VAT and Customs Duties affect the cash flow of most businesses. In the current financial climate, cash flow is more important than ever. We have found the following 10 VAT and Duty procedures can improve cash flow:
1. Time to Pay agreements – Subject to certain conditions you could agree an informal payment promise (or formal payment plan) with HMRC for both Indirect and Employment Taxes. HMRC has introduced a specific helpline to assist with this and we have been able to secure favourable payment arrangements for our clients.
2. Accelerate or decrease VAT repayments – VAT return periods can be changed or moved from quarterly to monthly cycles to speed up VAT repayments or delay VAT payments. It may also be time for previously un-registered businesses to voluntarily register and recover the VAT they incur on expenditure.
3. VAT accounting schemes – A number of VAT accounting schemes can be used by smaller businesses to pay less VAT or pay it later. These include the Cash Accounting, Annual Accounting and the Flat Rate Schemes.
4. VAT recovery accruals – Where book-keeping or invoice processing results in VAT being recovered in a later VAT period accruals can be agreed to accelerate the recovery of VAT. This can apply to VAT incurred on most expenses including rent, imports and late supplier invoices. Self-billing arrangements could also be introduced to accelerate the recovery of VAT on regular costs.
5. The timing of sales invoices – While sales invoices must be issued at specific times, cash flow can be improved by issuing payment requests or demands or by raising sales invoices at the beginning of a VAT return period. This can be a complex area and requires bespoke advice.
6. Bad Debt Relief – The VAT declared on sales invoices can be claimed back from HMRC where the invoices remain unpaid after six months. However, the opposite is also true, VAT recovered on unpaid purchase invoices should be repaid to HMRC after six months.
7. Staff expenses – Most businesses routinely under-recover the VAT they incur on staff expenses. HMRC has discretion to allow retrospective VAT reclaims, for as much as four years.
8. Import VAT and Duty – Duty Deferment and Simplified Import VAT Accounting (SIVA) procedures are two examples of measures that allow the payment of import tax to be deferred. There are a number of HMRC procedures (some as part of the BREXIT process) that can be used to defer the payment of tax and create process efficiencies/savings.
9. Sector specific VAT reclaims – Changes in VAT rules have resulted in “sector specific” opportunities for retrospective refunds (of up to four years) for overpaid VAT. This includes Hotels (cancellation charges/room hire charges), Property renovations and conversations (reduced rate VAT), Financial Services (fund management charges) and Retailers (vouchers, discounts and delivery charges).
10. Recover overseas VAT – Globally nearly 170 countries have a VAT system. Some countries have reciprocal arrangements with the EU and UK and in certain circumstances VAT incurred on overseas travel, subsistence and other costs can be recovered.
Over the years we have helped clients to maximise their cashflow and obtain favourable outcomes from Indirect Taxes. In these uncertain times we are here to support and share our knowledge, so please contact our VAT team if you want to discuss your cash flow position or find out more about any of the above procedures.
The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.