It may be a good time to switch to cash accounting if your VATable turnover is under 1.35 million. When you join the scheme, cash accounting is likely to reduce at least your first payment, if you sell goods on credit and are usually owed more than you owe. Rather than amounts invoiced outputs and inputs are based on monies received and paid, as VAT is only paid when collected from customers.
If you have small amounts of input tax to reclaim each month, you may be able to increase your retained profits using the Flat Rate Scheme, providing your turnover is under 150,000 per month. To see if the scheme would be beneficial, you must compare the cost of VAT payable under the existing method with that on the Flat Rate Scheme, as each business sector suffers a different rate of VAT.
You can also claim bad debt relief, even if you don't qualify for a special scheme. To qualify as bad debt, the debt has to be over six months old. You can reclaim the output tax you will have paid. You should however repay any input tax you claim to your suppliers if you have unpaid invoices.
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
In January and July each year, self-employed people will be used to making payments on account of tax liabilities. 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, you will pay any balancing amount of tax in January 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 In our November Financial Monitor which covered the Chancellor's Pre Budget announcements, we mentioned that when goods or services had been paid for or invoiced before 1 December 2008 but supplied after that date then the VAT charge can be reduced from 17% to 15%. Whilst there is no requirement for the supplier to give this VAT reduction, if they wish to do so, they must issue a credit note by 14 January 2009, otherwise the VAT has to remain at the 17% rate.
If you have small amounts of input tax to reclaim each month, you may be able to increase your retained profits using the Flat Rate Scheme, providing your turnover is under 150,000 per month. To see if the scheme would be beneficial, you must compare the cost of VAT payable under the existing method with that on the Flat Rate Scheme, as each business sector suffers a different rate of VAT.
You can also claim bad debt relief, even if you don't qualify for a special scheme. To qualify as bad debt, the debt has to be over six months old. You can reclaim the output tax you will have paid. You should however repay any input tax you claim to your suppliers if you have unpaid invoices.
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
In January and July each year, self-employed people will be used to making payments on account of tax liabilities. 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, you will pay any balancing amount of tax in January 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 In our November Financial Monitor which covered the Chancellor's Pre Budget announcements, we mentioned that when goods or services had been paid for or invoiced before 1 December 2008 but supplied after that date then the VAT charge can be reduced from 17% to 15%. Whilst there is no requirement for the supplier to give this VAT reduction, if they wish to do so, they must issue a credit note by 14 January 2009, otherwise the VAT has to remain at the 17% rate.
About the Author:
Andrew Histon is an accountant sheffield. Through many years of work and experience he is able to write with first person knowledge.
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