Special schemes
There are several schemes that are designed to make it easier for businesses to save time dealing with VAT. From the margin schemes to annual accounting, cash accounting and partial exemption, for both large and small businesses alike, there are plenty to consider, each with benefits in terms of potential VAT savings and reduced VAT administration.
Retailers
During my career as a VAT consultant working for various accounting firms, I’ve advised many different sorts of retailers, from small one shop businesses to major high street names to online retailers. I also started my VAT career in HM Customs & Excise as a VAT officer carrying out control visits to many small shops. I spent a lot of time sitting in small, cramped stock rooms reviewing purchases that were “filed” in black plastic bin liners, so I did my time at the less glamorous end of the retail industry market!
There are so many VAT issues that affect retailers, from property to partial exemption to business promotions and of course their own special retail schemes.
Here are just a few of the ways we can help:
- Assisting retailers with issues arising from the implementation of new logistics systems and negotiating with HMRC to find a suitable partial exemption special methods and retail schemes.
- Reviewing business promotions schemes to avoid unnecessary VAT liabilities.
- Sorting out VAT liability problems on everything from stationery to food to childrens’ clothes to hot pies!
Smaller businesses
The cost of specialist advice is normally just too high for small businesses to consider, but that shouldn’t prevent them from benefitting from the VAT savings that can be made from the various schemes and adding value to their businesses.
One of my accountant friends had asked me for some advice about one of her clients who runs a cafe. He also had the license to operate a kiosk at a local bus station. Its turnover would be around £70k per annum and his wife would be running it. The issue here was about the method to be used for calculating the output tax.
Option One: The Flat Rate Scheme
Her initial intention was to use the FRS. It is extremely simple to administer and doesn’t take much time to do. It’s also a sort of “one size fits all” approach to VAT as the calculation is essentially the same for each client just using different figures and different FRS rates. In this case, the annual VAT liability using the FRS in conjunction with the retail catering adjustment would be around £10k per annum.
Option Two: What about a retail scheme?
I suggested that she have a look at the two main retail schemes, the mark up scheme and the apportionment scheme, both of which can be used in conjunction with the retail catering adjustment to see if using either of them made any significant difference to the FRS liability.
And we were both surprised at the result.
In this case, each of the retail schemes significantly reduced the liability by nearly £5k per annum, saving nearly 50% of the bill using the FRS scheme every year.
Of course it can work the other way round. Accountants often tell me how much money they’ve saved their client by changing to the FRS.
But the important point is that even for a small business, taking into account all of the different schemes available can help you make a more informed choice for your client.