Neil Warren considers how the three main VAT schemes can reduce VAT bills and help the cash flow of a small business
The three main VAT schemes that are available to small and medium enterprises (SMEs) are:
- the flat rate scheme;
- the cash accounting scheme; and
- the annual accounting scheme.
The initial challenge is to establish which clients might be eligible to use the schemes. The joining thresholds for the annual and cash accounting schemes are the same; i.e. taxable sales in the next 12 months are expected to be less than £1.35m excluding VAT. The flat rate scheme threshold is much lower and expected taxable sales in the next 12 months must be less than £150,000 excluding VAT.