Businesses are continuing to face uncertainty arising from tensions created by the global political and economic situation and the impact of the pandemic. These issues have the potential to impact significantly on your cashflow. For many businesses, VAT can have one of the biggest impacts on cashflow and we have set out several ways in which differing VAT treatments can help manage your cashflow.
FREQUENCY OF VAT RETURNS
The default position for VAT returns is submission on a quarterly basis. However, if you are in a repayment position on a regular basis, i.e. you are claiming VAT back from HMRC on your VAT returns, then we would recommend moving from quarterly returns to monthly returns. This will speed up the repayment of VAT owed to the business.
If you are not already on monthly VAT returns, it is straightforward to change this using your VAT online services account.
TAX POINTS
The tax point determines the time at which VAT becomes accountable to HMRC. The basic tax point for goods is when they are removed or otherwise made available. For services the tax point is when the services are performed.
This basic tax point can be advanced by the receipt of a payment or issue of an invoice before the basic tax point. The issue of an invoice within 14 days after the basic tax point also creates an actual tax point. Consequently, for most supplies of goods and services the scope to delay the tax point is limited.
However, for the continuous supply of services, there is no basic tax point. And a tax point is only created by the issue of an invoice or the receipt of payment. Rather than issue an invoice to customers, the issue of either a pro-forma document or a request for payment, neither of which create a tax point, can delay the tax point until payment has been received.
Importantly, a pro-forma document or request for payment is not evidence of your right to claim input tax. If you have received one of these documents, you must wait until you receive a full VAT invoice or a VAT receipt before claiming the input VAT.
