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EU VAT CHANGES FOR 2015

The measure allows the countries of the EU membership to apply the reverse charge mechanism for a limited period of time with specific conditions also to be taken under consideration. All of this represents a faster procedure..

More specifically, this new directives apply to digital services (everything that can be downloaded or used online)

The area of sectors where this mechanism can be taken to action is broader and it includes also mobile pones, integrated circuit devices, supply of gas and electricity, telecom services, game consoles, tablet PCs and laptops, cereals and industrial crops and raw and semi-finished materials.

As a seller on the market you are responsable to pay the buyers VAT based in their own country (this means any EU country) nevertheless whether you are an EU based company or not. This new directives are not quantitiy and price aware so by selling one ítem for less than a dollar, new legislature will rules are still being applied.

You are also obliged to store buyers information (their location etc.) for the next 10 years after the deal was executed.

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JULY 2015 BUDGET AT A GLANCE

The key tax announcements of Chancellor George Osborne in his 8 July 2015 Budget.

In his second Budget for the year and the first Conservative Budget since 1996, Mr Osborne honoured his party’s election manifesto promises on tax changes and welfare cuts, and in so doing sought to rebalance the scales between size of the state and the wealth of the citizen

He said it was a Budget for working people and will benefit the whole country. “This is the new settlement”, he says. “A Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create.”.

The Budget is predicted to be in Surplus by 2019/20.

The key announcements were:

  • Tax avoidance – HMRC given £750m extra to tackle avoidance
    Reform of controlled foreign companies regime
    Review disguised employment when working through personal service companies
    Non domiciliaries – from today people born in the UK but with non dom parents cannot claim non dom status themselves
    Non dom tax status abolished from April 2017 for anyone who has been resident in the UK for 15 of the past 20 years.
    Claims management companies charges to be capped
    New 8% surcharge on bank profits from next year. Bank levy will be phased out
    Reform of Vehicle Excise Duty for new cars from 2017
    Fuel duty will remain frozen this year
    Insurance premium tax will be raised to 9.5% from November.
    New enterprise zones for small towns
    Buy to let landlords – tax relief on interest payments to be restricted to basic rate of income tax over a 4 year period from 2017
    Rent a Room allowance to be extended to £7,500 from April 2016
    Inheritance tax – from 2017 there will be phased in a £175,000 allowance against the home. You can pass on up to £1m free of inheritance tax for couples.
    The inheritance tax nil-rate band is currently frozen at £325,000 until April 2018 and will now remain frozen at that amount until April 2021
    Pension tax relief – from 2016 the contribution annual allowance will be tapered down to £10,000 for those earning more than £150,000, as widely predicted
    Green paper on pensions – pensions could be taxed like ISAs
    Secondary market for pension annuities delayed until 2017
    Annual Investment Allowance – set at £200,000 permanently from 1 January 2016
    The Dividend Tax Credit abolished from April 2016 and replaced with a new Dividend Tax Allowance of £5,000 a year. The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Dividends in ISAs not affected
    Corporation tax reduced to 19% in 2017 and 18% by 2020
    Corporation tax relief a company obtains for the cost of ‘goodwill’ will be restricted for all acquisitions and disposals on or after 8 July 2015.
    Freeze working aged benefits for 4 years
    Benefits cap reduced to £23,000 in London and £20,000 outside London
    Lower earnings limit for gradual withdrawal of tax credits
    Limit support for tax credits and universal credit to 2 children from April 2017 for new claimants
    Similar changes for housing benefits for children born after April 2016
    Income tax personal allowance – £11,000 from 2016/17
    Higher rate threshold – £43,000 from 2016/17
    No changes in the rates of income tax
    The government will proceed with powers to allow HM Revenue & Customs to directly recover tax debts of over £1,000 from bank accounts (including ISAs), subject to safeguards.
    Commitment to spend 2% of GDP on defence
    National Living Wage for over 25s to be £9 per hour by 2020, starting next year at £7.20 (offset by rate reduction in corporation tax)
    Employment allowance increased by 50% to £3,000 from 2016 to enable up to 4 people to be employed on the National Living Wage without extra cost to the employer.

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FUNDAMENTAL ACCOUNTING

In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts. Going Concern, unless there is evidence to the country, it is assumed that a business will continue to trade normally for the foreseeable future.

Accruals and Matching, revenue earned must be matched against expenditure when it was incurred Prudence, if there are two acceptable accounting procedures choose the one gives the less optimistic view of profitability and asset values. Consistency, similar items should be accorded similar accounting treatments. Entity, a business is an entity distinct from its owners. Money Measurement, accounts only deal with items to which monetary values can be attributed.

Helps existing and potential investors and creditors and other users to assess the amounts, timing, and uncertainty of prospective net cash inflows to the enterprise

Separate Valuation each asset or liability must be valued separately.
Materiality, only items material in amount or in their nature will affect the true and fair view given by a set of accounts. Historical Cost, tTransactions are recorded at the cost when they occurred. Realization, revenue and profits are recognized when realized. Duality, every transaction has two effects.

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SAVE ON TAXES

Under EU law, the standard rate of VAT in any EU state cannot be lower than 15%.Each state may have up to two reduced rates of at least 5% for a restricted list of goods and services. The European Council must approve any temporary reduction of VAT in the public interest.

The default VAT rate is the standard rate, 20% since 4 January 2011. Some goods and services are subject to VAT at a reduced rate of 5% (such as domestic fuel) or 0% (such as most food and children’s clothing).

VAT is an indirect tax because the tax is paid to the government by the seller (the business) rather than the person who ultimately bears the economic burden of the tax (the consumer). Opponents of VAT claim it is a regressive tax because the poorest people spend a higher proportion of their disposable income on VAT than the richest people.Those in favour of VAT claim it is progressive as consumers who spend more pay more VAT.

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ACCOUNTING 1 ON 1

In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts. Going Concern, unless there is evidence to the country, it is assumed that a business will continue to trade normally for the foreseeable future.

Accruals and Matching, revenue earned must be matched against expenditure when it was incurred Prudence, if there are two acceptable accounting procedures choose the one gives the less optimistic view of profitability and asset values. Consistency, similar items should be accorded similar accounting treatments. Entity, a business is an entity distinct from its owners. Money Measurement, accounts only deal with items to which monetary values can be attributed.

Helps existing and potential investors and creditors and other users to assess the amounts, timing, and uncertainty of prospective net cash inflows to the enterprise

Separate Valuation each asset or liability must be valued separately.
Materiality, only items material in amount or in their nature will affect the true and fair view given by a set of accounts. Historical Cost, tTransactions are recorded at the cost when they occurred. Realization, revenue and profits are recognized when realized. Duality, every transaction has two effects.

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PROPER INVOICE INFO

Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) Statement of Financial Accounting Concepts No. 1, are to provide information that

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