The good news is that all the special VAT schemes that existed prior to 6 April 2011 continue with a few minor changes.
Flat Rate Scheme
This scheme can be particularly beneficial for businesses that have low levels of business expenditure that include VAT.
Because of this, businesses that manufacture or sell goods are disadvantaged if their direct costs and other overheads include purchases that are mainly standard rated. Firms that also have significant zero rated sales should also be wary of using this scheme.
If your turnover, excluding VAT, is less than £150,000 this is a scheme that can produce cash savings and is simple to operate. What you must do is work out the likely effects of registration, before you register. Firms that are already using the scheme should review their participation from time to time to ensure that the scheme still produces the best result.
A business can enter this scheme provided the estimated VAT taxable turnover for the next VAT year is not more than £1.35 million. It can continue to use the scheme until the VAT taxable turnover exceeds £1.6 million.
Generally speaking if your business is owed more than it owes, cash accounting is likely to be of benefit.
In a nutshell, users of this scheme pay VAT when cash is received from customers and paid to suppliers.
Combine the two
What may not be too evident is that you can combine the flat rate scheme with elements of the cash accounting scheme. This can be extremely useful for smaller businesses that qualify for the flat rate scheme as it extends the benefits of paying VAT when customers pay you.
For more details please give us a call.