Recognising the areas of VAT that have been troubling to other businesses is a good way to avoid them yourself.
The fact that the VAT treatment is obvious for most transactions often means people don’t give the tax a second thought. This can be dangerous!
It is important to consider the VAT position before agreeing to a transaction without thinking about VAT. Below are some key issues to be aware of.
Duty savings and warehousing
Duty costs affect both importers and those exporting outside the European Customs Union.
We can advise on the issues that arise from duty reliefs and optimum tariff classifications and structuring commercial transactions to minimise duty levels. We can also help clients to set up in-house VAT and duty warehousing for imports from outside Europe.
We can identify Customs and duty issues affecting your business and support you in resolving those matters with HMRC and relevant specialist advisers.
International transactions
It doesn’t matter whether you trade in goods or services or are buying or selling, trading with other countries, even those within the EU’s supposedly ‘common VAT system’, brings a whole host of problems.
The tax could be payable by either you or the other party in either case in the UK or the country that you are dealing with. It may even be payable by you in the other country even if you have no permanent establishment there, requiring you to appoint a fiscal representative.
You need to be aware not only of the UK’s rules, but also the differences in other countries. Get it wrong and, at best, the tax bill will wipe out some or all of your profits. At worst, your goods could be held up for lengthy periods of time and your legitimate VAT refunds could take years to be paid out.
We can advise you on the VAT consequences in different jurisdictions and recommend ways to alter your contracts or supply chains to secure operations that are as tax/VAT efficient as possible.
Raising finance
All businesses need to raise finance at some point, whether it be to fund expansion of new ventures, or just to cover cash flow issues. What you don’t want is an unexpected tax cost, or interest and penalties.
What is frequently overlooked is that financial transactions can affect not only the amount of VAT that you have to pay, but also the amount that you can reclaim on expenditure.
Raising finance when part of a wider restructuring of your business also brings its own tax and VAT consequences which will need to be considered and managed.
Setting up new ventures
Are you expanding your business? Is the new venture simply another part to your existing business or would a separate company be advantageous? Should you have a separate VAT registration or does the new venture not even qualify for VAT registration at all? What about a group registration?
You need to plan in advance to minimise the VAT costs of the new venture, or even to get VAT working for you. This is where our VAT practice comes in. We can:
- advise upon the VAT implications of your new venture and how best to structure it to minimise both UK and, where appropriate, foreign VAT costs
- advise upon VAT registration aspects and arrange this where necessary or advantageous to you
- where you need to agree VAT issues with HM Revenue & Customs, we can liaise with them on your behalf and make sure your new arrangements are set up as smoothly as possible.
In short, we can manage the VAT risk, letting you get on with what you do best – running your business.
The next step
We can advise you on the restructuring of your business and how to structure the finance so as to minimise the tax costs and risks of doing so.
For more information on raising finance see our Corporate Finance section.
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