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Hello,
I’m new to this forum, so i may be asking a question that’s been asked before.
I had a VAT inspection yesterday, all went well, except for one thing.
They informed me that I had been on the wrong flat rate for 4 years.
I am a carpenter, I work in the TV and film industry, so, that is the rate I had been put on. 13%.
They say i should have been on the rate for “Labour only or Construction services” rate, which is 14.5%
I’ve been looking through the HMRC website and can’t find any clarification on why a Scenic Carpenter should not be on the TV and film rate.
Can anyone direct me to somewhere i can find out please.HMRC’s advice for businesses is to choose the trade sector that best matches the activities of your business. In some cases, this is quite simple but there are instances where the activities of the business are relevant to multiple sectors.
The law (SI 1995/2518, Reg 55H) states that “the appropriate percentage shall be that specified in the table for the category of business that he is expected, at the relevant date, on reasonable grounds, to carry on in that period”.
Notice 733 describes the procedure for a business choosing its rate, stating that: “The descriptions of the sectors are not technical and use ordinary English. So if there is a match or a close fit, use that sector.”
In summary the rules can be summed up as:
1. if you are obviously X category but you has chosen Y category, then you or HMRC can correct this retrospectively as this is “an error”.
2. if you could be X or Y and has chosen X, but HMRC prefer Y: then HMRC cannot assess for back tax (because the trader’s choice was reasonable), but HMRC can insist on Y going forward (because that is also a reasonable decision and the tribunal cannot overturn it).
Hope this helps.
If you are struggling to come to a decision you can ask HMRC for guidance but ultimately the decision falls with you.
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