I work with a lot of small, seasonal businesses — market stalls, tourist accommodation, pop‑up cafés, Christmas shops and online sellers whose turnover spikes for a few months and trickles for the rest of the year. VAT is one of the most common sources of cashflow shocks for them: a busy season produces a VAT bill you weren’t expecting, or a low season leaves you short of reclaimed VAT because you paid suppliers earlier in the year. In this piece I’m sharing simple, practical VAT strategies I’ve used with clients to reduce surprises and keep cashflow steady.
Understand how your season affects VAT timing
The first step is always awareness. VAT is about timing as much as it is about rates. Ask yourself:
When do I make most of my sales? Peak months?When do I incur most of my costs (stock, staff, marketing)?Are supplier invoices concentrated before the season (e.g. buying stock in spring for a summer season)?Once you map sales and purchases across the year you’ll see how VAT receipts and VAT recoveries don’t line up — and that mismatch is the root of many surprises.
Pick the VAT accounting scheme that suits seasonality
There’s no one-size-fits-all. These are the main options I weigh up with clients:
Standard accrual accounting – VAT is due when you issue invoices; reclaimable when you receive supplier invoices. This suits businesses with balanced sales and purchases across the year, but can create cashflow pain for seasonal sellers who have to pay VAT on big seasonal sales before reclaiming VAT on purchases.Cash accounting – You pay VAT to HMRC when customers pay you, and reclaim when you pay suppliers. This often helps seasonal businesses because VAT follows actual cash receipts. It’s available if your taxable turnover is under the VAT threshold (currently £90,000, check current HMRC guidance).Annual accounting – You pay provisional VAT in installments during the year and a final balancing payment. It smooths payments but requires good forecasting to avoid underpayment.Flat Rate Scheme (FRS) – You pay a fixed percentage of turnover as VAT and keep the difference. It simplifies bookkeeping but can be costly for businesses with high input VAT (like buying stock) because you can’t reclaim most VAT. Some seasonal businesses benefit because it simplifies planning; others lose out if they buy expensive stock.I usually run a short cashflow model showing VAT payable under each scheme for the next 12 months before advising a change. Switching schemes mid-year may not be allowed, so plan around your accounting period.
Timing your VAT registration and deregistration
Registration and deregistration timing matters for seasonal businesses. If you expect to exceed the VAT threshold only during your busy season, you might:
Register before the season starts so you can reclaim VAT on the stock bought to prepare for it.Consider deregistering after the season if turnover falls below the threshold and you won’t benefit from being VAT‑registered. But remember, deregistration has consequences: you must account for VAT on remaining stock above a de minimis value and you may lose VAT recovery rights for certain costs.Practical tip: prepare a 12‑month rolling turnover forecast and revisit it quarterly. Don’t rely on a rough gut feeling when registration obligations are at stake.
Use short-term cashflow smoothing tactics
If your VAT bill arrives after your busiest months, consider these short-term measures I commonly recommend:
Build a VAT reserve – when season is busy, transfer a percentage of VAT receipted to a separate bank account. I usually suggest at least the VAT rate of your sales (20% for standard-rated) so you don’t spend the money by mistake.Negotiate supplier payment terms – extend payment terms outside peak season or consolidate supplier payments so VAT on purchases is spread.Invoice timing – invoice promptly and set clear payment terms. If you’re on accrual VAT, sometimes delaying invoice date to fall into the next VAT period (legitimately) can spread liabilities. Be careful: this must reflect the true supply date and is not a dodge.Installments under Annual Accounting – if you’re eligible and can forecast reliably, Annual Accounting smooths payments and can be useful if you want predictable monthly or quarterly VAT outflows.Practical forecasting: a mini example
| Month | Sales excl. VAT | VAT on Sales (20%) | Purchases excl. VAT | VAT on Purchases | Net VAT to Pay |
| Apr | £3,000 | £600 | £2,000 | £400 | £200 |
| May (peak) | £30,000 | £6,000 | £5,000 | £1,000 | £5,000 |
| Jun | £5,000 | £1,000 | £1,500 | £300 | £700 |
| Total Q2 | £38,000 | £7,600 | £8,500 | £1,700 | £5,900 |
In this simple example the bulk of VAT due falls in May. If the business doesn’t ringfence VAT receipts, that £5,000 could be spent on wages or stock and create a shortfall when the VAT return is filed.
Make the most of technology
Tools can make this far less painful. I recommend:
Xero or QuickBooks Online for real‑time VAT reports (they show what VAT is due for the current period).Making Tax Digital (MTD) compliant software — HMRC requires digital VAT records for most businesses; using compliant software prevents last‑minute headaches.A simple spreadsheet or the forecasting features inside accounting software to model best/worst case seasonal scenarios. I build a 12‑month VAT forecast for clients showing worst, expected and best outcomes — that’s often enough to decide whether to open a VAT savings account or switch accounting schemes.Special VAT rules to keep in mind for seasonal sellers
Bad debt relief – if a customer never pays, there are rules to reclaim VAT previously accounted for. Seasonal businesses can face spikes in bad debts after busy periods, so know the time limits and conditions.Partial exemption – if you make both taxable and exempt supplies (e.g. some accommodation sales are exempt in certain circumstances), reclaiming VAT becomes more complex and you may need to use a partial exemption method.VAT on stock at deregistration – if you deregister because you’ll fall below the threshold, you may have to account for VAT on remaining stock above a small threshold.Practical next steps you can do this week
Pull your last 12 months of sales and purchases and map them month-by-month.Work out VAT on sales and VAT on purchases per month and identify months with large net VAT outflows.Open a dedicated VAT bank account and start transferring the VAT portion of income during your busy months.Review whether cash accounting, annual accounting or the flat rate scheme could be a better fit — and model the impact.Talk to your accountant before switching schemes or deregistering — small technical details can have big cashflow consequences.If you’d like, send me a simple monthly sales/purchases spreadsheet and I’ll outline the VAT timing risks I’d expect for a business like yours and which scheme I’d consider — no jargon, just clear options you can act on.
