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Did you know that you could increase your income by registering for VAT!

Many small businesses think that registering for VAT is complicated and adds an additional administrative burden. Obviously, if your turnover exceeds the threshlold (currently 2014-2015 tax year £81,000) you have to register but you are perfectly entitled to voluntarily register if your turnover is less than that amount.

But, why would you want to voluntarily register?  Simply because it could increase your company’s profit and therefore the amount you can potentially take as a dividend. This is not as crazy as it sounds, each and everyone of us pay VAT as part of our daily expenditure, as a business you are entitled to claim this back from the Government. Moreover, if your business is subject to zero-rate VAT, once registered you will be able to claim back VAT incurred on all your business expenses!

We will explain why it could be beneficial for you to register your business for VAT.  We will execute the registration process and will ensure that all your VAT returns are accurate and within specified deadlines.


There is a simple way! Contact us now to generate more income for your business! 

Contact usrequest a call back or speak with us online if you have got any questions.  

We will discuss with you your VAT options and in particular whether you can make use of the Flat Rate Schemes, this HMRC initiative makes it easier and less expensive for businesses to handle their VAT obligations and is available for annual turnovers of up to £150,000.

Flat Rate Scheme

It is really very simple and the amount that you could save may be considerable. The Flat Rate percentage varies from trade to trade.

If we consider a client who happens to be, for example, a builder operating general building and construction business (regardless whether self employed or limited company), his business’s flat rate could typically be 9.5%.
His business would invoice its customer for say £500 plus VAT.
The invoice would be £600 (that’s £500 plus VAT of £100).
The customer, who are themselves VAT registered, do not mind because they can recover the £100 VAT.
The customer pays the invoice and the company banks £600.
When the business’s VAT return is done it has to pay HMRC the VAT at the agreed flat rate percentage, that will be £600 x 9.5% = £57
So in summary . . . . . . .
The business received VAT from its customer of                          £100
The business paid VAT to HMRC of                                              £57
It has made a surplus of (that’s additional profit)                         £43

Now if the builder has the gross sales of £42,000 the VAT surplus is worth £3,210 a year – extra cash in your pocket!

Remember, the preparation of your VAT returns can all be included in our monthly fee. Most clients find that VAT savings alone often far outweigh our fees!

As an additional bonus, HMRC will also discount the flat rate percentage by 1% for the first 12 months. In the above example that’s worth an additional £420 in the first year.

There is an even simpler way!

Annual Accounting Scheme

As well as the Flat Rate Scheme, you can also make use of the Annual Accounting Scheme. This allows you to submit just one VAT return per year instead of the usual quarterly returns. Essentially, this will help you to budget for your VAT and will reduce your accountancy fees because we will need to prepare just one large return instead of four smaller ones.

For a new business, you need to estimate your annual turnover and then make quarterly VAT payments on account based upon this estimated figure. For existing businesses the quarterly payment is based on you last four quarters returns. There will then be a balancing payment or repayment based upon the actual return which is submitted at the end of the year.

In simple terms if you estimate that your turnover will be £42,000 and your flat rate is 9.5%, you will make four quarterly payments of £997*. If your actual turnover for the year is then calculated to be £32,000, your final quarterly payment for the year will be just £47.

Remember, that because you will charge the full rate of 20% to your customers you will actually receive £583 (based on invoicing of £3,500 per month) from your customers so you will actually have a cash-inflow or net saving each month.

For a new business it makes sense to regularly review your VAT position and we can assist you with this. You just need to let us know your sales figures, perhaps on a quarterly basis and we will review your VAT position and let you know if the monthly payment is still appropriate. This will help you to budget for any year-end adjusting payments.

* just in case you were wondering the £1,330 is calculated as £35,000 x 1.20 = £42,000 x 9.5% = £3,990 divided by 4 = £997. The flat rate calculation is applied to the gross (inclusive of vat) turnover amount.