalculator today by emailing firstname.lastname@example.org. A return invoice and contract will be sent for payment online or by cheque, contract signed and scanned or sent with cheque. The programme will then be shipped online to your chosen destination.
The programme is copyrighted and licensed for use by the end user
Eros De Minimis approximate check spreadsheet programme.
Ever wondered whether making an equipment purchase might put you over the de minimis level?
Our Eros De Minimis Quick Check programme (£10 plus vat) provides a simple ready reckoner for businesses to input the approximate information about their type of operation and play “what if” with exempt purchases they are considering.
The Eros Quick Check will display whether you are in danger of breaking the de minimis level over a year.
If it warns you then you may need advice or help or at the very least consider purchasing the Eros Auto Vatcalculator which will help you accurately account for VAT.
When you are busy looking after patients and the business you don’t always have time to fine tune your VAT position but it could be harming the cost effectiveness of the very business you are achieving.
Purchase Eros De Minimis Quick Check today by emailing email@example.com. A return invoice and contract will be sent for payment online or by cheque, contract signed and scanned or sent with cheque. The programme will then be shipped online to your chosen destination.
The programme is copyrighted and licensed for use by the end user
If you need help, advice or a quick chat call us now.
Bob Hutchinson will be attending Optrafair 2016 and can meet up at the fair. Either call 07785353681 or email. You can also request a meeting by attending two of Eros BCs clients Grafton Optical and Snowbird Finance both showing at Optrafair.
Want to read PHN business briefing on VAT and Partial Exemption. Click here.
Read about case studies of businesses overpaying vat here
For further information please contact
Bob Hutchinson BSc. FCOptom, FSMC
Preston St Mary
Suffolk CO10 9NG
01787 326 468 :: 07785 353 681
Just email your questions and we will chat