VAT Schemes
There are several VAT accounting schemes for businesses to consider, some of which can help save both time and money. Some schemes have been developed by HM Revenue & Customs for particular trade sectors and others to simply try and help business owners operate more efficiently.
Standard VAT Accounting – VAT is payable when an invoice is issued.
Cash Accounting – Instead of VAT being payable when an invoice is raised it becomes payable when payment is received. Similarly VAT cannot be reclaimed until you have paid your suppliers
Annual Accounting – Only one VAT return is completed per year. Businesses using this scheme pay either 9 monthly or 3 quarterly payments based on the VAT paid in the previous year. Once the return has been completed a balancing payment or refund is made
Flat Rate Scheme – Businesses pay a “flat rate” percentage of turnover as VAT rather than account for it on individual transactions. The percentage varies for different business sectors and is less than the standard rate as it takes into account VAT not being reclaimed on purchases.
VAT Schemes for Retailers – there are several standard schemes for retailers particularly those selling high volumes of relatively inexpensive items to the general public. Different schemes are available for different types of business.
Margin Schemes – This scheme is for businesses that buy or sell second hand goods, works or art, antiques or collectable items. You account for VAT on the difference between the sale and purchase price of an item, meaning VAT is not paid if you don’t make a profit on a deal. VAT is still accounted for in the normal way for overheads.
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