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How do I reduce VAT on my business

Although VAT does not form part of your profit or income, VAT can have a significant impact on your business including cashflows and price competitiveness. There are many ways of avoiding and reducing VAT and these include:

·         Splitting the business into genuine different businesses without being seen as artificially splitting business. This can result in both businesses not exceeded the VAT threshold.

·         Transferring some and/or all-corporate activity to a low VAT and corporate tax environment. This will also help cash flow by simply changing suppliers to those based outside of ones home country since current EU rules mean that if two EU companies are registered for VAT then neither has to pay or reclaim VAT.

·         Setting up VAT registered companies to reclaim back VAT on property investments – For example, rather than simply investing in property where there is a VAT charge as in Spain, it may make better sense to actually develop a property from scratch as VAT could then be reclaimed.

·         Other ways include those wishing to purchase a yacht to use in EU waters it might be worth considering using it for business purposes and/or setting up a charter company both with the purposes of reclaiming back VAT.



Consider using a ‘flat rate scheme’ if you meet the criteria. Once approved to use the scheme by HMRC, a business can account for VAT on their turnover at a lower rate, while still charging customers the full 20 per cent.


Cash accounting alongside the flat rate scheme, which allows the business to account for VAT only once it receives payment.

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