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.

Urgent Message to all Businesses that provide Partially Exempt Services.

Are you sure that your Partial Exemption process, treatment of De Minimis and your refunded Input Tax is being treated fairly in your accounting processes? 

In recent years Eros has provided consultancy services to optical and audiology businesses as we have done since the early 2000’s.

In the early days much of our business involved putting in place systems allowing new start-ups or those just registering for VAT to account correctly for their sales tax which involved gaining a signed agreement with HMRC.

Our CEO and Principal Consultant Bob Hutchisnon was exceptionally well placed to provide this knowledge as he was the Chair of the Optical Joint Body which put in place an agreed full cost apportionment process and was the co-signatory of the Business Brief jointly published with HMRC, or Customs and Excise as it was known then.

He also steered the Optical Profession’s challenge at Judicial Review at the Royal Courts of Appeal to win the case against Government to gain a full 6 years repayment of overpaid VAT for the optical profession.

Nowadays, Eros is called in to both Audiology and Optical concerns who are at odds local HMRC officers or who have suspicions that their Full Cost Apportionment Percentages are unfair to the business or have been made aware by HMRC that they are not applying the de minimis rules correctly.

Many of these businesses have relied on their accountants especially since “Making Tax Digital (MTD)” came into force to calculate their returns often from Digital Book-keeping Systems that cannot deal with Partial exemption or checking de minimis.

In recent times clients we have assisted were unaware that they were accounting for partial exemption incorrectly having found out either by intervention from HMRC or by asking us to run an audit on their process.

In each case Eros Business Consulting has put in a system which is legally compliant either by assisting their accountants or working with the client allowing them to upload their returns themselves, leaving the accountants to deal with the basic company year-end accounts.

In every case we have, where required, improved the relationship with HMRC officers, given the business owner’s peace of mind and an increased a quarterly deduction on their VAT returns and where possible gained substantial refunds going back up to 4 years.

We are also proactive in assisting clients on equipment and shopfitting decisions reducing the risk of exceeding de minimis and losing refunded input tax on purchases.

Are you sure that your business is:

• correctly applying partial exemption rules,

• has the fair and correct full cost apportionment percentage on spectacle, contact lens and hearing aid sales

• is correctly applying on each return a de minimis check?

In our experience over the last few years this has never been the case as accountants very rarely deal with partial exemption issues in their main clientele.

Our own large Company Accountants are in agreement, and you can read from Kinnaird Hill and Associate’s chief accountant a warning to others on being complacent and that many accounting practices are deficient in Partial Exemption Knowledge and the required skill set should be left to those who wholly spend time of PE Businesses as we do.

“Partial exemption is an extremely complicated and specialist area that in my experience many accountants either ignore or simply get wrong. My firm has successfully used Eros Business Consulting many times with our clients as a specialist advisor.

The risks to businesses that do not successfully calculate their VAT for partial exemption are basically twofold:

• firstly the missing out of correct claims that can involve thousands of pound each year,
• and secondly making a mistake the other way and end up owing HMRC vat incorrectly claimed over many years.

I would encourage any business owner who does either personally or through an accountancy practice or should be dealing with Partial Exemption to have Eros Business Consulting check them out with an Audit.”

David Rees FCCA

Consider a Partial Exemption Health Check

At Eros Business Consulting we have designed a questionnaire for you to complete as well as offering a confidential call following its assessment as to whether you are HMRC compliant, likely to be achieving a realistic value of refunded input tax and correctly determining de minimis on each return.

The VAT health check costs £150 plus vat and if you need further assistance our rates thereafter are below average accountancy rates per hour, timed to the minute. (Rates available on request)

We are more than happy to work with either the business owner, their accountants or both. In either way the business owner will be kept fully informed of the process.

Where we have intervened in every case the business has received refunds or an increase in refunded tax on purchase that has far exceeded our fees, and these increased returns continue thereafter.

Contact Bob Hutchinson Principal at Eros Business Consulting for more information and our Partial Exemption Audit Check questionnaire today by email or by our contact page https://erosconsultants.com/contact-us/

Just add in the comments or message Partial Exemption Audit Check Please fill in this contact form and we will get back to you within 24 hours on a working day. Your information will be treated with complete confidentiality.

Eros Business Consulting Ltd

Company email: info@erosconsultants.com 

Hall Barn
The Street
Preston St Mary
Sudbury
Suffolk CO10 9NG

01787 326 468 :: 07785 353 681

solutions@erosconsultants.com

Just email your questions and we will chat