Now as we all know VAT is a necessary evil for most businesses but there are ways to alleviate the pain when dealing with Customs and Excise.
Not only that but what I'll share in this short article should also help some of you with increasing cash flow, reduce admin and also highlight an area that may allow you to claim a whole lot of VAT back! Tip No.
1 So lets start with the normal way that most businesses handle their VAT returns - and that's on an 'invoice' basis.
This means whether you've received the VAT you invoiced for or not you've got to pay it over to customs and excise each quarter.
I've seen this cause huge cash flow problems for some businesses but you don't have to do this.
If you want to you can switch to the cash accounting system of VAT which will allow you to just pay the VAT you've received for that quarter.
Plus you don't need permission to do this.
This one change alone can transform cash flow for some businesses.
Tip No.
2 Not only that but if you want to reduce the admin headache of VAT even further you can also move to the annual accounting scheme.
This will allow you to do a VAT return just once a year and then pay your VAT on account for 9 months of the year and make a balancing payment within 2 months of your year end.
Just these two things can have a dramatic effect on how long you're able to keep valuable cash in your business by deferring your VAT payments.
But what about paying less VAT.
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3 Well one example where people pay less VAT than others is in business mileage.
And with the historic rise in fuel prices the following advice could be extremely valuable.
You see when you pay a fixed rate for business mileage the rate is meant to pay for a number of things such as wear and tear, depreciation, etc.
which don't carry VAT.
But another element hidden in the rate is fuel which is VAT reclaimable.
But many business owners miss this and don't claim this VAT portion back from the people over at customs and excise.
But here's the really good news! If you haven't reclaimed this in previous returns you can go back 3 years and reclaim the VAT now! That could end up being quite a bit of money for some of you.
So there you have it.
Some simple ways to improve cash flow and reduce the tax you have to pay when it comes to VAT.
Again I hope this article illustrates how using specialist knowledge, thinking differently and making different decisions is the main reason why some business owners end up paying a lot less tax than the majority.