Why? How? Where? When? What? Who?
Why?
It is impossible for any business to do such a basic thing as set its prices properly unless it understands its VAT position and ensures that this is reflected in those prices, terms and contract terms etc. The aims of tax planning are:
- compliance
- business planning
- avoiding unnecessary tax costs
- maximising input tax claims
- minimising VAT payable where possible
- obtaining any refunds and retrospective claims due
- avoiding penalties and interest
How?
The “How?” is dependent on the specific business and its needs. We offer a flexible and tailored service from start-ups to multi-national companies. We offer:
- solutions to ad hoc issues
- negotiation
- structuring and restructuring
- contractual arrangements
- Dispute resolution (with HMRC, suppliers, customers etc)
- full reviews and health checks
- training of staff and management
- assistance with international/cross-border supplies and purchases
- due diligence
- cost reduction exercises
- income maximisation programmes
- comprehensive land and property advice
- advice on overseas indirect/GST matters both EC and non-EC
- accounting and documentation advice
The VAT planning process – “The four As”
- Ascertainment
- Analysis
- Alternatives
- Action
More details of this approach here.
Where?
VAT, or its derivations applies in most countries around the world. So, the answer is probably “everywhere”. This is particularly relevant with cross-border transactions. A common issue is the “Place Of Supply” (POS) rules which dictate where a supply takes place and thus the VAT liability of it.
When?
Planning needs to be done in advance of transactions. Once a contract has been entered into without thought for the VAT consequences, the damage may have already been done.
Where there is a one-off transaction (eg; sale of premises, sale of know-how, issue of shares), this is, by definition, something of which the business has little experience. It is an occasion to assume that advice is needed, rather than to assume that the most obvious treatment is correct.
Since the impact of a change in the pattern of a business’ activities will continue down the years, rather than being restricted to a single occasion, it is doubly important to ensure that the correct treatment is identified from the outset.
Periodic reviews are a good time to look, not only at the future, but also at the past, to see whether developments in case law reveal past overpayments which may be reclaimed. This is particularly important since repayments are subject to the four-year capping provisions.
The essential step is to have some means of becoming aware of changes and monitoring these with VAT in mind. The means to be adopted are various and will depend on the size and type of the business.
What?
“Right tax, right time”. This means compliance with the relevant legislation but not paying any more VAT than is necessary. As one wag once said; “You must pay taxes. But there’s no law that says you have to leave a tip.”
Since VAT is a transaction-based tax, timing is often crucial and the objective is to legitimately defer payment to HMRC until the latest time possible, thus improving cash flow and retaining the use of VAT monies for as long as possible. The converse of this of course, is to obtain any repayments of VAT due from HMRC as soon as possible. We must also consider avoiding VAT representing an actual cost and taking advantage of any beneficial UK and EC legislation, determinations, guidance, case law and Business Briefs etc available.
VAT Planning objectives
- improve cash flow
- improve competitive position
- legitimately reducing VAT payments or increasing repayments
- minimise administration/management
- avoid unnecessary tax or compliance costs
- avoid penalties and interest
Who?
Marcus Ward Consultancy of course!