As accountants that specialise in the medical and tax space, one of the first questions the Inaura team get asked is, ‘Should I register my practice for VAT?’’
There are a few things that need to be understood when it comes to VAT and your medical practice:
- VAT registration is required once the turnover for your practice hits the R1 million mark within the 12-month financial year.
- You are required to register for VAT post the R1 million threshold whether you are trading as a sole proprietor or an corporation.
- There are no specific benefits to registering for VAT as a medical practice.
In short, if you are turning over R1 million or more per 12-month period, you will need to register your practice for VAT.
How does VAT affect your practice?
In order to understand how VAT affects your practice, you first need to understand how VAT works:
- Output VAT is paid over to SARS at 15% of your total turnover. This relates to invoiced turn over and not to money received in the bank. It is likely you will be paying VAT on money not yet received.
- Input VAT is deducted from your output VAT payable to SARS at 15%. Only SARS-allowable business expenses can be used as a deduction against the output VAT.
- Allowable business expenses refer to ordinary, necessary and reasonable expenses that help your practice earn an income. This would include general and administrative, business travel and employment benefits.
Because medical practices don’t have many allowable deductions, the net output payable to SARS is quite high and needs to be managed carefully by your accountant. Mismanagement can have a huge impact on your cash flow because your practice pays VAT on an invoice basis, not on a cash basis. Late or incorrect submissions may result in large penalties and interest being charged.
How can we help you?
Optimising VAT within the medical space is something that we, at Inaura, specialise in. We are here to guide you through the numbers and make sure your practice is not only registered correctly, but that the numbers make sense.
- During post-VAT assessment, we find that many practices should no longer be registered for VAT or possibly should never have been registered in the first place. If this is the case with your practice, we’ll help you with a VAT deregistration after conducting an assessment on your practice.
- We can assist with both revenue and expense enhancement in order to maximise your VAT payables. Through our monthly VAT reconciliations, we ensure that you have the most efficient VAT system possible.
- Switching from a sole proprietor to corporation. can assist greatly with reducing your VAT burden. We can walk you through this process, making it simple and painless for you.
At Inaura, we assist hundreds of practices to assess, calculate, submit and pay or claim from SARS on a monthly basis. It is through this process that we remove your VAT headache completely.