VAT Planning…VAT is it really?

VAT planning embraces all sorts of things. It may simply involve an adviser advising a client setting up a business that it may be necessary to register. Or it may involve a VAT specialist looking at a particular business scenario and using the detail of the current legislation to obtain a VAT advantage. It most commonly involves compliance which helps to avoid unnecessary operational and penalty costs.

Its essential characteristics are that it involves having a proactive attitude, avoiding problems before they arise or else grasping opportunities that exist, or in certain cases, creating those opportunities, rather than merely reacting to visits from HMRC. It is as much to do with ensuring that contractual arrangements between commercial parties are satisfactory for all concerned, and that VAT consequences are properly factored into commercial decisions before they are made.

It is very critical that the VAT position of a transaction be considered before a contract is signed or the transaction has taken place. Once the contract has been entered into without thought to the VAT consequences, the damage may already have been done; the VAT consequences would have been set by the transaction and cannot be altered at a later date.

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