VAT overview

Should you be VAT registered? Until your business reaches the compulsory VAT registration threshold, you will have the choice to become voluntarily VAT registered. Whereas businesses reaching the compulsory threshold must make an application to become VAT registered with HMRC and subsequently file VAT returns.

As a business, there are certain advantages and disadvantages you may wish to consider when deciding whether or when to become VAT registered. The majority of businesses use the default accruals based scheme to calculate the amount of VAT they owe each quarter. However, there are various VAT schemes available (some help reduce the amount of VAT payable) and Coalesco can assist you in selecting the one that is most appropriate for your business and complete your online application for you:

Annual Accounting Scheme

Based on the VAT that your company paid the previous year, under the Annual Accounting Scheme you pay VAT on account in nine monthly or three quarterly installments. Only one VAT Return is required to be completed at the end of the year, giving you a reduction in administration. However it does not remove the requirement to keep all required VAT records and accounts nor is this scheme suitable for businesses that regularly reclaim VAT.

Cash Accounting Scheme

For businesses with a turnover of less than the scheme limit the Cash Accounting Scheme entitles you to pay VAT once your customer has paid you. However, you cannot reclaim VAT on your purchases until you have paid for them. Beneficial for businesses with customers who are slow to pay or are prone to nonpayment, the Cash Accounting Scheme may not be viable if you regularly reclaim more VAT than you pay.

Flat Rate Scheme

Only available for businesses with a turnover of less than the scheme limit, the Flat Rate Scheme offers a range of flat rates depending on your trade sector. Although you cannot reclaim VAT on your purchases (with some exceptions) under the Flat Rate Scheme, smaller businesses may benefit from reduced accounting time by just paying a flat rate on their turnover and may pay less VAT overall.