Year End Tax Review 2008 Contents New Year's resolutions Investment limits Borrowings and tax Family tax planning Mr and Mrs Give generously and save tax Jam today, or jam tomorrow? Tax payback - tax credits Bringing it back home Children's pensions? A matter of trust Children's savings? All change for gains Second homes Portfolio gains Capital ideas Tax-free perks Employee pensions and NIC Pension policies Employee cars and fuel Business tax Pay rise for the other half? Company or trade Two jobs = too much NIC Should VAT be flat? VAT and cash Inheritance tax One careful owner

VAT and cash HMRC suspect that traders who are paid in cash sometimes don't declare it for VAT. That's obviously against the law, but the "VAT Cash Accounting Scheme" is a different rule that's supposed to help small businesses - since April 2007, those with turnover of up to £1.35m can use it. The normal rules of VAT require you to pay the tax on your sales over to HMRC for the period in which you make the sale, regardless of whether you have received the money from your customer. If you use the cash accounting scheme, you only report the sales on the return for the period in which you get paid. If you have a slow payer or a bad debt, this helps your cash flow. There is a downside - you can't claim back the VAT on your expenses until you pay for them. Cash accounting isn't suitable for someone who gets paid quickly and takes time to pay suppliers, such as most retailers. But it's a good idea for many small businesses, and the increase in the turnover limit last year made many more eligible to use it. Action Point! Are you eligible for this scheme, and would it benefit you?