Doing your business’ VAT returns can be confusing as well as stressful. At Oxford Professionals, our dedicated team of accountants help with the business’s paper work in in order to ensure the smooth running of a business. Every business has an end of year turnover, and if that turnover exceeds the registered threshold then it’s compulsory to register your business.
Before registering your business for VAT, find out about the different schemes available. The three most popular one are:
Standard or Accrual Scheme - which is the amount of VAT you owe or reclaim is based on the date of invoices.
The Cash Accounting Scheme - which is when VAT is deemed to be owed at the end of the quarter in which you were actually paid for the invoice.
Flat Rate Scheme (FRS) – this is when you get given a flat-percentage rate dependent on the industry you are in.
VAT registered business will need to prepare and be prepared for:
- VAT accounting advice
- Reconciliation of VAT accounts
- Production and filing of VAT returns
- Management of VAT inspector visits
Not all businesses need to register for VAT but for some small businesses it can be beneficial to register even if your turnover is less than the VAT registration threshold. Reason being, you may buy many items that charge VAT that you sell and since your input tax will be much higher than your output tax, HMRC will reimburse you the difference. Also in the future when your turnover reaches the threshold, your paperwork will be ready and it assures customers you are a legitimate business.
When you have completed your VAT return you should journal the value of VAT in Sales and Purchases to the reconciliation account, this separates the immediate short term liability of VAT to be Paid from the longer term liability of VAT that will not be paid for another three or four months.
VAT registered businesses will have VAT officers visiting. Before a visit, HM Revenue and Customs usually contact you to arrange a visit. They normally give you 7 days’ notice but you can ask them to delay the visit. When they call to give the notice, they will also confirm the information they’ll want to see, how long it’s likely to take and if they want to inspect your premises.
VAT visits depend on how big or complex your business is and whether you’ve submitted late or incorrect VAT Returns before. After each visit, HMRC will write to advice you on how to improve your VAT record keeping, amending your VAT accounts if needed, inform you of any overpayment or underpayment of your VAT and any penalty you have to pay.
You only need to complete one VAT Return at the end of the year, and this should be filed on time and payments made before the payment deadline. With the help of an accountant the VAT filing process will be an easy step in the right direction.