VAT small business schemes
October 19th, 2008
There are a number of schemes aimed at alleviating the VAT administration burden on small companies. It may be worth considering adopting one of these to ease a business’s cash flow or VAT burden.
- The flat rate schemes works by levying VAT as % of business turnover (the exact % depends on the industry) and blocking input tax on purchases. This tends to work well for profitable businesses using a large number of unregistered suppliers and less well for businesses making losses or whose VAT position is neutral or in a refund position
- The annual accounting scheme requires a business to make monthly payments for nine months (months 3-11) of the year and a single VAT return plus balancing payment in month 12. This reduces the administration of 4 VAT returns but puts all the pain into a single month instead.
The cash accounting scheme allows businesses to account for VAT on the basis of cash received and paid - this is most suitable for businesses with credit customers who take a long time to pay.
The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.
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