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Steve Allen of VAT Advisers Ltd offers some helpful VAT hints.

1. Should You be VAT-Registered?

If your taxable UK supplies are above £70,000 p.a., you must register compulsorily, unless they are all zero-rated, in which case, you could apply for exemption from registration. If your taxable supplies are below £70,000, and your customers are mainly or wholly VAT-registered, you can register voluntarily to recover UK input tax. If you have a UK business establishment (including a branch or agency), but your supplies (including certain exempt supplies) are all made outside the UK, voluntary registration to recover UK input tax is again an option, but does mean you might be compulsorily registerable in another country.

2. Make Sure you Recover ALL Pre-Registration VAT (Including Pre-Incorporation VAT if applicable)

VAT incurred up to four years previously on capital assets and stock which is still on hand at the registration date can be recovered. VAT paid for services received up to six months before the registration date can usually be deducted.

3. Unregistered Businesses can also Save VAT

The use of unregistered suppliers may help, as could the use of non-UK suppliers of services (but this may count towards your UK registration turnover). If you are looking to rent premises, consider looking for a property with a non-VAT rent, or else raise the issue of your inability to recover VAT in the rent negotiations. Charities should check they are getting VAT relief on their income under the charity zero-rating concessions and fundraising exemption.  Similarly, for expenses, charities can check that suppliers are zero-rating or reduced-rating their supplies wherever possible. [ See for instance Charities - Make Sure You Don't Pay VAT on Advertising Costs! - Ed. ]

4. Use an Appropriate Simplification Scheme

The Flat Rate Scheme (with a 1% discount in first year of registration), Cash Accounting, or Annual Accounting can all create cash low and/or administrative savings.

5. Be Compliant!

Keeping up-to-date VAT records, submitting and paying VAT returns on time, and disclosing errors as soon as they are found will avoid interest, potential penalties, and endless hassle from HMRC.  

6. Recover VAT Incurred Elsewhere in the EU

You may be able to claim EU VAT via HMRC’s online portal under the EC 8th Directive.

7. Need a Car? You Could Save VAT by Leasing

Unless there would be purely business use (e.g., a taxi, hire car, or pool car), which would allow full VAT recovery, the VAT on the purchase of a car is irrecoverable just by the car's being ‘available' for private use. Consider leasing rather than buying, as 50% of VAT on the lease charge is recoverable, as is 100% of roadside maintenance if it is split out on the invoice. 

8. Do you Claim the VAT on Road Fuel?

You can keep detailed records of private and business journeys to support apportionment of the input VAT, or else pay the fuel scale charges and recover all the VAT.

9. VAT on Entertainment Costs

The VAT on entertaining clients, potential clients, and non-employees is not recoverable (unless a reasonable charge is made), but the cost of staff entertainment will be recoverable if incurred for the ultimate benefit of the business (e.g., a team away-day).

10. Are your VAT Liabilities Correct?

Many businesses have complex VAT liabilities (e.g., printers, financial services providers, charities, take-away food outlets). If you are not sure, it would be wise to have them reviewed to make sure you are not storing up a future VAT bill or a challenge from HMRC.