UK VAT – Cash Flow Planning

Neglected however easy UK VAT reliefs that may ease your money stream

Organizations can at all times profit from an improved cash-flow place and given the present pressures on companies arising from COVID-19 and disruptions to produce chains, this 12 months is not any exception.

This text supplies a reminder of some effectively established however typically missed UK VAT cash-flow measures that companies can implement.

VAT unhealthy debt aid

Companies who haven’t acquired cost from their prospects greater than six months after the due date of cost are entitled to unhealthy debt aid to scale back their VAT payable to HMRC.

Utilizing unhealthy debt aid, the output VAT beforehand accounted for and paid to HMRC may be reclaimed on the VAT return. If the shopper subsequently makes cost, output tax must be accounted for and paid once more to HMRC.

Notice, while the unhealthy debt aid provisions can be utilized for debtors, in respect of a enterprise’ collectors they should be utilized. Enterprise ought to due to this fact guarantee the identical train is carried out the place for his or her suppliers they’ve reclaimed the VAT however cost is greater than six months overdue.

Expense claims

Companies ought to evaluation whether or not claims are being made for VAT incurred on workers’ expense claims. If not, are legitimate VAT receipts held which might assist VAT restoration for gadgets similar to lodges, journey, subsistence and workers entertaining? 

While it’s doubtless that these actions may need been considerably diminished up to now 18 months, forward of a (hopefully) upsurge this 12 months in exercise steps needs to be taken to make sure that is finest managed going ahead. These companies who ebook journey and lodging centrally also needs to evaluation whether or not VAT is claimed on invoices addressed to the enterprise.

Buy accruals

Companies receiving buy invoices dated in the course of the VAT return interval, however acquired or entered into the accounts after the quarter finish can nonetheless embrace this enter tax on their VAT returns. For big VAT bearing prices acquired after the quarter finish, processing the bill for inclusion within the VAT return can present a big money injection. It’s potential that distant working and disruptions to the work power could have resulted in elevated delays to buy invoices being acquired and authorised for cost additional growing the potential worth of an enter VAT accrual.

Tax factors

The tax level determines the date on which a VAT cost crystallises. Companies ought to contemplate how they’re creating VAT tax factors for his or her provides and whether or not there’s scope for delaying this. For instance, it could be potential to boost professional forma invoices/ requests for cost quite than issuing VAT invoices up entrance or, for companies within the building sector, to boost functions for funds. In these conditions, the time of provide (i.e. when VAT turns into due), may be delayed, probably to when the shopper makes cost quite than the date the VAT bill was issued.

Abroad VAT prices

UK companies incurring VAT in different nations can typically make claims for abroad VAT restoration. For EU VAT claims, companies needs to be conscious that the UK is now a 3^rd nation, which means that claims are made on to the abroad tax authorities quite than by the earlier HMRC course of that utilized when the UK was a member of the EU. Care is required across the closing dates for making a declare, the interval for which a declare can cowl and the necessity for particular items of proof (i.e. arduous copies of authentic invoices).

VAT grouping

The place prices are made between related corporations, VAT is normally chargeable. AT is accounted for by the provider and claimed by the recipient entity (topic to their typical VAT restoration place). Relying on the VAT return staggers and when prices are raised, there could be a time delay between the VAT that’s paid to HMRC and the VAT that’s reclaimed. 

One method to mitigate that is to type a VAT group as provides between members of the identical VAT group are normally disregarded for VAT functions. There may be further professionals and cons to VAT grouping, so this needs to be thought of earlier than implementing. 

Month-to-month VAT returns

Some companies can be in a compensation place with HMRC i.e. receiving funds from HMRC. These are usually companies who’re:

–       Beginning up so incurring VAT on prices however haven’t but made taxable provides

–       Making provides which might be predominantly topic to the zero fee of VAT or outdoors the scope of VAT

A few of these companies want to submit quarterly returns, as a result of elevated admin of month-to-month returns. Nonetheless, companies can request to maneuver on to month-to-month VAT returns to help with receiving faster repayments from HMRC. 

Import VAT claims

When items are imported into the UK from one other nation import VAT is payable. Expertise has proven that many organizations are fighting the adjustments arising from Brexit to the method for bringing items to the UK and the resultant necessities for customs declarations and paying and reclaiming import VAT.

Regularly, companies are uncertain whether or not they have paid import VAT and, in that case, how it’s to be reclaimed. The consequence of the uncertainties is that it not unusual for companies to have imported items after which be ‘lacking’ import VAT. As most companies buying and selling in items are capable of reclaim the VAT they incur it’s essential to make sure that the right administrative steps are taken in order that the import VAT paid may be recovered.

Companies may additionally wish to be certain that postponed accounting for import VAT is utilized the place potential. This allows the products to be cleared with out import VAT being paid, as a result of that’s achieved by together with it on the VAT return. On the identical time the VAT will also be recovered and therefore for many companies the quantities will internet off, giving a money stream benefit. 

Money accounting

Companies with VATable turnover that’s lower than £1.35m each year can use VAT money accounting. VAT on gross sales and purchases is accounted for when cost is acquired or remitted. This may be notably helpful for companies who’ve low VAT bearing prices however who could not at all times obtain immediate cost from prospects.