If you run a professional practice with a turnover of more than £85,000, you must be registered for VAT and make returns, together with the appropriate payments of the tax to HM Revenue & Customs (HMRC) every three months.
But sweeping changes are afoot, which may require a complete change in the way in which you manage your VAT liabilities – are you ready for them?
Making Tax Digital
With effect from April 2019, every VAT-registered business in the UK must be prepared to submit its three-monthly VAT returns electronically. This is part of the government’s Making Tax Digital strategy and one that clearly has a major impact on the way businesses conduct their tax affairs, by doing so entirely online.
A measure of the very extensive impact this change is going to have is recognised by a recent scaling back of targets, so that it is only accounting for VAT that needs to switch to online reporting, according to an official policy paper updated on the 13th of July 2017.
From the point of view of the businesses involved, this is likely to entail not only a steep learning curve on the way in which a totally digital system works, but may inevitably entail significant investment in the relevant IT software and hardware.
The Chartered Institute of Taxation (CIOT) wrote on the 27th of July 2017 that digital accounting for VAT will be “significantly different” from the way in which records are currently held. After 2019, for example, you will no longer be able to keep manual records of your VAT transactions and any existing electronic records may need to be adapted to accommodate HMRC’s digital systems. The challenges to businesses – such as your own professional practice – “should not be underestimated”, says CIOT.
At the same time that those changes are being introduced, the whole VAT structure may likely be transformed following the UK’s decision to exit the European Union.
In an article dated the 5th of June 2017, the Association of Accounting Technicians (AAT) wrote that Brexit introduces an age in which the UK is free to go it alone when it comes to the way – and the rate at which – VAT is raised.
VAT was the brainchild of the EU and membership has meant that every state has had to charge a rate of at least 15% (although the UK’s chosen rate of charge is currently 20%).
In future, however, UK governments may decide to make its independent tax regime more attractive to businesses by lowering the rate of VAT or by changing the rules on the way it is raised – Brexit gives the UK that freedom. Other changes might also involve a lowering of the current £85,000 threshold for VAT registration, says AAT.
Are you ready?
If your professional practice is to be ready to meet these changes and challenges, it is important to start preparing for them now.
Some of the questions you might be asking of your practice, therefore, are:
- do you have the accounting staff capable of responding to the changes and what financial provision needs to be made for their training;
- are electronic systems already in place to respond to the Making Tax Digital strategy; and
- if so, to what extent does your firm’s software or hardware need to be updated and improved to handle it.
Unsecured VAT loans
The answers to questions such as these are all likely to involve expenditure of working capital for which your practice might not have made provision in the past.
As is often the case when capital is needed to meet exceptional and unexpected expenditure, therefore, you are likely to consider borrowing the required funding.
VAT loans from us here at Professions Loans are designed to provide just such a facility.
These are unsecured loans, so none of your firm’s assets or those of your partners are put at risk by arranging such an advance.
Our fixed rates of interest mean that monthly repayments remain the same throughout the term of the loan, so making budgeting and management of your cashflow considerably easier – as well as spreading out repayments throughout the entire year.
At the same time that you are working to ensure the perfect match between your own VAT recording systems and those of HMRC, a VAT loan contributes substantially to that close inter-relationship by making VAT payments directly to HMRC.
Assessing the viability of a VAT loan and what it is likely to cost your professional practice is as easy as completing a short online questionnaire – and a quote will be with you within the hour (during normal working hours). If you decide to proceed with an application, this too is dealt with speedily and smoothly to ensure you receive a decision within the following 48 hours.
Why not contact us today to find out more?