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Monday
Jun082009

Ten tips for paying less VAT

 

VAT is one of the biggest headaches for business, but getting it wrong can mean a visit by the VATman plus expensive penalties and surcharges.


Imposing a simple VAT strategy can save time and money – so here are 10 tips on understanding and paying less VAT.

Know your rates

VAT is charged at 15%, 5%, 0% and zero depending on the goods or services a business provides. Charge at the right rate.

Get decisions in writing

Don’t use the telephone helpline for important questions – write to the VAT office so they respond in writing and you have evidence to back your actions.

Pay on time

Miss the first payment and you get a yellow card warning – miss again within a year and it’s a red card that comes with a penalty of a percentage of the VAT due.

Pay online

HM Revenue & Customs allow seven extra days from the payment date to allow for electronic fund transfers, so you can stash the cash in your bank for a little longer.

Pick the right accounting scheme

Depending on your business turnover, pick the accounting scheme that saves you time and money:

  • Cash is king

Businesses with an annual turnover of less than £660,000 should opt for cash accounting so VAT is only due on invoices paid.

  • Spread the debt

Annual accounting allows small businesses to pay VAT in nine monthly instalments, followed by a balancing payment, each year. This helps cash flow and saves time because only one VAT return has to be filed.

  • Flat rate scheme

Consider the flat rate scheme that calculates VAT as a flat rate percentage of turnover.

This scheme will probably save money for businesses that do not reclaim much VAT

Never do cash in the hand deals

The only person that benefits is the one who should pay the VAT. Remember that no receipt means no reclaiming the expense.

Watch invoice numbers

Issue consecutive invoice numbers – it’s easier to check down a list to spot missing invoices and see who hasn’t paid.

No you can’t! The answer to three popular questions

VAT can’t be reclaimed on car purchase, entertainment or non-business expenditure.

Don’t sit on expenses

Keep the cash flowing by claiming expenses in the quarter they were incurred.

Take advice

If in doubt, ask an independent expert for advice. Making VAT mistakes can be expensive.

 

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    Ten tips for paying less VAT - Tax, Legal & Business News from London - St Matthew Accountants London
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