Simon Shaw at Chartered Accountants Duncan & Toplis answers some of your questions
4th March 2011
... Comments

Q. My business has just become VAT registered, are there any VAT schemes that will help me manage my VAT?

A. VAT can often be a drain on a business’s cash flow, especially where customers and clients are sometimes slow to pay. A way of reducing this burden is to use the Cash Accounting scheme which allows you to pay over the VAT you have charged when you receive payment rather than the date you issue your invoice. The downside is that you can only reclaim VAT on your purchases and costs when you pay your suppliers invoice.

The Cash Accounting scheme is open to any business with turnover less then £1,350,000 per year.

Another scheme is the Flat Rate scheme where the VAT is paid based on a % of total income rather than the VAT charged less the VAT incurred on purchases and costs. This can sometime work to your advantage but you need to look carefully at the amount of input tax you incur to ensure you do not lose out. Businesses with turnover of less than £150,000 per year can apply to join this scheme.

Q. I’m thinking of starting in business, which business structure would be best for me?

A. When starting in business it is important that you chose the structure that best meets your own needs. The questions to consider include how you will be taxed, what are your exposure to creditors, who will own the business and what are your plans for the future?

The options available are sole trader, partnership, Limited company or Limited liability partnership. Each of these structures have their own merits and choosing the right one most appropriate for your needs is an important decision to make in the early days of your business.

The simplest and quickest option is to establish as a sole trader, and very often this is the right choice for the fledgling business. Even when using a sole trader there are certain obligations to register with HM Revenue & Customs so you start off on the right foot. Another popular option is to form a Limited company, and although this involves an initial cost and takes a little longer the use of a company can have many benefits.

The above is offered as general advice only. Before making any decisions specific advice should always be sought.

Popular Categories