Trying to decide the best VAT scheme that suits your business best can be a bit of a headache so hopefully, the following pointers will be of use.
If you just want to submit your VAT return once a year then ‘Annual Accounting’ is the scheme for you, you will have to make 10 equal monthly payments. The monthly payments are calculated by adding your previous year’s VAT returns together and dividing them by 10 or based on an estimated turnover for the year ahead. Once you submit your annual VAT return any balancing payment is then paid to HMRC or if you have overpaid, then HMRC will refund you.
If you are in arrears though it is highly unlikely that you will be able to join this scheme.
The positives of this scheme obviously are that you will be allowed to make monthly payments and it will cut down on administration.
If your business suffers late payments then maybe ‘Cash Accounting’ would be the best fit for you when filing your VAT returns. You only have to pay the VAT on the money you receive and reclaim it from amounts you pay out. That way, if some of your customers are slow payers then you wouldn’t have to pay over the VAT until you received your payment.
The advantages to this scheme are again that it helps reduce administration and that you don’t have to wait six months to reclaim VAT on bad debt relief.
There are other VAT schemes apart from the usual ‘Accrual’ scheme including ‘Flat Rate’ and ‘Partial Exemption’. The rules have recently changed on the ‘Flat rate’ scheme making it not so appealing. If you would like help with VAT then please get in touch with us by email calling us on 020 3633 1340 or you can contact us via our website www.cainandbeer.com.