VAT accounting schemes can help simplify your VAT accounting and smooth your cashflow. So you ask……….how?
“The flat-rate scheme is available for businesses with a turnover up to £150,000 and can really simplify VAT accounting for businesses. It does away with most of the process of preparing a VAT return each quarter. You pay a set percentage rate relevant to your business sector and apply it for the quarter instead of looking at every item. Follow the link below to find out percentage rates.
“It can save time and also give you a pot of cash. If you run a business that has operating expenses with little VAT, for example, if travel is the main operating expense then that can work in your favour. You may find you are effectively keeping some of what you would have been handing over in VAT. For early stage businesses it allows a cash flow boost and underpins some growth.”
The widely used cash accounting scheme can be used if your estimated VAT taxable turnover during the next tax year is not more than £1.35 million. You can continue to use the cash accounting scheme until your VAT taxable turnover exceeds £1.6 million.
“VAT is payable only based on VAT received rather than on the standard invoice basis where you could wind up paying VAT before you’ve been paid. The turnover limit for that is up to £1.5m and it applies to a wide range of businesses so for those under cash flow pressure on collecting cash in it is worth considering. There’s generally a cash flow benefit straight away if a business is profitable.