VAT Planning for your Business

VAT Planning for your Business

At The VAT People, our specialist consultants have helped hundreds of businesses with all aspects of VAT planning. With more than 20 years in the industry, we are well placed to assist your company, no matter what your individual requirements might be. 

We understand how difficult it can be to decipher how much you need to pay, as well as any reliefs you may be entitled to, but we can help you every step of the way when it comes to ensuring you are compliant with HMRC regulations. 

Our specialists can help you to understand and manage all of your VAT obligations for the different types of transaction you may be carrying out. For more information about our services, contact us by calling 0161 477 6600, or fill out an online enquiry form and we will be in touch.

How we can help you

We are well equipped to use our expertise to help your business with every aspect of VAT planning. 
The VAT People can advise on the structure of new business ventures, one off property transactions, business transfers and any other scenarios where a VAT leakage might arise.  We will help your business to ensure that it maximises its VAT position whilst remaining compliant with the letter and spirit of the law. 

It is also important to understand the risks you take by not paying proper attention to VAT laws, as it can be very expensive if you are not well-read. Find a detailed list of VAT fraud penalities here, and how you can avoid them.

We also offer a wide variety of VAT training opportunities for businesses across a variety of industries. To find out more, visit our VAT training page.

How we have helped others

Some examples of our interventions to assist clients in this area include: 

  • Reducing a private developer’s VAT costs to 5% on the contractor’s costs in a business transaction involving turning residential properties into flats.
  • A review of a company’s partial exemption calculations, which identified that no annual adjustments had been made and, on recalculation, we discovered over £50,000 in additional VAT due to the client.
  • A review of a company’s non-UK activities uncovered a responsibility to register for VAT in another EU member state, but by structuring the arrangements in the correct manner we ensured full recovery of VAT on expenditure incurred there.
  • We ensured that an overseas property development company could recover almost £80,000 on VAT incurred in the UK.
  • We helped to remove the VAT charge and reduced the Stamp Duty cost on the purchase of a VAT-opted commercial building containing an ongoing tenancy. 


How long should you keep records on VAT returns for?

It is necessary for taxpayers to keep records for at least 6 years. This is measured by the end of the last company financial year that they relate to.

Some records have different laws about how long they must be kept, which can make the process complicated. However, standard VAT records are straightforward and important to keep.

One alternative to the six-year limit applies when the taxpayer uses the VAT MOSS service for sales to EU countries, which states that records must be kept for 10 years. However, the VAT MOSS service has halted qualifying sales dated after 1st January 2021, so the portal cannot be accessed for new sales to EU countries, but the records must still be kept for the appropriate time.

While records can be destroyed legally after 6 years, it is sometimes recommended to keep these records, along with other statements, for up to 7 years, or even indefinitely.

Why should you hold onto VAT records?

Taxpayers are required to keep these records by UK VAT law. Any VAT returns figures submitted to HMRC must be accurate, and keeping records of these will enable this.

While this is required by law, it is also important to hold onto records for other reasons, as they can be very important when monitoring progress, identifying sources of income, and preparing other financial statements. Directly relating to VAT, one crucial example of their use is if a legal case requires access to them. These records must be detailed and kept up to date so they can be used as proof, or to calculate liability and repayment.

Keeping records enables a taxpayer or business to check their past plans and actions for positive and negative outcomes. If a taxpayer can view how much they spent on different purchases over time, they can assess the financial efficiency of these actions and make changes to future purchases, decreasing outgoings and subsequently increasing potential rofits.

What can happen if you fail to keep records?

If a taxpayer fails to give evidence of how their VAT returns were calculated they may be assessed unfairly, therefore, suffering financial losses to the business. If a business loses track of their previous financial actions, it means they can lose track of budgeting.

If a taxpayer is invoiced and charged incorrectly, they would struggle to dispute the mistake without solid evidence shown by their records. In more serious circumstances, further financial implications might lead to bankruptcy, which could be made an even more difficult
process if the taxpayer is required to provide records of this too.

How can you keep and maintain VAT records effectively?

VAT records can be kept on paper, but this can cause problems with storage space and orderliness as they will have to be stored in a physical location.

Records can also be stored digitally, which allows easier structuring, and they can be kept on a computer, a hard drive, or in cloud storage, which takes up much less physical space. Another important point is that using electronic methods can make them more readable and
accessible, provided the user has an adequate understanding of digital databases.

Physical record keeping is typically done by older and smaller businesses. Should these businesses move to digitise their records, older businesses would have to go through the arduous process of inputting 6 years worth of data, potentially more. This can be very time
consuming, especially for newer, smaller businesses, as they may have less staff members to do the job, potentially causing financial or organisational issues in other areas of the business. It is best to start keeping records digitally early on.

What is a Limited Costs Trader, and might my business be one?

A Limited Costs Trader is a way to describe businesses that spend less than 2% of the value of its sales on goods. These traders are exclusively ‘labour-only’ businesses. A business can also fall into this category if its spending on goods is over 2% of that value, but only if its
VAT-inclusive turnover is less than £1000 per annum.

This percentage came into effect on 1st April 2017 and, despite Brexit, it is unlikely that this will decrease.

What is the flat rate of VAT applied to a Limited Costs Trader?

The flat rate that any business considered a Limited Costs Trader must pay is 16.5%.

How often must this calculation be done?

This test must be performed for every prescribed accounting period, and if the business meets this criteria they will be required to apply the new Flat Rate percentage, whether they fall into it or not.

For clarification on how this test should be applied and how the results may affect how the business accounts for VAT using the Flat Rate Scheme, please seek advice from our free VAT helpline.

Get in touch

Before your business undertakes any major transaction, simply contact us to talk through the potential consequences and any opportunities there may be to make VAT savings. Contact us either by calling 0161 477 6600, or fill out an online contact form and we will be in touch.