M T writes: After the news that the rate of Vat was being cut from 17.5% to
15%, one of my customers asked me to re-invoice him in December at the lower
rate of Vat. Am I allowed to do this?
The Vat rate you should apply will depend on what you supplied, when you
supplied it and when the invoice was raised, writes Adrian Houstoun, Vat
partner at Kingston Smith LLP. The reduction in Vat from 17.5% to 15% is
intended to cover standard-rated supplies made between December 1, 2008 and
December 31, 2009.
In general, you should apply the tax rate at the “basic tax point”, but if
there is an “actual tax point”, then that should be used.
A basic tax point for goods is the date the goods were sent to a customer. For
services, the basic tax point is when the work is complete.
An actual tax point occurs if you raise a Vat invoice or receive payment
before the basic tax point, or the point you raise a Vat invoice any time up
to 14 days after the basic tax point.
So, the new rate of 15% will apply to supplies made on or after November 18,
provided payment is received and the Vat invoice is issued on or after
December 1. If a payment has been received or invoice issued using the old
17.5% rate before December 1 for goods or services that will be provided on
or after that date, businesses can choose to leave the Vat at 17.5% or use
the new rate of 15% and refund the difference to the customer.
You have already invoiced the customer, and presumably delivered the goods, so
this has created the actual tax point and you cannot re-invoice at the lower
rate.
GET AGREEMENT TO LAY OFF STAFF
A D writes: I am considering cutting hours or laying off staff without pay
to cut costs. This is only a temporary measure but I wanted to seek advice
on the matter before proceeding.
Employees can be laid off without pay only where there is a specific clause in
their contract, writes Peter Done, managing director of Peninsula.
A lay-off is when employees are not provided with work and the situation is
expected to be only temporary. You will only be able to instigate lay-offs
if there is a contractual agreement between you and the workforce, or
agreement between the company and a recognised trade union. If there is no
contractual right you will need a written agreement between the company and
its workforce.
If you have to lay off employees then they may be entitled to a
statutory-guarantee payment. Payment is limited to a maximum of five days in
any three months. On days when a guarantee payment is not payable employees
may be able to claim Jobseekers’ Allowance and should contact their local
Jobcentre about eligibility.
Short-time working occurs when staff are instructed to work for fewer days
each week, or for fewer hours during the working day. You must have the
right to invoke lay-off or short-time working and to reduce the amount of
pay, otherwise this is a breach of contract and an unauthorised deduction of
wages. Normal practice would be for the workforce or trade union to agree to
short-time working as an alternative to redundancies, but consultation is
essential.
Where short-time working is introduced without justification or implied
rights, or if procedures are not followed, employees may claim that your
actions amount to a dismissal and take you to a tribunal.
Finally, if employees are laid off or put on short-time working for four
consecutive weeks or for six weeks in a period of 13 weeks, they can serve
you written notice that they consider themselves dismissed on grounds of
redundancy and intend to claim a redundancy payment.
Kingston Smith LLP, the chartered accountant, and Peninsula, the
employment-law firm, can advise owner-managers on their problems.
Send questions to The Business Doctor, The Sunday Times, 1 Pennington Street,
London E98 1ST, or fax to 020 7782 5765. Advice is given without legal
responsibility.
bizdoc@kingstonsmith.co.uk
