VAT and improving cashflow

ES STL · May 9, 2010

My company is VAT registered.

I have an invoice to pay, due in installments over several months, where the tax date is in September (it currently being May), the date on which the last installment is due.

To improve the cash-flow, is it necessary to pay the VAT to the supplier (also VAT registered), or can I simply quote the VAT Number, record it as not paid, and not claim it from HMRC, or do HMRC object to this?

If they do, I shall request to make my VAT return monthly, which increases the bureaucracy, but also the cash available.

Thanks in advance.

Logistika · May 9, 2010

yes, the Vat office might take umbridge at your idea if you received a compliance visit. You want to negate the supply and the payment because of timing differences. Thats a no-no, but lets face it you need to get caught first.

I don't understand why your supplier is willing to defer the tax point to September. Technically, it is only in September that you can reclaim the Vat shown on the invoice if that is their tax point date. You cannot preclaim. Most suppliers request the VAT along with the first payment, and the only exception I know of are professional recurring services from e.g. accountants and solicitors.

You don't mention amounts, but as long as amount isn't roughly in excess of 3k, just stick it into next quarterly return. The accountants on here might scream at this idea, but this is the real world and timing differences do exist, and as long as the VAT accoutn balances out at end of the day, who gives a monkeys?. Worst HMRC will do to you is charge you interest on over claiming between periods. Cheaper than a bank overdraft by the way.

You can use monthly Vat returns. If it eases cashflow it shouldn't be viewed as increasing bureaucracy, but a necessary evil. Monthly returns are generally only useful where the registered trader is constantly in a refund situation: farmers, "new build" builders and businesses who buy from UK suppliers, but sell to EC countries.

DuaneJackson · May 9, 2010

Easiest thing to do is get on the Cash Accounting Scheme for VAT, then the VAT only becomes due as you make payments. so you pay 1/12th of the invoice, you declare 1/12th of the VAT on your return.

ES STL · May 12, 2010

Thank you to both of you for your suggestions. I have asked HMRC to put me on monthly returns.

A Cash Accounting scheme would not really be suitable, I fear; I did look into it.

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VAT and improving cashflow

ES STL

Logistika

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