Press release: May 2008

For small businesses, VAT returns can be a time-consuming and complicated administrative nightmare.

Stuart Sheldrick of regional based chartered accountants, LB Group, says that there is a better and more cost-effective option, but not every small business knows about it.

"It´s a very cost-effective scheme that could potentially benefit the thousands of small businesses that have a turnover of no more than £150,000 per year (excluding VAT)," he said. "It is particularly suitable for labour intensive businesses where there are few expenses that attract VAT.

"Under the scheme, businesses pay a percentage of gross turnover to HM Revenue and Customs (HMRC) without being able to claim VAT on purchases incurred," he explained. "The percentage is set by HMRC and varies according to industry sector. For instance, for a publican it is 5.5 percent and for a photographer, 9.5 percent. Better still, there´s a one percent discount in the first year of VAT registration".

"On this basis where little or no VAT is claimed back on purchases, a percentage lower than 17.5% will mean a VAT saving. Where you purchase a capital item over the value of £2,000, you can still reclaim the VAT though," Stuart added.