If your business sells goods or services, there’s a strong chance you’ll need to register for Value Added Tax (VAT) at some point. Even if you’re not hitting the £85,000 threshold that makes VAT registration compulsory, there are still some benefits to signing up. Namely, claim back the VAT you pay; keep the size of your business private (if you’re not VAT-registered, you’re a micro-business – Trust? Sustainability?) and importantly, set the foundations to turn your tiny business in to your small business.
The decision to register made, now choose your VAT scheme. Here, we examine the options available so that you can choose the best one for your business.
Standard VAT Accounting
The majority of businesses use the standard accounting scheme – you raise 20% tax on all sales eligible for VAT, and claim back tax at the same rate. You then submit a quarterly tax return demonstrating VAT paid and collected, and the difference is the payment to (or refund from) HMRC.
Annual Accounting Scheme
This is the scheme that Nabarro Poole use. We complete one VAT return each year and make separate payments throughout the year. (payments on account)
Annual Accounting helps plan cash flow. We know what we will pay each month and can keep track of surplus or deficit building up to the end of the year. This is a great scheme, but if you’re not great with the numbers, you’ll need some help. We, and any good accountant, would include this help as part of your standard service agreement.
Flat Rate Scheme
If your VAT taxable turnover is under £150,000 per year, you can take advantage of the Flat Rate VAT scheme – which allows you to pay a percentage of your total turnover as VAT. This scheme was fantastic last year (2017) as businesses in certain sectors could benefit from charging VAT at 20%, but paying 12-14% over to HMRC.
It’s less attractive now, but worth chatting to us about to see if any benefit possible. You can work out your rate here.
Cash Accounting Scheme
This is easily the most popular scheme. This VAT scheme involves accounting for VAT on the date you’re paid, rather than the invoice date. You pay over the VAT once your client pays you, so you’re never out of pocket. The same applies on the payment side, but you are a company that pays what you owe when you owe it, so no problem.
Choose the right VAT scheme with Nabarro Poole
Still stuck on deciding which VAT scheme might be best for your business? Don’t worry, Nabarro Poole can help. We specialise in taking care of clients teetering on the VAT threshold, enlightening them to the benefits of each scheme in great detail.
You can book a free appointment with one of our experts by giving us a call on 0161 998 4276 or dropping us a line using our contact form. We’d be happy to answer any questions you might have regarding VAT.