Making VAT simpler
PUBLISHED: 11:05 22 March 2007 | UPDATED: 13:54 04 May 2010
VAT is a significant burden for small businesses. Therefore, anything that can ease the pain is more than welcome. Here are a number of simplified arrangements to make VAT accounting less fraught: Annual accounting Most businesses account for VAT on qua
VAT is a significant burden for small businesses. Therefore, anything that can ease the pain is more than welcome. Here are a number of simplified arrangements to make VAT accounting less fraught:
Most businesses account for VAT on quarterly VAT periods and send in four returns every year. However, if a business's turnover is under £1,350,000 it may join the annual accounting scheme and send in just one return a year. If a business uses the scheme it has to make regular payments throughout the year with a final balancing payment. This can help financial planning and cash flow.
Bad debt relief
If a business makes supplies of goods or services to a customer but it does not receive payment, it may be able to claim relief from VAT on the debts.
Broadly, if no payment is received within six months a supplier may reclaim the VAT previously paid to HMRC.
Flat rate scheme
A business is eligible for this special scheme if its turnover is under £150,000.
It provides savings on administration because a business is not required to account for VAT on each individual "in and out".
It just pays over a set percentage of its total turnover. The rate depends on the business type. The percentages are decided according to the trade sector your business is in. As an incentive, businesses in their first year of VAT registration can also benefit from a 1 per cent reduction in the flat rate.
INFO: It may be possible to "mix and match" some of these schemes, but it is always worth checking first. For further advice on these and other schemes which could help you, please contact Marcus Ward, VAT Director, at Price Bailey Chartered Accountants on 07748 117935, or email Marcus at marcus.ward@pricebailey. co.uk
If you value what this story gives you, please consider supporting the Ely Standard. Click the link in the orange box above for details.