Need help with VAT? HRBS can guide you through the VAT maze.
HRBS have over 20 years experience in VAT and can help you with your VAT queries and running which ever scheme is mots suitable for your business. We can also complete and submit your VAT returns for you as we are approved online filing agents with HMRC. Click here for a FREE fixed fee, no obligation, quotation.Do you need to be VAT registered?
The current registration threshold is £67,000 of taxable turnover for the preceeding 12 months. If you advertise using Google Adwords, then for VAT registration purposes, Adwords expenditure should be added onto your other turnover in calculating your taxable turnover and whether you exceed the registration threshold.If you are not legally obliged to register for VAT because the value of your taxable supplies is below the threshold, you can apply for voluntary registration. Businesses which have a high proportion of VATable purchases or sell to VAT registered businesses often voluntarily register for VAT. Also if your main income is from business to business sales then voluntarily registering for VAT and using the flat rate scheme may mean that you make a slight VAT surplus each year.
Which VAT scheme is suitable for you?
There are many VAT schemes a small business can use to reduce their administrative burden, pay VAT only when they have been paid by their customer or spread payments over the year.HRBS can help you choose the right scheme for your circumstances and register your business online with HMRC. We can also help with your VAT returns or any ad-hoc VAT queries you may have, all included in our agreed fixed fee.
Flat rate VAT scheme
The VAT flat rate scheme was introduced in 2002 to make VAT accounting easier for small buinesses. Businesses using the scheme do not need to identify input VAT on their purchases and overheads, instead VAT is calculated as a fixed percentage of gross sales (ie sales + output VAT). For example if your net sales in the quarter are £20,000. Gross sales would be £23,000 (ie £20,000 + 15% output VAT). If your flat rate percentage is 8.5% then you would pay £1,955.00 VAT at the end of the quarter.Our free flat rate VAT scheme guide also includes a full list of the flat rate VAT percentages.
Under the flat rate scheme, input VAT is not deducted in your VAT return and from the amount payable to HMRC, so the scheme is not suitable for all businesses. However you can reclaim the VAT you have been charged on a single purchase of capital expenditure goods where the amount of the purchase, including VAT, is £2,000 or more.
The flat rate VAT scheme has its own cash based option, you simply apply the flat rate percentage to the VAT inclusive supplies for which you have been paid in the accounting period. You can also apply to join the annual accounting scheme and only submit one VAT Return per year.
Who can apply for the VAT flat rate scheme?
You can apply to use the scheme if there are reasonable grounds for believing that you meet both of the following tests:Test 1
Your taxable turnover (excluding VAT) in the next year will be £150,000 or less and,
Test 2
Your total business income (including VAT and exempt supplies, such as rent, lottery commission or bank interest on a business account and any other income received or receivable by your business ) in the next year will be £187,500 or less.
1% reduction in the flat rate for the first year.
As an incentive to join the scheme, new entrants receive a 1% reduction on their flat rate percentage for the first year of VAT registration.Call us on 01226 379000 to discuss your business and whether the VAT flat rate scheme is suitable for you.
Cash accounting VAT scheme.
Under the cash accounting scheme you only account for and pay VAT when your customer pays you. The scheme helps your cashflow because, unlike the traditional VAT scheme, if you don't get paid by your customers, you don't have to pay the VAT to HMRC. However, you can't reclaim VAT on purchases until you pay your supplier. It is ideal if your customers take a long time to pay you and can help your cash flow.
Who can use the cash accounting scheme?
All businesses whose annual turnover is less than £1,350,000 (excluding VAT) and meet certain conditions.You can continue to use the scheme until your annual turnover (excluding VAT) reaches £1,600,000. You may use the cash accounting method for a further six months for any VAT outstanding on supplies made and received while using the scheme. But any VAT still outstanding at the end of the six month period must be accounted for then.
If you think the cash accounting scheme would help you, the good news is ... you don't need to apply to use it! You can change to it at the beginning of any tax period. If your business is already registered for VAT when you start, you must make sure you do not account for VAT twice on any supplies made or received previously. HRBS can help you with your accounting systems to ensure that you do not duplicate VAT. Call us on 01226 379000.
Annual accounting scheme.
The annual accounting scheme allows you to complete just one VAT return each year, instead of the usual four. You pay instalments of the VAT that you expect to owe, so that you are not faced with a large VAT bill at the end of the year.You can choose to make three (quarterly) or nine (monthly) instalments towards your end of year VAT liability. These must be paid by Direct Debit, Standing Order or other electronic means. HMRC calculates the instalments when you join the scheme and they notify you of the instalment amounts and dates they are due. You can ask for the instalments to be changed if you think they have got it wrong or your business circumstances change.
Payments under the annual accounting scheme.
Monthly- If you have been registered for 12 months or more, each monthly instalment will be 10% of your previous years VAT liability.
- If you have been registered for less than 12 months each instalment will be 10% of an estimation of your expected VAT liability.
- If you have been registered for 12 months or more, each quarterly instalment will be 25% of your previous years VAT liability.
- If you have been registered for less than 12 months each instalment will be 25% of an estimation of your expected VAT liability.
HRBS offers a fixed fee service.
We agree your accounting fee in advance so that you can plan your cashflow through out the year. HRBS clients pay quarterly and know that they can contact us with ad-hoc queries without fearing that they will be charged extra. Visit our fixed fee page to find out more and how to become a satisfied HRBS client.Contact us on 01226 379000 or click the online help icon above to find out more or send us an email .
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