Date
23 Nov 2022Category
VAT & Indirect TaxIn view of current financial climate and the increasing financial pressure, many businesses are looking at what they can do to improve cashflow. A regular significant outlay is the payment of VAT and duty. However, there are ways in which businesses can save money from a VAT & duty perspective.
Scott Craig, National Head of Indirect Taxes, highlights below the savings and benefits that are available to most businesses in this area.
Changes frequently occur to the activities and turnover of most organisations. Businesses that cannot recover all the VAT incurred on expenditure should regularly review their existing VAT recovery calculations. It may be possible to improve a calculation and increase the amount of VAT that can be claimed back from HMRC. The goal is always to ensure that the calculation of recoverable VAT represents the use of expenditure.
Subject to specific conditions being met, businesses should be able to agree with HMRC informal payment processes or formal payment plans for VAT and/or duty. This can result in the tax cost being spread over a longer period of time, which can improve cashflow.
Businesses can amend VAT accounting periods, change from quarterly to monthly returns or vice versa. This action helps to speed up VAT repayments or delay VAT payments. Unregistered businesses may be better off voluntarily registering for VAT. This would allow them to recover VAT on significant expenditure and assist with cashflow.
HMRC offer a number of accounting schemes that are designed to help smaller businesses pay less VAT or pay it later. These include the Cash Accounting Scheme, Annual Accounting Scheme and Flat Rate Scheme. Further information on these can be found here.
A quicker recovery of VAT will improve cashflow. Businesses can accrue the recovery of VAT on a variety of costs, which would normally be claimed later due to business processes. These include rents, and late supplier invoices.
Businesses may be able to defer the payment of VAT to HMRC by issuing payment requests or pro- forma invoices rather than sales invoices. The use of self-billing procedures can also improve and speed up the recovery of VAT incurred on expenditure.
If payments aren’t received after 6 months businesses can recover the VAT declared and paid on sales from HMRC. Remember that the VAT recovered on unpaid purchases is repayable to HMRC under the same rules.
Most businesses routinely under-recover the VAT they incur on staff expenditure. HMRC has discretion to allow retrospective claims in this area for four years.
The duty deferment and postponed import VAT accounting procedures are two of the many measures intended to delay the payment of import VAT & duty or remove the cashflow burden altogether.
Businesses in the hotel, construction, financial and retail sectors can benefit from VAT opportunities that apply to their activities. Retrospective reclaims can be made for period of up to four years. The opportunities include the VAT treatment of cancellation charges, construction services, fund management fees, vouchers and delivery charges.
Under the 13th Directive procedures, VAT incurred overseas can often be recovered. Overseas travel and subsistence expenses are common areas where VAT recovery is possible. Claims can be made for periods to 30 June each year and submissions are required to be with a relevant authority by 31 December.
It’s important to note that conditions are applicable to all of the points mentioned above. We recommend that you speak to a VAT specialist before taking any action.
If you have any questions on VAT or the points raised in this article, please get in touch with a member of our specialist VAT team or your usual Azets advisor.
