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.
If your turnover is under 150,000 and you have small amounts of input tax to reclaim each month, the Flat Rate Scheme may increase your retained profits. Each business sector suffers a different rate of VAT so 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.
Even if you don’t qualify for a special scheme, don’t forget to claim bad debt relief. Any debt that is over six months old qualifies as a bad debt and you can reclaim the output tax you will have paid. However, if you have invoices unpaid from your suppliers more than six months old, you should repay any input tax you have claimed!
If you file your VAT return online, you will have an extra seven days and the payment will not appear on your bank account for a further three days, providing you pay by direct debit. Tax Payment on Account Considerations
Tax Payment on Account Considerations Those of you who are self-employed will be used to making payments on account of your tax liabilities in January and July each year. In January 2009 you will pay any balancing amount of tax 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.
It is assumed by the payment on account that profits for the accounting year 2008/09 are the same as those for 2007/2008.Payments on the account can be reduced if you anticipate a fall in profits as a result of the current economic climate, which can be discussed with your usual member of our Tax Team. However, reductions in payments should not be carried out if you do not anticipate a reduction in profits, as it may result in punitive interest charges and the possibility of 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 Regarding the Chancellor’s Pre Budget announcements, it was mentioned in November’s Financial Monitor that when goods or services had been supplied after but paid for before 1 December 2008 then the VAT charge can be reduced from 17.5% to 15%. If suppliers wish to give this VAT reduction, although they are not required to, they must issue a credit note by 14 January 2009, otherwise they must cintinue to use the 17.5% VAT rate.
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