Diversify into other areas

For any business this means trading in something that is zero rated for VAT purposes.

Good examples of zero rated supplies are children’s clothes, books and newspapers.

If you’re a plumber you may be able to charge VAT at the reduced rate of 5 per cent when you supply and install certain energy-saving materials.

For a restaurant or café you could start dealing in take-away cold food.


Use the flat rate VAT scheme

This might not only save you in money terms but it could also save you hours of admin work (and time is money!).

The way the Flat Rate scheme works is that HMRC give you a flat rate VAT percentage that you multiply by your gross turnover every quarter.

The flat rate percentage is different for every particular type of business.

*Recommended for a small business


Try to get corporate or business customers

These customers (if they themselves are VAT registered) don’t mind that you are charging them VAT because they can claim it all back.

If all or most of your customers are VAT registered it might even be worthwhile to voluntary register – you can do this even if your turnover is below the threshold.


Don’t register too early

Finally if you do have to register for VAT (and you’re dealing generally with the public) it’s usually wise not to register too early.

In most cases a trader only becomes liable to register for VAT if the value of his cumulative taxable supplies exceeds the VAT threshold.

You can however still claim back for up to six months from date of registration for VAT you’ve paid on services and for three years for stock or equipment you’ve purchased.

Your first VAT return will then often result in a payment from HMRC to you.