Page 6 - Addition Autumn 2017

CHOOSING THE RIGHT VAT SCHEME FOR YOUR BUSINESS
There are a number of ways to account for VAT. While standard VAT accounting is used by many rms, small business owners may wish to consider the alternative schemes that are available. Choosing the most suitable option could save you a considerable amount of time and money.
Annual accounting scheme
Open to most businesses with a taxable turnover
of £1,350,000 or less, businesses under this scheme are required to submit one VAT return per year, and make agreed monthly or quarterly payments based on the previous year’s gures.
Submitting three fewer VAT returns per year than under standard VAT can save considerably on time and paperwork, and the agreed payments and extra month to pay any outstanding balance can make it easier to manage cash ow. In cases
of reduced turnover this can lead to overpayment, but this can be corrected when signi cant.
Cash accounting scheme
Businesses with an expected turnover of under £1,350,000 could nd the
SUBMITTING THREE FEWER VAT RETURNS PER YEAR THAN UNDER STANDARD VAT CAN SAVE CONSIDERABLY
ON TIME AND PAPERWORK.
cash accounting scheme bene cial – particularly those with slow paying customers. Under this scheme VAT on sales is only due when cash is received and bad debts are automatically exempted, giving a potential cash ow advantage. The downside of this scheme is that VAT paid for purchased goods and services cannot be recovered until supplier invoices are paid.
Flat rate scheme
Under the at rate scheme,
the VAT due is calculated by applying a predetermined at rate percentage (dictated by the trade sector), to the business turnover of the VAT period. The current trade sector rates range from 4% to 14.5%, or a new rate of 16.5% exclusively for limited cost traders – such as labour-only businesses.
Open to businesses
with an expected turnover of £150,000 or less, and current scheme members with reported or expected turnover under £230,000, the at rate scheme allows smaller businesses to pay a lower level of VAT – but this becomes complicated for businesses importing goods, as input VAT usually cannot be recovered.
This article is intended as a basic introduction to some of the key VAT schemes. To discuss these or other schemes, such as those available to retailers, get in touch with us today.
6 | addition • autumn 17 • Issue 39