Les was one of our first associates and brings more knowledge than most can imagine. He knows things about VAT that most don't want to know. We asked him to answer a few questions about his mastermind topic:
What is the most important thing to get right when it comes to VAT?
Certainty is the most important thing. You need to know that there are no nasty surprises down the line. Take opportunities to reduce your VAT; use special schemes if you are eligible; but make sure you know your VAT Returns are right.
As a business owner when is the best time to register for VAT?
My rule-of-thumb is simple:
For B2B, register at an early stage, to recover input tax on expenses;
For B2C, register when you have to, to enable you to trade VAT-free as long as you can.
You mention Special Schemes, what is available?
There are four schemes that you should acquaint yourself with. These can provide VAT savings, cash flow savings, or administrative savings.
Flat Rate Scheme: you calculate your net VAT each quarter, based on your gross income, multiplied by a fixed ‘flat rate’ percentage relevant to your type of business. The Scheme applies up to annual taxable turnover up to £150,000.
Cash Accounting Scheme: you only pay VAT when you get paid. And you only claim VAT when you pay your suppliers. This provides automatic relief on any debts, so assists cash flow. You can join if your taxable turnover is less than £1.35m p.a.
Annual Accounting Scheme: you submit a single VAT Return for a whole year, with interim payments. You make a balancing payment when you submit the Return. This works for seasonal or growing businesses. You can join if your taxable turnover is less then £1.35m p.a.
Second Hand Margin Scheme: you only pay VAT on the gross margin achieved on the goods, rather than on the full selling price. There is no turnover limit.
What paperwork do I need to keep?
Proper business records are essential, and enable you to know how your business is doing.
You should ensure your Sales Invoices are fully compliant with the legislation. And, when you buy goods or services for your business, get into the habit of asking for an invoice.
Where do I go for further help?
The HMRC website is the place to start for VAT information. But do not expect to find advice.
Also, speak to your Accountant. Find a basic VAT training course. Or speak to me!
What is the most unusual thing you have seen VAT claimed on?
A large redevelopment of a private house overlooking Regent's Park in London, where the project included the painting of cartoon characters in a child's bedroom; and the installation of a television in a shower cubicle