Thursday 29 September 2016

Problem Solver: I'm confused about what VAT rate to charge on my range of products

Feargal Quinn

Published 09/06/2016 | 02:30

Feargal Quinn
Feargal Quinn

Q: I don't fully understand why there is VAT on certain products that I sell and yet other items don't contain any VAT. How do I know for certain if I am charging the right VAT rates?

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A: Understanding VAT can be a bit of a challenge. Many day to day items, especially those in the food area that are classified as everyday items, which are not luxurious, have a 0% VAT rate.

Where an item is deemed to be a treat or some sort of a luxury, then typically VAT is applied.

There are three rates of VAT for example on food. The majority of items are 0pc rated, there is another rate which is applied to products at 13.5pc, and a top rate of 23pc.

On www.revenue.ie there is a very detailed list of products and services, showing the appropriate VAT rate. Sometimes a product may not be included on the list. In that instance submit a written query on the Revenue website detailing the ingredients of the product and requesting clarification on the appropriate rate.

I remember one of the team in Superquinn having a query about whether a fruit loaf was bread or a cake. My recollection is that the team in the Revenue Department were able to clarify that the determination of whether the product attracted VAT or not was based on the amount of fruit used. In other products sometimes sugar can also be a determining factor.

Never guess a VAT rate: your accountant should be consulted where there is any doubt. You can get into very serious difficulties and incur large fines or penalties if you apply VAT incorrectly. If in doubt seek advice!

Q: I have been offered a mentor by my Local Enterprise Office to help advise me on setting up my new business, but I am not entirely sure what to expect. I am nervous of sharing some of my ideas with a third party.

A: The mentors employed by the Local Enterprise Office's (LEO) are usually industry professionals who have either taken a step back from the main industry, or may still run a business, but are happy to dedicate some of their time to the industry.

All will have signed confidentiality agreements with their Local Enterprise Office and are doing mentor assignments because they want to help others.

The role of the mentor is not to do the work for you but rather ask questions, challenge your thought processes and provide good, sensible advice for you to action.

Typically a mentor will suggest some follow up actions to you which can be viewed at a follow-up session.

You need to view this as having temporary access to another expert on your management team who will be willing to give you some good advice and opinions.

It will be up to you whether you take this advice on board and whether you follow up on any of the suggestions.

The mentor's role is not to take on board tasks on your behalf, but rather to identify the tasks and direction that you need to move in.

To maximise your mentor sessions I would advise you to prepare for these meetings, have an agenda and take plenty of notes.

You are being provided an expert and in order to maximise these expertise be selfish in a positive way about maximising your time with your mentor.

Mentors love clients who interrogate them and really want to learn from the experience.

You also need to provide the mentor with as much information as possible so when attending meetings bring as much material and information as you can in order to make the decision making process much easier.

The more information you provide, the better the potential advice you will get.

In summary, my advice to you is to jump at the opportunity to work with this mentor as it could be a great asset to you.

If you find that the mentor's skills are not suited to your project, then it would be perfectly acceptable to talk with your LEO and see if they have someone else with more appropriate expertise for your project.

Send your small business questions to himself@feargalquinn.ie

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