News - Lunch Lesson 14 - Europe
| There are many things which influence how a business is run.
In the UK, companies are not only guided by the law of the land, but they must also conform to European law and abide by regulations set down by the European Commission. They generally sound quite boring, but can actually be very important to companies.
The Invoicing Directive isn’t something you’d want want to read in bed, but it could have a big impact on businesses when it’s introduced It’s being hailed as a measure that will have significant practical benefit to firms operating within the internal market of EU member states. Its aims are: At first it will concern only businesses which have cross-border trade with other European countries. But as the UK’s tax system becomes more harmonised with Europe, eventually all businesses will be affected. Changes There are two main changes that the directive will bring about. The first is to do with VAT. From 2004 businesses trading with other EU member states will have to quote not only their VAT registration number on their invoices, but also the number of their customer.
If an invoice fails to include this then it won’t be considered valid for taxation purposes. Matthew Simmons from the Global Invoice Corporation says that this might come as a shock to some businesses. “The onus will be on companies sending invoices to keep an up-to-date database of their customers’ details,” he says. “They will have to establish which companies are VAT registered and keep good records.” Good practice So how difficult will it be for companies to comply?
Games Workshop is the largest tabletop fantasy games business in the world. At its Nottingham , mighty armies are designed, manufactured and distributed. Invoices are sent all over the world - 70% of the company’s sales come from outside of the UK. Amzee Hosein, the finance manager for Games Workshop’s northern European operations, says that the new regulations are just good business practice. “We have very good accounting software where the details of all of our customers are kept,” he explains. “So the new regulations shouldn’t make much of a difference to us as we keep that information already.”
Amzee thinks that the inclusion of customers’ VAT details on invoices will cut down on fraud. “It’s quite easy to check the VAT information and it gives you added security knowing that you’re dealing with a legitimate company,” he says. The other big change the directive will introduce concerns how invoices are sent. All invoices sent electronically will need to “authenticity of origin” - that’s proof that the invoice has come from the person it says it has. Speed It also has to show “authenticity of content” - proof that the invoice could not have been changed once it was sent. .
This means an end to sending invoices by e-mail because it is not secure, so that should cut down on fraud. Although up to 90% of business invoicing is still done by post, there are a growing number of businesses who have chosen to send invoices electronically because of the speed. These businesses will have to think carefully in the future about how they send and receive invoices. At the moment many large corporations use a system called “electronic data interchange” (EDI) to send invoices. This fits in with the new directive, but it is extremely expensive, prohibitively so for most small and medium-sized companies. But there are other ways, according to Matthew Simmons. “You can do EDI over the internet, or you can use a web-based transaction service, where you pay a fee for each invoice sent. “This latter option can be cheaper than sending invoices by post.” Upload Games Workshop is currently among the majority which still relies on the post to do business, but this may change. “We have many large customers with whom it would make sense to do invoicing electronically,” says Amzee Hosein. “Instead of sending out 60 different invoices to one client we could just upload the information for the customer to retrieve. “We can definitely see the benefits.” As for EU tax harmonisation in general, Amzee is in favour, but says that it won’t really impact on Games Workshop because it generally complies with most EU-wide practices anyway. He says: “In rates and policy it’s not a bad thing, as long as local legislation is still adhered to.” And as long as the UK continues to pay a lower rate of VAT than most of its European neighbours, he’ll be happy. If you’re a business and you want to keep up to date with the latest accounting practices, here are some tips.
|
