If your VATable turnover is under 1.35 million and you are not using cash accounting, now would be a good time to switch. If you sell goods on credit and you are usually owed more than you owe, cash accounting would probably reduce at least the first payment you make when you join the scheme. Essentially, you only pay VAT when it is collected from customers. Outputs and inputs are based on monies received and paid, rather than amounts invoiced.

If your turnover is under 150,000 and you have small amounts of input tax to reclaim each month, the Flat Rate Scheme may increase your retained profits. Each business sector suffers a different rate of VAT so the only way to see if this scheme would be beneficial is to compare the cost of VAT payable under the existing method with that on the Flat Rate Scheme.

Any debt that you have which is over six months old qualifies as bad debt, and so if you have any, you can claim bad debt relief, even without qualifying for any special schemes. As a result of claiming bad debt relief, you can reclaim the output tax you will have paid. If you have any unpaid invoices whcih are more than six years old, however, you should repay the input tax you have claimed.

It’s also worth filing your VAT return online. You are given an extra seven days to file the return and if you pay by direct debit, the payment will not appear on your bank account for a further three days.

People who are self employed and are used to paying on account of tax liabilities in Janiary and June each year will pay any balancing amount of tax for the accounting year ending in the tax year to 5 April 2008 in January 2009. You will also pay half the anticipated liability for the accounting year ending in the tax year to 5 April 2009.

It is assumed by the payment on account that profits for the accounting year 2008/09 are the same as those for 2007/2008.Payments on the account can be reduced if you anticipate a fall in profits as a result of the current economic climate, which can be discussed with your usual member of our Tax Team. However, reductions in payments should not be carried out if you do not anticipate a reduction in profits, as it may result in punitive interest charges and the possibility of penalties.

Clients who are struggling with with meeting VAT or tax payments can call the Revenue debt helpline, which has been created to help those with cash flow problems. The telephone number is 0845 302 1435.

VAT Changes In our November Financial Monitor which covered the Chancellor’s Pre Budget announcements, we mentioned that when goods or services had been paid for or invoiced before 1 December 2008 but supplied after that date then the VAT charge can be reduced from 17% to 15%. Whilst there is no requirement for the supplier to give this VAT reduction, if they wish to do so, they must issue a credit note by 14 January 2009, otherwise the VAT has to remain at the 17% rate.