Newspaper article The Evening Standard (London, England)

Budgeting for the VAT Man; Customs and Excise Is on a Charm Offensive, in a Bid to Offer More Support to Businesses with Genuine Payment Problems

Newspaper article The Evening Standard (London, England)

Budgeting for the VAT Man; Customs and Excise Is on a Charm Offensive, in a Bid to Offer More Support to Businesses with Genuine Payment Problems

Article excerpt

Byline: NIKI CHESWORTH;SASCHA OLOFSON

THE rules of VAT can be a minefield for unwary businesses.

Did you know, for example, that if you have a payphone at your office, you need to pay tax on all the loose change you collect, as it counts as income?

Dealing with Customs and Excise can be difficult. Even if you are diligent about filling out your VAT return, one small mistake that gets repeated can mean a backdated demand through the post.

In Chancellor Gordon Brown's recent pre-Budget report, he announced a clampdown on VAT fraud. This applies mainly to specific loopholes, such as VAT on freehold buildings and to fraud, rather than innocent mistakes made by honest companies.

While the latest initiative announced in the pre-Budget is designed to reduce the proportion of VAT which goes uncollected - and produce more than pound sterling2 billion per year in additional revenues by 2005 - Customs and Excise will also be offering more support to businesses trying to meet their VAT liabilities. It will only crack down on those who choose not to comply.

Smaller businesses who are genuinely finding paying difficult will be offered help and advice.

There are a number of schemes smaller firms can take advantage of to reduce the VAT burden.

The flat-rate scheme

This is targeted at companies with turnovers of up to pound sterling100,000. As from April 2003, this will be extended to those with an annual turnover of up to pound sterling150,000. It aims to simplify bookkeeping and give businesses greater certainty about actual liabilities. Firms who join the scheme do not have to keep records of sales or purchases and, at the end of the period, they simply apply an agreed flat-rate percentage to total turnover.

Estimates show that businesses could benefit by as much as pound sterling1,000 per year.

The annual accounting scheme Changes have also been introduced to the annual accounting system for VAT, which is offering reduced compliance costs to an estimated 900,000 businesses. This scheme is aimed at firms with a turnover of up to pound sterling600,000 a year, who simply submit one VAT return per year.

Businesses with a turnover of up to pound sterling100,000 will be able to join the scheme from the day they become VAT-registered.

The cash accounting scheme

Previously, companies have had to settle their VAT returns regardless of whether all outstanding monies were paid to them by customers. Under the cash accounting scheme, VAT is not payable until the customer has paid up. The conditions to join this scheme require turnover to be up to pound sterling600,000.

Your company must be up-to-date with VAT payments to qualify.

In trouble?

Over the past two years, Customs and Excise has been undergoing a dramatic reorganisation, mainly in response to the difficulties that arose as a result the foot-and-mouth crisis. …

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