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VAT News

VAT Schemes for Small Businesses

A reminder of the VAT schemes available to small businesses, of special note is the recent increase in turnover threshold for the Cash Accounting scheme which is very useful in controlling cash flow. You can also start to use this scheme at the start of your next VAT quarter with no need to apply or advise H M Revenue & Customs.

Annual accounting

Monthly/Quarterly instalments – one return at year end when balance is paid. Scheme can be used by any business with turnover (excluding VAT) not expected to exceed £1.35mill.

Cash accounting

Pay and reclaim VAT on receipt/payment of invoices. Scheme can be used by any business with turnover (excluding VAT) is not expected to exceed £1.35mill (from 1 April 2007) prior to this the threshold was £660,000. Must revert to invoice accounting when turnover exceeds £1.6mill.

Flat rate scheme

Pay VAT on a fixed percentage of gross turnover dependant on type of business. No reclaim of input VAT unless one-off purchase is £2,000 or more. Can also use cash-accounting method. In the first year of trading 1% discount on usual rate. Care – it may not always be beneficial, comparative checks should be made periodically. Scheme can be used by any business with annual turnover of £150,000 or less.

30/5/07

New rules for VAT fuel scale charge from 1 May 2007

Existing fuel scale charge based on engine size has been replaced by a charge based on CO2 rating. There are no adjustments for fuel type. Notification will be included with your next VAT return.

New system to be used for quarters starting after 1 May 2007.

30/05/07

Staff mileage claims

From 1 January 2006 (and only due to EU legislation) staff making mileage claims based upon either the tax free mileage rates OR the fuel mileage rates, they MUST have VAT receipts attached to the claim if YOU wish to reclaim the VAT. It does not matter if more supporting claims are attached to the previous or subsequent claim but as an employer you must ensure this is complied with. We suggest you ask staff to obtain a VAT receipt every time they get fuel and attach every one to their next mileage claim.

06/01/06

Bad debts

Many clients are aware that VAT on sales invoices can be recovered if the invoice is not paid within 6 months. But did you know that you have to REPAY VAT on supplier’s invoices if they are not paid within 6 months! This is now a staple test for VAT inspections.

21/07/05

VAT and Corporation Tax Inspections

Again these are on the increase too. The same comments apply per the above but as we look after fewer clients through our outsourcing service than we do for payrolls you may have more of a problem. Please call us for help if you receive notice of any form of tax inspection, but a pre-emptive review of your systems and controls may be very worthwhile.