Apart from the retail trade and internet traders most of us send an invoice when we provide our goods or services to customers and then wait for the period of credit to expire before we get paid.

During this waiting time we still have our own bills and wages to pay so the working capital we have to accumulate to finance monies owed by customers can be considerable.

And then, of course, there is VAT…

If we sell or provide standard rated supplies and are registered for VAT we have to add 20% VAT to our invoices.  The VAT added, in normal circumstances, has to be paid over to HMRC (less any VAT input tax we have been invoiced by suppliers) on a quarterly basis.

Accordingly, it is possible that we have to pay over VAT to HMRC before we receive the equivalent payment from our customers.

Acknowledging this injustice, especially for smaller concerns, HMRC allow registered traders to use their Cash Accounting Scheme (CAS). Simply put, if you qualify to use CAS you only have to pay VAT added to your invoices when your customers pay you. On the flip side, any VAT charged to you by suppliers can only be reclaimed from HMRC when you pay your supplier.

The scheme is only available if your expected taxable supplies in the next year will be £1,350,000 or less. Taxable supplies are defined as the value excluding VAT of standard, lower and zero-rated supplies you make.

There is no formal election required to use CAS but it is well worth crunching the numbers to ensure that you get a positive cash flow impact from doing so!

If you have been trading for some time before you register your business for VAT don’t forget to consider your option to reclaim VAT on goods and services purchased prior to your registration date.

For example, if you are required to register for VAT from 1 January 2014, you only need to pay VAT on taxable supplies you make from that date. However, if you had bought goods or services prior to 1 January you may be able to reclaim the VAT you paid on them. You can generally reclaim VAT on goods you bought up to four years before you registered for VAT, and services you bought up to six months before you registered.

You can reclaim VAT on goods you bought or imported no more than four years before you were registered for VAT if all the following are true:

• the goods were bought by you as the entity that is now registered for VAT (for example, the individual, business or organisation)
• the goods are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply
• the goods are still held by you or they have been used to make other goods you still hold

You can't reclaim VAT on any of these goods:

• goods that you've completely used up before you registered for VAT (such as petrol, electricity or gas)
• goods that you have already sold or supplied before being registered, or have used to make goods you have sold or supplied before being registered
• goods that relate to supplies you make that are exempt from VAT

The word 'goods' includes goods that are intended for resale, and also goods that you keep as assets, such as computer systems, shop fittings, office equipment and furniture, tills, vans and other equipment. It also covers anything else you've bought that isn't a service, so it includes consumables such as stationery.

You can reclaim VAT on services you bought during the six months before you registered for VAT if both the following are true:

• the services were bought by you as the entity (for example, the individual, business or organisation) that is now registered for VAT
• the services are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply

You cannot reclaim VAT on any of these services:

• services that relate to goods you disposed of before you were registered for VAT – for example, repairs to a machine you sold before you were registered
• services that relate to goods or services you supply that are exempt from VAT

Examples of services you might have paid for when starting your business are legal and accountancy fees, services relating to setting up your computer and other equipment, and fees and services relating to your premises.

Don’t forget that if you make a claim to recover past VAT paid, the input tax recovered will effectively reduce the cost of goods and services that you have claimed tax relief on in past years. This will effectively increase your taxable profits in the year you make your claim. Even taking this tax adjustment into account it is still worth making a claim.

The government has announced a clamp-down on the decade-long use of ‘hybrid mismatches’, a technique commonly used by multinational companies to significantly reduce their tax bills.

It is the latest in a series of steps the government has taken to tackle aggressive tax planning and is expected to bring tens of millions of pounds per year of additional revenue into the Exchequer once implemented.

Hybrid mismatch arrangements exploit differences between countries’ tax rules to avoid paying tax in either country, or to obtain more tax relief against profits than they are entitled.

The UK has worked with G20 and OECD member countries as part of the BEPS project to agree a solution that prevents companies from taking advantage of this and proposals were endorsed by G20 Finance Ministers at their meeting in Cairns last month.

More information on the steps the government would like to take will be published when a consultation on the implementation of rules to prevent hybrid mismatches is included as part of the Autumn Statement on 3 December.

 If any of your Construction Industry (CIS) returns are filed one day late, HMRC will charge an initial fixed penalty of £100.

 Additionally, if they have still not received that return:

• two months after the date it was due, they will charge a second fixed penalty of £200
• six months after the date it was due, they will charge a further penalty of £300 or 5% of any liability to make payments, that should have been shown in the return
• 12 months after the date it was due, they will charge a second further penalty. The amount of this penalty will depend on why your return was late. The amount charged will be either £300 or 5% of any liability to make payments, or a ‘higher’ penalty of up to 100% of any liability to make payments, or a minimum penalty of £1,500 or £3,000.

 Confused?

There are also occasions when HMRC will consider a reasonable excuse for not filing a CIS return, and if they accept your reason for the late filing then penalties will not be applied.

HMRC will not normally accept that lack of funds to pay (unless due to circumstances outside your control) or reliance on someone else to file your returns, as a reasonable excuse.

To further complicate matters there are circumstances when penalties may be capped at a lower amount.

Obviously, the best way to avoid penalties is to file your CIS returns on time. If you are presented with a bill for penalties it is well worth getting your tax advisor to check it out for you, and if necessary, appeal.

This month sees the launch of a new service that provides a personalised written estimate of what you can expect to receive under the new State Pension system. This will be based on your work history and National Insurance (NI) contributions to date.

Initially, the estimate will be available to the approximately 2.5 million people who reach State Pension age in the first 5 years of the new scheme – currently between April 2016 and August 2021 – the service will be expanded gradually over the next 18 months, eventually becoming available to all working age contributors.

Minister for Pensions, Steve Webb MP, said:

“The new statement service means that for the first time we can give those people closest to State Pension age personal information on how they will be affected by the reforms. Over the next 18 months, this will be rolled out further until eventually it is available to everyone of working age.

The introduction of the new State Pension marks the biggest reform of the State Pension in a generation. At its heart is the concept of a clearer, fairer, single-tier payment, the full rate of which is set above the basic means test, but which remains contributory in nature.

Over time, the various complexities which have built up in the present system will be swept away and replaced by a much more straightforward weekly payment. Those people with 35 qualifying years of National Insurance contributions will receive the full rate, which will be set above the basic level of means-tested support (currently £148.35 a week).

In future, the option for people to ‘contract out’ of paying full NI contributions will be removed, so that everyone pays a standard rate. Those who have contracted out in the past will have an appropriate deduction made to their starting amount.”