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VAT – know the rules!

VAT can seem like a bit of a minefield but investing some time researching the subject can really help a small business.

Did you know that some of the rules are changing from April 2010?

If your turnover is more that £100,000 or you register for VAT after 1/4/2010 then you will have to file your VAT returns online AND pay electronically. There will also be new fines for not doing so correctly or on time.

Many of our clients continue to have to keep a close eye on their cash flow. Business conditions seem to be improving for many but, as activity levels grow, it often means building stock or investing in technology before any customers can be invoiced. In this case we usually suggest that they use the Cash Accounting Scheme – a system specifically for small businesses with turnover less that £1.35m. It means that you’ll only pay over VAT to HMRC if you’ve been paid by your customers (remember though that you’ll only be able to claim VAT on what you’ve bought if you’ve actually paid for it!).

Benefits for small businesses don’t stop there. The ‘flat rate scheme’ allows a business to pay over a pre-determined percentage of its turnover. The record keeping requirements are vastly reduced leaving a small business owner more time to run the business and less stress and worry over the bookkeeping.

By creating an annual budget you will know in advance whether you should be registered for VAT or not. A rolling 12 month turnover above £70,000 means an immediate need to enrol. However, nobody likes mid-year price changes so a voluntary registration in advance of breaching the VAT limit can help everyone and ensure your advertising literature and marketing material will last longer!

If you’d like help deciding whether the flat rate scheme would benefit your business or whether a switch to cash accounting would help please get in touch……

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