The VAT is the short form of Value added tax, which is one of the critical types of charges. All businesses have to comply with it as it is one of the most significant sources of revenue for the government. If you are a small business owner or are about to begin with your business venture, you must gather relevant information about the impact that compliance with VAT regulations can have on it.
This article aims to introduce you to those key points to elaborate on the pros and cons of complying with VAT regulations.
Key impacts of VAT for small businesses
To gain maximum benefit from the VAT practices, you will need to outsource a VAT, a consultant from a reputable accounting firm. If you are living in the UAE, you can find such a seasoned resource around you with guaranteed ease. It would help if you did some research to choose the Best VAT consultancy in Dubai according to your business needs
1. Advantages of VAT for small businesses
VAT subjects you to comply with regulations, but it doesn’t mean that it doesn’t come with some added benefits. Those advantages are as follows:
I. It can be reclaimed
You can reclaim VAT after due payment in several cases. For instance, in the UK, you can reclaim VAT on goods and services that you bought at least four years before VAT registration. In the case of UAE, you can reclaim excess VAT if the output VAT is lesser than the input VAT amount.
II. Cash-flow planning opportunities
VAT compliance demands your company to set financial records straight. Thus when you comply with VAT regulations, you will automatically have your company’s books and accounts up to date. All the cash flows will be clear and transparent. When the records are organized, you will observe how it gets easier to plan the outflows and manage cash flows overall.
III. Compliance adds to the credibility
When your business complies with VAT regulations, the financial records and books of your company are no longer devoid of accuracy and transparency. Thus your credibility in the market increases. People buy your product with confidence, and your company earns the client’s trust.
2. Disadvantages of VAT for small businesses
While there is the advantage of complying with VAT regulations, you must not lose sight of the negative points to make sure your practices are shaped accordingly. The disadvantages are as follows:
I. Compromise on profits
The value-added tax is a percentage of your company’s benefit after adding Value to goods or services. As a small business, giving up a significant portion of the amount which could’ve been your profit is trouble.
II. Additional administration
For VAT compliance, you will need to outsource VAT consultants and devise a framework that supports compliance with the regulations. All of this other administration can be difficult to manage for you as a small business owner.
III. Risk of penalties
Since you run a small company that hasn’t yet matured enough, it will get crucial to managing any sanctions in case of improper compliance. After registration, the whole process to vat payment requires careful deliberations. If you want to save your company from strict litigation, seek services of the right VAT consultancy around you.
If you’re living in the UAE, you can quickly get in touch with reputable consultancies. Your company can immensely benefit from the services of the Best VAT consultancy in Dubai to avoid risks of penalties in the due process of VAT filing. Similarly, in the UK, inaccuracy in the record can get your small company in serious trouble.
Is your small company VAT compliant?
VAT regulations are an essential part of running a business. Thus it imperative for you as a business owner to be aware of the pros and cons. When you look at things from a better-informed place, decision making gets easier to support your business and avoid risk-taking.