Five ideas to ease the pain of VAT
December is a very common quarter end for VAT returns but is the money available to pay the VAT in January?
Most businesses should be indifferent to VAT. You add it to your sales invoices, collect it when you get paid by the customer and pay it over to HMRC when it’s due. In principle: no problem.
In the real world, making sure you have the money to pay the VAT can be a struggle so here are five ideas to ease the pain of VAT, whenever your VAT quarter ends:
- Track the build up of your VAT liability each month so the size of your VAT bill doesn’t come as a surprise.
- Get totally on top of credit control so your sales invoices are collected in good time.
- Put 20% of the money you receive from customers into a separate bank account. Not only will you have the money to pay the VAT but if your main bank balance is looking low it’s telling you that you have other business problems you need to solve NOW!
- Think about changing to the Cash Accounting Scheme for VAT . If your net of VAT sales are under £1.35m give some thought to this but BEWARE – cash accounting is not always dealt with very well by all of the accounting software packages
- Set up a direct debit with HMRC to pay your VAT – this will focus your mind!
- Consider changing your VAT quarters. You might want to do this simply to tie your VAT quarters in to your financial year-end, but from a cashflow perspective, if your business is seasonal, a change might be helpful. Email HMRC and they should change it for you.
VAT is out there, it’s not going away and with so many more profitable ways to spend your time you should not let it get in the way.
Why not read more on how we take away the pain of VAT for our clients – visit our VAT Services page.