The Business Exchange Swindon & Wiltshire Edition 24: April/May 2016 | Page 10

FINANCE Hear it from the experts… Pros and cons of VAT using cash accounting or invoice basis. As ever, it depends. Assuming turnover doesn’t exceed the turnover threshold for cash accounting of £1.35m, you would need to consider what is best for your particular business: VAT Cash Accounting scheme Here are some advantages for small/simple businesses: 1. You only account for Output VAT on sales in the VAT quarter in which you are paid (rather than the VAT quarter in which you have invoiced) – so it is generally good for cash flow because, overall, you pay over your VAT a bit later; 2. If you have simple bookkeeping records based on your bank account and cash expenses then it is easy to extract the figures for your VAT returns without needing to keep separate sales and purchase ledger records; 3. If a customer fails to pay you, then you never have to pay VAT on the sale to HMRC (whereas on an invoice basis you have to pay VAT on sales - even if you never get paid – and then recover the VAT from HMRC only once the debt is over 6 months late). The more usual (invoice basis) VAT accounting method Here are the advantages for the more usual VAT accounting method: 1. If your customers pay you quickly, but you are given credit by your suppliers, then there can be a cash flow advantage to using the invoice basis for VAT; 2. If you already run a Sales Ledger and a Purchase Ledger through your bookkeeping system, then it is not really an extra complication to calculate VAT on the invoice basis. Peter Bromiley ACA AMS Accountancy Ltd, 01793 818400 www.ams-accountancy.co.uk/about-us/ ask-ams Let Basepoint help you step up as you set up THAT’S THREE MONTHS SAVINGS! 75% RENT 50% RENT PAY ONLY 25% RENT HURRY! Get your business off on the right foot! LIMITED OFFER MONTH 3 MONTH 2 PAY ONLY PAY ONLY MONTH 1 Getting a new business off the ground or expanding a growing one can be a costly process. That’s why at Basepoint Swindon we are offering three months worth of savings when you move your business into our office space. Ends 30th Apr 2016 Pay only 25% rent in your first month, 50% in your second and 75% in your third*. *Terms & conditions apply. 01793 602555 basepoint.co.uk 10 THE BUSINESS EXCHANGE 2016 [email protected] @basepoint_swnd Ask AMS Advice for small businesses I’m employed now but still owe tax on my ex Self-employed business. Can HMRC collect old unpaid tax? Yes they can – and in a new way. Since April 2015, HMRC have collected outstanding income tax via your tax code - meaning your employer must pay it to HMRC without you having a say. This can put a massive strain on people’s finances while HMRC get paid before the mortgage etc. If you earn less than £30,000 p.a., HMRC will not collect more than £3,000 of unpaid tax per year – above this there is a graduated scale (up to a maximum of £17,000 per year). Also, the tax collected under PAYE cannot be more than 50% of gross wages or salary. Previously you could negotiate a payment plan with HMRC’s debt management team; sadly this seems less possible now. Peter Bromiley ACA www.ask-ams.co.uk www.ams-accountancy.co.uk AMS Accountancy Ltd. 01793 818400 @AMSAccountancy