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Clive Lewis, head of enterprise at the Institute of Chartered Accountants in England & Wales (ICAEW), offers a number of practical steps that businesses can take to ensure that they face 2010 on a positive note.
Many small businesses experience their highest sales during the festive period. If your expected sales have fallen short:
- Try to clarify your cash flow situation as much as possible. Compile a detailed cash flow assessment and put money aside.
- If you need extra finance to cover shortfalls, research the best deals in order to secure the best finance. A bank overdraft may be the most effective way to bridge trading low points and you may also be able to arrange repayment holidays for bank loans.
VAT rate increase
The standard rate of VAT, which fell temporarily to 15% last year, returned to 17.5% on January 1. HMRC recognises that the change may cause problems and has put measures in place. These include a ‘light touch’ to be operated by HMRC audit staff in dealing with errors, arising out of the rate change.
If you had an overlap of goods and/or services around December 31, the VAT charge can be split on a fair and reasonable basis so that 15% tax is charged on work carried out before December 31, 2009 and 17.5% on work carried out after.
Don’t forget that any credit note or refund given to a customer is based on the same rate of VAT that was charged on the original sale. The same principle applies to VAT claimed on bad debts.
HMRC Business Payments Support Service
Introduced in the 2008 Pre-Budget Report, this scheme allows businesses and individuals with tax and VAT debts to re-schedule payment over a longer period of time. By January 2009, just 11,000 businesses had taken up the scheme, but by October 2009, 200,000 businesses were on board.
If you have taken advantage of the scheme remember that it just defers the tax. It does not write it off so eventually it has to be paid back.
Do not just default on time to pay arrangements. Keep in touch with HMRC on a regular basis as they are much less likely to be understanding if you don’t keep them informed of what is going on.
For further information please visit www.icaew.com/enterprise
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