VAT Aide Memoire for Minimising Your Threats & Maximising Your Opportunities


A large proportion of a business’ cash flow can be tied up in VAT so it is crucial to manage both VAT payment and VAT compliance efficiently and effectively. 

Additionally, VAT can be complex for some types of business due to special rules applicable to their sector and can cost businesses dear if VAT issues are not resolved promptly, or VAT saving opportunities are missed.  As a reminder, our senior VAT manager, Alison Birch, has highlighted some areas of VAT where it is easy to get it wrong.   If you identify with these please contact Alison who will happily help you.

Calculating VAT

Which rate of VAT to  charge?
Are you charging the correct VAT rate? Whether you are a retailer, manufacturer, sports club or builder there are different VAT rates depending on the goods you are selling or the services you are offering

Is VAT payable on  promotional activities?

  • Do you offer any promotions or vouchers? This is a highly litigated area of VAT and if it is not done correctly it could make the promotion not cost effective.
  • Do you offer rebates or offer goodwill to customers? If so, in some cases this can reduce your taxable supplies and the VAT due

VAT on Property
Do you have a property portfolio?  Are you aware that the option to tax relates to your interest in the land/building, therefore if you rent or buy land or buildings that are opted you still need to exercise the option for your interest in the property otherwise you could encounter some difficulties if/when you sublease or sell.

VAT on restructuring costs – lack of advance planning could be costly!
If you are restructuring your business or are planning to buy or sell businesses are you aware of the VAT impact of this? This is a very litigious area and advice should always be taken before decisions are made to ensure that you are in the best position possible to reduce the potential VAT cost to you.

What VAT are you entitled to recover?

  • Are you in receipt of grant income? This can indicate non business activities which can result in a requirement to restrict VAT incurred on purchases.
  • Are you partly exempt? Have you undertaken a review of your calculation to ensure you are maximising your VAT recovery?  Could a different partial exemption method suit you?
  • If you are eligible for reliefs and reductions (e.g. if you are a charity) are you taking advantage of these?

Are you incurring foreign VAT or dealing with international suppliers or customers?

  • Do you transact with overseas suppliers or customers? Are you comfortable that you are getting your VAT position correct?
  • Have you incurred EU VAT in the course of your business? There are mechanisms to reclaim this VAT in certain situations.

Are you eligible for a special VAT scheme?
Are you on a special scheme or eligible to be on one? For example the Flat Rate Scheme, Second Hand Margin Scheme, Tour Operators Margin Scheme.  These can simplify your VAT accounting….they can also complicate it!

VAT on defined benefit pension funds
Do you have a defined benefit pension scheme (even if no longer open to new members)? There are changes to how VAT is treated as a result of a Dutch ECJ case (PPG).   Is the fund registered for VAT? It may be that the fund has a historical obligation to register for VAT and it may be possible to do a retrospective VAT registration which should enable a partial reclaim of VAT incurred since that date.

Recovering VAT on Mobile Employee’s Expenses
Do you have a large number of mobile employees? Many businesses are too prudent with employee expenses and are not recovering as much VAT as they are entitled to.   Are you recovering enough?

Have you considered the impact of VAT on your cash flow?
Are you as VAT efficient as possible? There are opportunities to improve working capital by better management of VAT processes.

If we can help you with any, or all of the above, please contact our Senior VAT Manager, Alison Birch via email or complete our quick enquiry form and we will be happy to contact you directly.

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