James Sheard, owner of TaxAssist Accountants Central and South Manchester provides us with advice on the best way to approach VAT.
VAT at 20% is a major tax on small businesses as it is for everyone, but there are steps that can be taken to help you make the best of it. In fact many of my clients voluntarily register for VAT and even make money from it. Here’s how.
Flat rate VAT is an excellent scheme and many small businesses are better off when they take advantage of it. The scheme works by allowing you to keep part of the VAT you charge your customers, with the amount depending upon your industry. This is often particularly advantageous for self employed consultants, they might be able to boost their income by over £300 in every £10,000.
The scheme is for businesses with turnover less than £150,000 – it is definitely worth checking to see if the numbers work for you.
While consultants benefit from the flat rate VAT scheme, cafes and hairdressers can really suffer because much of their competition will not be VAT registered. You need to be VAT registered when your revenue exceeds £73,000, and lots of businesses of this type will not be big enough. We have helped clients by making sure that they get below the VAT threshold. For one hairdresser client they earned more money if they worked fewer hours but deregistered for VAT – prior to this the VAT bill was bigger than their earnings!
A final one to mention here is cash accounting. Businesses with sales of less than £1,350,000 can make their payments on the basis of cash received and paid, they therefore only pay over their VAT when their customer have paid them.
For more information and advice about VAT and other accounting services, contact James Sheard from TaxAssist Accountants Central and South Manchester.