Paying VAT on a non-fault insurance claim

chanz4

if you cant afford £500, shouldn't be vat reg as turnover to be worth while needs to be reasonable.

jjlandlord

I think the explanation has been provided: The insurance will only indemnify you (at most) for your loss.

Since you are VAT-registered, VAT on invoices you have to pay is not a loss (cost) for you, as you will get it back.

The assumption is that a business with a 77k+ annual turnover should have the cash to advance £500 over 3 months.
If not, most would conclude that your company has a very serious cash flow management issue and is an inch from going under.

SuperHan

As above. VAT has no impact on profit. It is to do with turnover and more importantly cash flow.

It's a relatively fair expectation that a business turning over £80k would have sufficient cashflows that £500 would have a relatively low impact.

If you are struggling so much, you should maybe be looking at doing monthly VAT returns, as this would allow you to recuperate VAT faster... That said, if you're making profits in a standard VAT business you're likely to be paying over more VAT than you reclaim, so this may not help.