Funding a VAT bill

Value added tax (VAT) is a charge that relates to the tax of goods or services. VAT is only charged when the business is registered for the scheme or their VAT taxable turnover is more than £85,000. This results in a 20% charge being added to items or services that are purchased or sold. Key items where VAT will be charged include

• Sale of products and services
• Hiring of products
• Short-term or long-term loan of products
• Purchase of business assets

In essence VAT will apply to anything that is considered as a taxable supply.

As a VAT registered business, VAT must be charged on any products or services that are sold and the business can reclaim any VAT that has been paid as a result of the purchase of any products or services. All transactions are reported and a quarterly VAT return will be compiled to show what VAT payments need to be made directly to HMRC.

Most businesses who are part of the VAT scheme will utilise an online accounting software solution that will track all income and expenditure. It will then summarise the payments that need to be made so that budgeting for all VAT payments is made much easier. A business will then ensure that they have the right cash reserves to cover the VAT payment when it is due.

However, sometimes an unexpected expenditure arises and the business may then be forced to use the VAT savings. Of course, the issue will be that when the VAT bill is then due, there is nothing left to cover the payment.

Fortunately, there are some good finance options available that can help with funding a VAT bill, rather than relying on a traditional bank loan. They are more flexible and the repayment schedule can be tailored to suit each individual business.

If you are struggling to cover your VAT bills, then our team have some funding options to help. To find out more please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.