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VAT – Don’t ignore the impact on your business


In order to ease the administrative burden for the business, cut costs or perhaps improve cash flow, have you considered using Annual Accounting, Cash Accounting or the Flat Rate Schemes?

Annual accounting is just that – you will only have to complete one VAT return each year and this has to be submitted 2 months after your tax period has ended. You will have to make interim payments during the year (usually nine) and a balancing payment when your return is completed. Admission to the scheme is subject to conditions including taxable turnover of less than £1.35M.

Cash Accounting helps businesses struggling to collect debts. Under the scheme the business will not be liable for VAT on invoices it raises, until it receives the cash. This can be a significant cash flow advantage for some businesses. Admission to the scheme is subject to conditions including taxable turnover of less than £1.35M.

The Flat Rate Scheme can make completing your VAT Return even simpler.

How does it work? You multiply your total VAT inclusive turnover for the tax period by the percentage relevant to your business type and this is the amount you pay, there is generally no claim for input tax. The only adjustment you would ever make was if you bought an expensive capital asset.

The flat rate scheme is not right for everybody, as some of the percentages set by the government result in more VAT being paid. However for some businesses there can be both an administrative saving as well as a tax saving. Admission to the scheme is subject to conditions including taxable turnover of less than £150,000.