04 Feb VAT efficiency tips
Taxes take up a considerable amount of time. They can also cost your business more money than necessary if you’re not submitting your VAT returns in the correct manner. So, with that in mind, read on to discover how to handle VAT more efficiently.
Have a separate bank account for VAT
It is always a good idea to have a separate bank account for VAT only. This will make it much easier for you to manage your cash flow and pay your VAT effectively. If you do not have a separate bank account, you may find that you have spent your VAT money by accident. This ensures that there are no nasty surprises and that you can budget effectively.
Choose the right VAT accounting scheme
You have several different VAT accounting schemes to choose from in addition to the traditional approach. This includes the Flat Rate VAT Scheme, Annual Accounting and Cash Accounting. There is no right or wrong answer when it comes to choosing one. It all depends on what is right for your business. Cash Accounting involves paying VAT once the customer has paid you. This is ideal for businesses with restricted cash flow and bad debts. The Flat Rate VAT Scheme involves paying a flat rate percentage on your turnover. This is beneficial because you do not need to calculate VAT. Finally, annual accounting gives you the option to pay VAT on your account in either nine or three monthly instalments throughout the entire year. One of these schemes may make your VAT a lot more manageable, thus they are certainly worth bearing in mind.
Claim back VAT on bad debts
If a customer has not paid you the money they owe you for more then six months and you are not likely to get this payment from them, you can reclaim any sales VAT that you have already paid. After all, you are essentially paying tax on money you have never even received. You need to ensure you maintain good records and regularly review who owes you money.
Claim VAT on mileage
You can claim VAT back on the fuel element of mileage claims that are made. These claims are made to cover the expenses of your company’s vehicles, and they are typically 20p or 45p per mile.
Hire an accountant
Last but not least, rather than tackling your tax yourself you should definitely consider hiring a high-quality accountant. A lot of people see this as an unnecessary expense. However, your accountant will save you money. They will know about various tax reliefs you could be eligible for as well. If you do not file your VAT return successfully, you could face significant fines, which is something no one wants.