27 May 2020
VAT & Customs Duty,
Tax Reliefs including R&D
As we deal with the ‘now’ of the Coronavirus crisis, some businesses are still in survival mode trying to secure their financial stability and operations. Others are starting to reflect on ‘what next’? For all businesses, cashflow and VAT planning to improve cashflow will remain a key consideration.
Steve McCrindle, VAT specialist, shares his top tips on VAT planning to improve cashflow.
1. Maximise the amount covered by the VAT Payment Postponement holiday
VAT payments due from businesses between 20 March 2020 and 30 June 2020 will be automatically deferred to the end of the tax year. Ensure that you have calculated your VAT obligations correctly so that you benefit from the saving on the maximum amount of VAT payable.
2. Defer the time when VAT becomes declarable
Cashflow can be improved by timing when you issue sales invoices. For example, issuing sales invoices at the beginning of a VAT period can provide a short-term benefit to cashflow. This does require planning – and specialist advice is recommended.
3. Optimise recovery of VAT incurred on costs and the timing of it, including VAT incurred overseas
VAT incurred on purchase invoices that are received at, or after, the end of a VAT quarter can often be recovered from HMRC before the VAT needs to be paid to your supplier. This could provide your business with a cashflow boost.
4. Apply for VAT grouping or de-grouping
Supplies between VAT group members are normally disregarded for VAT purposes. This means that VAT is not chargeable on intra-VAT group supplies, a VAT cashflow advantage.
5. Exit the 'Monthly Payments on Account' regime
All VAT registered businesses with a net VAT due liability of £2.3 million in a 12 month period are required to make interim payments in each VAT quarter. These are a percentage of the total annual liability. If you have suffered a reduction in business and therefore, a reduction in the amount of VAT payable, it may be possible to agree a reduction in monthly payments with HMRC or plan a complete exit from the regime.
6. Utilise special VAT schemes
A number of VAT accounting schemes can be used, particularly by smaller businesses, to pay less VAT or pay VAT later. These include Cash Accounting, Annual Accounting and the Flat Rate Scheme; which all have their own turnover thresholds. It is worth reviewing your current circumstances to see if changes to your turnover mean you could agree a better VAT position with HMRC.
7. Obtain VAT & Customs duty deferment or suspension regimes
These already exist, for example: warehousing regimes for goods. Are you taking advantage of them to delay when VAT and duty becomes due on imports or wash these costs out of these transactions completely?
How can we help?
We help business owners to maximise their VAT cashflow and obtain favourable outcomes with HMRC. We are here to support you and share our knowledge during this challenging time.
Please get in touch if you want to discuss any of the points raised or other VAT and duty matters.