Firstly, you could reduce your liability by registering for the Flat Rate Scheme (FRS). Basically, you would pay an industry specific percentage (set by HMRC) of your turnover inclusive of VAT at the standard rate. You would not be able to recover your input VAT, unless it was on capital items costing in excess of £2,000 (including VAT). You would need to assess whether the scheme would be advantageous for you. However, you should bear in mind that once you join the scheme, you must remain in it for 12 months and your VAT exclusive turnover is below £150,000 p.a.
If your turnover is above £150,000 p.a. but below £1.35m, then you could apply to use the Annual Accounting Scheme. You make 9 monthly payments based on the previous 12 months with a final balancing payment and only submit one return per year.
If your customers are slow to pay and your VAT taxable turnover for the next 12 months is expected to be under £1.35m, you could apply the Cash Accounting Scheme. This will mean that all VAT is accounted for on sales invoices once customers have settled them, and on your suppliers’ invoices when you pay them; not when they are raised.
The above schemes may be used in conjunction with one another.
As you can see, there are a number of things to consider and therefore we suggest you contact your local TaxAssist accountant for guidance and advice, before making a decision.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.