AN EFFICIENT VAT accounting operation can reap real benefits for all types of organisations, particularly during testing economic times such as these. The following advice could prove to be invaluable.
Input VAT – There is usually no requirement in VAT legislation for a business to pay an invoice before it can reclaim the VAT incurred as input tax (unless it operates
the cash accounting regime). However, many businesses have systems in place which only allow posting of an invoice once payment approval has been received. The result of this can be that input VAT is reclaimed three months later than it could have been, adversely affecting cash flow. A small change to internal arrangements can accelerate VAT relief for input tax.
Equally, there are often invoices relating to a VAT period that are not issued by suppliers until the customer has already submitted its VAT return covering that period. The customer is therefore unable to recover this VAT at the earliest opportunity.
In these scenarios, it may be possible to agree an accrual method with HM Revenue & Customs (HMRC), which will generate a permanent cash flow saving.
For more information or assistance on VAT matters, telephone 01908 687800, e-mail mail firstname.lastname@example.org or visit www.bakertilly.co.uk
Self Billing – If your regular suppliers are often late in issuing you with invoices,
one solution would be for you to self-bill. This would mean that, subject to certain conditions, you would be able to issue invoices on your supplier’s behalf and recover the VAT as input tax considerably sooner.
Bad Debt Relief – Businesses struggling in the current economic climate may find it harder to meet payment obligations. Consequently, a supplier who has already accounted for VAT to HMRC on a transaction will be at a cash flow disadvantage if its customer is slow to pay or does not pay at all. In these circumstances the supplier may claim bad debt relief, enabling it to obtain a refund of the output VAT paid over to HMRC on that supply, subject to certain conditions.
Three-Year Cap Claims – Following a landmark decision in the House of Lords, businesses are now entitled to submit claims to recover any VAT they have overpaid, or underclaimed, prior to 1997. Claims can go back as far as the inception of VAT in 1973. This is a real opportunity to obtain a windfall refund of VAT, potentially spanning 24 years, but claims must be submitted by 31 March 2009.
Baker Tilly’s VAT team can advise you on all aspects of the above as well as on further valuable VAT-saving initiatives. Using our specialist software, we can also help you sort and analyse large amounts of information, with a view to identifying potential VAT overpayments.