How to pay my VAT
How does business VAT work?
Should your business exceed the current registration threshold at any point throughout the course of the year, it will become subject to VAT. Being a VAT-paying business, you are required to place an additional (typically 20%) charge on all the goods and services you offer. As such, every 3 months your business is obligated to pay any and all collected VAT to HMRC.
However, for any developing SME business, this can prove a challenge, with some businesses even being forced into financial difficulty as a result. However, HMRC will still demand payment all the same and comes down hard on any business that fails to make payments on time. Therefore, it is important that you understand VAT and what rates are applicable to you based on the goods and services your business supplies. If you are unsure, ask your accountant or advisor for further advice.
- Standard rate: All goods and services classed in this tier are subject to VAT (the current rate stands at 20%). Most retail, consumer, restaurant, goods and services businesses, and so on, are all subject to the standard rate.
- Exempt supplies: If your business trades solely in services and goods within this tier your business may not be subject to VAT. Examples of exempt supplies include insurance, education, finance, some dental and medical services (excluding hygienists, osteopaths, etc.) and so on.
- Zero rate: With this tier, your business isn’t subject to VAT. However, you must apply for exemption. Zero Rate goods and services may include books, newspapers, clothing, prescriptions and some foods (excluding most restaurant and takeaway meals).
How can I finance my VAT bill?
Sometimes, your VAT bill may arrive as a complete surprise and at a time when your business is contending with an array of other challenges. Perhaps the bill demands a sum your business simply can’t afford to part with in one go? No matter what your situation might be, the HMRC still expects payment and within the specified deadline. Although the challenge facing your business may appear intimidating, you don’t have to face it alone. Rangewell can help source an array of finance solutions that’ll make your bill much more manageable. Some of these solutions may include Merchant Cash Advance, Term Loans and Invoice Finance.
- Merchant Cash Advance: Applicable to businesses supporting card and digital transaction technology. You could apply for a loan ranging from £5,000 to £300,000 to support your business or fund a VAT bill. In addition, your business can choose from 2 repayment options to suit your needs. Whilst Fixed Monthly Repayments requires you to pay a set amount each month, repaying through Percentage Of Your Monthly Sales can offer your business greater flexibility. Should you, or your client, perform fewer card transactions in a particular month the amount you’ll need to repay for that month is reduced, and vice versa.
- Term Loans: When using a term loan, your business could reap the benefits of a lump sum between £5,000 and £1,000,000, allowing you to pay off your VAT bill. The most noteworthy feature of term loans is the means in which your business can make repayments. With immediate-term loans, repayments can last up to 3 years, however, with long-term loans, the repayment scheme lasts in excess of 3 years. At the end of the repayment scheme, you may also be required to pay a balloon payment or lump sum.
- Invoice Finance: This method of finance unlocks the cash tied up in your business’s unpaid invoices. It is applicable as another means of support-capital leading up to the period where you expect final payment from your customer. Utilising this method of finance your business can borrow up to 90% of the total invoice value, which can be used to fund a VAT bill.
At Rangewell, we understand the challenges that business owners may face throughout their development. Utilising our in-depth knowledge and experience, we aim to source the ideal finance solution that caters towards your business’s needs.
Our values are simple – we’re on your side. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.