If you have a VAT turnover which is under 1.35 million, it would be a good time to switch to cash accounting. If you are usually owed more than you owe, and you sell goods on credit, at least the first payment of the scheme would be reduced. Because outputs and inputs are not based on amounts invoiced, but rather monies received and paid, you only pay VAT when it is collected from customers.
The Flat Rate Scheme may increase retained profits if you have small amounts of input tax to reclaim each month, and you turnover is under 150,000. The only way to see if this scheme would be beneficial is to compare the cost of VAT payable under the existing method with that on the Flat Rate Scheme, as each business sector suffers a different rate of VAT.
You can also claim bad debt relief, even if you don't qualify for a special scheme. To qualify as bad debt, the debt has to be over six months old. You can reclaim the output tax you will have paid. You should however repay any input tax you claim to your suppliers if you have unpaid invoices.
It's also worth filing your VAT return online. You are given an extra seven days to file the return and if you pay by direct debit, the payment will not appear on your bank account for a further three days.
In January and July each year, self-employed people will be used to making payments on account of tax liabilities. For the accounting year ending in the tax year to 5 April 2008 together with half the anticipated liability for the accounting year ending in the tax year to 5 April 2009, you will pay any balancing amount of tax in January 2009.
This payment on account assumes your profits for the accounting year ending in 2008/09 are the same as those for the year ending in 2007/08. If in the current economic climate you anticipate a fall in profit then it is possible to have the payments on account reduced. Please contact your usual member of our Tax Team to discuss this. However, do not be tempted to reduce the payments on account if you do not anticipate a reduction in profits as this will entail punitive interest charges and possibly penalties.
If you are having difficulty meeting any VAT or tax payments please contact the Revenue debt helpline which has been recently established to help those with cash flow problems. One of our clients has recently used this and found the experience to be a positive one. The number to telephone is 0845 302 1435.
VAT Changes In our November Financial Monitor which covered the Chancellor's Pre Budget announcements, we mentioned that when goods or services had been paid for or invoiced before 1 December 2008 but supplied after that date then the VAT charge can be reduced from 17% to 15%. Whilst there is no requirement for the supplier to give this VAT reduction, if they wish to do so, they must issue a credit note by 14 January 2009, otherwise the VAT has to remain at the 17% rate. - 15224
The Flat Rate Scheme may increase retained profits if you have small amounts of input tax to reclaim each month, and you turnover is under 150,000. The only way to see if this scheme would be beneficial is to compare the cost of VAT payable under the existing method with that on the Flat Rate Scheme, as each business sector suffers a different rate of VAT.
You can also claim bad debt relief, even if you don't qualify for a special scheme. To qualify as bad debt, the debt has to be over six months old. You can reclaim the output tax you will have paid. You should however repay any input tax you claim to your suppliers if you have unpaid invoices.
It's also worth filing your VAT return online. You are given an extra seven days to file the return and if you pay by direct debit, the payment will not appear on your bank account for a further three days.
In January and July each year, self-employed people will be used to making payments on account of tax liabilities. For the accounting year ending in the tax year to 5 April 2008 together with half the anticipated liability for the accounting year ending in the tax year to 5 April 2009, you will pay any balancing amount of tax in January 2009.
This payment on account assumes your profits for the accounting year ending in 2008/09 are the same as those for the year ending in 2007/08. If in the current economic climate you anticipate a fall in profit then it is possible to have the payments on account reduced. Please contact your usual member of our Tax Team to discuss this. However, do not be tempted to reduce the payments on account if you do not anticipate a reduction in profits as this will entail punitive interest charges and possibly penalties.
If you are having difficulty meeting any VAT or tax payments please contact the Revenue debt helpline which has been recently established to help those with cash flow problems. One of our clients has recently used this and found the experience to be a positive one. The number to telephone is 0845 302 1435.
VAT Changes In our November Financial Monitor which covered the Chancellor's Pre Budget announcements, we mentioned that when goods or services had been paid for or invoiced before 1 December 2008 but supplied after that date then the VAT charge can be reduced from 17% to 15%. Whilst there is no requirement for the supplier to give this VAT reduction, if they wish to do so, they must issue a credit note by 14 January 2009, otherwise the VAT has to remain at the 17% rate. - 15224
About the Author:
Andrew Histon has written many articles for accountants and accountant sheffield. Lives and works in the UK where he has been helping people with their accounts for many years of his working life.
