Business News
Top 10 tips to prepare you for the VAT rise
The dreaded VAT hike will come around in January and there is never a better time to start preparing than now.
Businesses of all kinds will need to begin factoring in pricing and cost control implications – are you ready?
1. Know your tax point rules and make sure your company policy is fully understood by all members of staff. Each business is entirely unique and it is not necessary for all businesses to have identical policies relating to the VAT increase. It is, however, essential that any policy you introduce fits within the scope of the tax point rules.
2. Review supplier terms and don’t be won over by ‘beat the VAT increase’ promotions. Unless cash flow within your business is particularly tight, it will take a good £1000 spend to incur an additional £25 cost as a result of the VAT increase. However, larger businesses payments on account will be passed on pre-VAT rise liabilities so you should give them some relief from the effect of the hike.
3. Be aware of the anti-forestalling regulations. By all means, explore chances to pre-invoice and receive payment at the lower rate, but ensure you are operating under the allowable legislation. Fines levied by the HMRC have never been more severe than they are at present.
4. Analyse your margins. Retailers should be planning to reduce the cost prices for goods and increase the selling prices to reflect the VAT increase. Retailers and sellers also need to ensure that they have sufficient resources in place to manage this change come January, which is often a busy time for them with sales and increased traffic on the high street.
5. Ensure your accounts are entirely accurate. The HMRC will not be lenient on offenders, despite the recent increase. They will not give you a second chance.
6. Charities and VAT-exempt businesses will be hit hardest. Your budgets will stretch 2.5% less than they did this year and if you’re considering making a capital investment, you may wish to consider bringing the purchase forward to enjoy the current 17.5% rate.
7. Think about marketing. Retailers may wish to consider boosting pre-Christmas sales by advertising lower VAT rates that last until the end of the year. Post January ‘no VAT rise’ pricing can be compensated by increasing margins on other lines.
8. Don’t fall foul of any potential fines for inaccurate accounting. Where credit debit notes are issued, businesses should ensure than any VAT credit or debit is applied at the correct rate by referencing it against the rate applied to the original supply.
9. Business on the flat rate scheme should take the chance to review their position. A revised flat rate scheme will become effective at the same time, so seek advice and establish whether you qualify for a lower banding.
10. Do your clients import? Import VAT levels should be reviewed. Simplified Import VAT Accounting may be a good option, but seek expert advice to ensure all is correct.
To successfully navigate the VAT hike minefield and ensure your business is getting the most out of the increase, consult Suretax Accounting today for impartial expert advice on all finance related issues and queries.
