You have five main options to choose from when it comes to the VAT scheme that will work best for you and your business.
- Flat-rate scheme – designed for smaller businesses with the aim of simplifying the whole process of accounting for, collection and claiming back VAT.
- Accrual/invoice accounting – you submit your returns and payments every quarter throughout the year (which can potentially impact on your cash flow, if not managed). You account for VAT from the date you INVOICE your customer, not when they pay you.
- Cash accounting – You account for VAT from the date your customer PAYS you, not the date on your invoice (improving the impact on your cash flow situation).
- Annual accounting – VAT is worked out once a year and then paid off in instalments across the year (making your payments more predictable and helping cash flow)
- Specialised retail schemes – HMRC has different retail schemes set up for specific industry sectors (for example, car businesses, or newsagents) aimed at making it easier for people to manage the VAT process.
Whether you opt for the cash, accrual or flat-rate options will depend on the nature of your business and the industry you trade in (come and talk to us about this).
If you’re a business that provides a service and has very little expenditure (consultants, freelancers etc.), the flat-rate scheme is the best option. You get a simplified way of dealing with your VAT and, generally, you’re going to make a profit from it.
Working with an accountant who’s your tax agent has some real advantage here. Your accountant can review your accounts, do the calculations and advise you if you’re still on the right scheme. If you’re not, they can help you to move to a more profitable scheme.
Outsourcing your VAT returns to your accountant also gives the security of knowing everything’s been accounted for, filled out properly and in the right format for HMRC.
If you’re unsure which VAT scheme to opt for, give us a call on 01454 300 999, or drop an email to info@fd-works.co.uk
Find out more about the FD Works’ approach to finance at fd-works.co.uk