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How to reduce your VAT bill

The FRS (flat rate scheme) is a simplified way of calculating the VAT you have to declare and pay. And it can actually reduce your VAT bill. It works by charging VAT at the full normal rate on sales you make but paying over a lower percentage to the VAT. With a few exceptions, you can't reclaim any VAT which you pay on purchases. The FRS makes bookkeeping for VAT simpler, so there can be administrative as well as cost savings.

The Cash scheme can provide cash flow benefits. It’s relatively simple to operate and gives you a VAT advantage where you have customers that are slow payers and/or become bad debtors. Rather than output and input tax being accounted for in the VAT return period in which you raise your invoices on sales or receive those on purchases, you account for these only when your customer pays you and when you pay your bills.

Annual accounting is designed for businesses that want to simplify administration by allowing the submission of only one VAT return each year rather than four. Benefits of using annual accounting are ease of administration and fixed payments throughout the year.

9 November 2014
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