Delay
Payment of VAT to HM Revenue & Customs
For most businesses, payment of the VAT liability
is their biggest regular cash outflow. There are, however, legitimate
actions which can be taken to delay the payment of this tax, allowing
you to hold onto the cash longer.
Requests for Payment
If you supply goods, the taxpoint for accounting
for VAT on these sales is the sooner of:
- The raising of a tax invoice, or
- Receipt of payment.
To delay this taxpoint, it will usually, therefore,
be beneficial, prior to dispatching goods, to raise a "Request
for Payment" or "Proforma Invoice" instead of a
valid tax invoice, which will only now be issued when payment
is received, or 14 days after delivery, if sooner.
Continuous Supply of Services
Where services are supplied continuously, such as
by an Accountant to an ongoing client, the option exists, once
again, to delay the tax point by issuing a "Request for Payment",
followed by a tax invoice only when the related payment is actually
received.
It is usually good practice to obtain prior clearance
from Customs that following such a procedure is an acceptable
basis for accounting for output tax for that particular business.
Credit Transfer
Usually, the due date for submission of a VAT Return,
and payment of the related liability, is the last day of the month
following the end of the VAT period. These dates can now both
automatically be extended by a further 7 days if the VAT is remitted
to Customs by credit transfer.
Basis of Accounting
Depending on the level of a trader's taxable supplies,
it may be advantageous to examine whether cashflow could be improved
by accounting for VAT using the cash accounting scheme. The affect
this will have upon VAT accounting will depend upon the relative
and absolute size of a trader's creditors and debtors.
Period of Accounting
The accounting period for VAT Returns is normally
3 months. A taxable person may, however, apply to Customs to adopt
a monthly accounting period instead. This will usually only be
of benefit to traders regularly receiving refunds.
Similarly, it may be beneficial to review whether
the Annual VAT Accounting Scheme is of benefit. As well as smoothing
cash outflows and simplifying administration, there may also be
a cashflow benefit, depending upon the seasonality of the trade.
Other Practical Examples of our VAT Expertise
- Investigatinmg whether there is an overall saving in
adopting the VAT Flat Rate Scheme.
- Registering a new business for VAT for the first time.
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