How will this affect my cash flow?
In the short term, this could affect your cash flow as when using the reverse charge scheme, you will not be charging or receiving the VAT from your CIS customers.
Some businesses use the money generated from the VAT payments to support their cash flow across that quarter. After the 1st of March, this money will no longer be collected potentially causing a shortfall in funds until you reclaim your VAT at the end of the quarter.
Subcontractors who also have CIS deductions at 20% (net status) and make reverse charge supplies could be hit the hardest.
Improving your cash flow from the 1st of March
1. Rather than quarterly VAT returns you can move to monthly. Although this can create additional administration, it will enable you to reclaim your money quicker.
2. Funding. To cover the first quarter's VAT payment deficit, Redstone has identified a range of funding options that will help with cash flow over this initial period including Invoice Factoring
3. Cash flow forecasts are a great way to highlight times when cash will be tight enabling your business to prepare for it.
Find out how Redstone can help your business through the transition to the reverse charge scheme today and maximise your cash flow from the 1st March. 0161 667 4911 firstname.lastname@example.org.