Optimising VAT to minimise the impact of COVID-19.

Considering how VAT flows through your organisation can make a real difference to overall cashflow and help your business to survive through this period of uncertainty.

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27 March 2020

HMRC have announced deferral of VAT payments due before 30 June 2020, but there are a number of options open to VAT registered entities to optimise VAT flows:

  • If the business is, or will be in a repayment position as a result of reduced turnover, consider applying for monthly VAT returns which will speed up VAT repayments.
  • Consider the timing of sales invoices in relation to VAT return periods, to maximise the time allowed to defer the point when VAT becomes accountable to HMRC.
  • Consider whether the business is able to claim VAT on expenditure earlier by amending accounting processes.
  • Consider whether your business can legitimately defer VAT payment by issuing ‘requests for payment’ instead of issuing a tax invoice before payment.
  • Ensure your business can identify and claim VAT bad debt relief, on outstanding invoices and where appropriate, remind customers if they don’t pay within 6 months it can affect their right to input tax recovery.
  • Consider available VAT schemes such as cash or annual accounting. We can advise if these are suitable for your business.

Other areas where VAT optimisation might be considered are:

  • The operation of any partial exemption or VAT recovery methods, particularly if the business is using a turnover based method. It might be prudent to agree a temporary alternative method with HMRC depending on your circumstances, particularly if trading has ceased altogether. 
  • The adjustment of VAT previously incurred on capital items (such as building works) could be affected by reductions in taxable turnover – consider whether you need to plan for this.
  • Now may be good time to review the process of attributing VAT on costs, to check you are deducting all the VAT you could be.
  • For the charity sector, maximising the use of zero or reduced rate reliefs where possible will also be important in minimising costs.
  • HMRC have announced that the zero rate supplies of certain e-publications will now take effect from 1 May 2020 rather than 1 December 2020, following the outbreak of COVID-19. Suppliers of e-publications will be able to zero rate sales to UK customers, and non-profit membership organisations which supply e-publications as part of their membership fees may be able to reduce the VAT they charge. 
Get in touch
Get in touch

While current circumstances prevent us from meeting you in person, our team of VAT experts are ready to support you via e-meetings, as well email and telephone. Desktop reviews can be undertaken and email advice is a regular facet of our work, so please contact us to discuss how we can help.

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