As your business grows and becomes more successful, there may come a point where you are required by law to register for VAT. Registering for VAT isn’t a particularly difficult task, but under what scheme should you register? The simplest VAT scheme would be the standard, whereby you pay over VAT you charge on invoices and claim VAT you pay on invoices from suppliers.
But is there a better scheme for your business?
If you are a service based business in particular, joining the VAT flat rate scheme could actually make you money. You charge 20% VAT on your invoices, but you only pay over a fixed % of your gross turnover to HMRC, meaning you get to keep the difference. You don’t claim input VAT, but overall you should be up.
Or if cash flow is a key issue for your business, why not join the cash accounting scheme. Here, you only pay and claim VAT when you physically receive payment and make payments, so you are more in control of your cash flow. If your customer doesn’t pay you for 60 days, at least you don’t have to pay the sales VAT over before you have the money.