If you run a small business, here are some tips on how to stay on top of your VAT responsibilities – from avoiding being in the wrong books with HMRC to choosing the best Value Added Tax scheme.
For comprehensive information on how to calculate your Value Added Tax liabilities, click here to visit the HMRC website. Alternatively, click here to read our VAT overview.
Top Ten VAT (Value Added Tax) Tips
- Get in Touch
Consider getting in touch with HMRC’s Value Added Tax helpline by calling 0845 010 9000 between 8 am and 6 pm, or visit HMRC’s VAT microsite by clicking here.
- Register for VAT
It is essential that you know when your business needs to register for Value Added Tax. You are required to register if your business’ turnover reaches the 77,000-pound mark within a financial year. On the other hand, you could voluntarily register for VAT even if your turnover hasn’t yet reached the threshold.
- Choose the Right Value Added Tax Scheme for Your Enterprise
Apart from the normal VAT scheme, a Flat Rate Scheme could also benefit you. The Flat Rate Scheme was essentially designed to simplify Value Added Tax accounting for small businesses. Other scheme types include the annual accounting scheme and the cash accounting scheme (this is where companies only pay VAT to HMRC once their customers have paid them. There are all sorts of changes on the horizon for VAT as this piece on import VAT deferral showcases.
- Impact on Customers
Once you’ve registered for VAT, you’ll need to include Value Added Tax on the costs of services or products you provide. Doing so will have an impact on your pricing, and will affect your non-VAT customers as they cannot reclaim the cost of the Value Added Tax themselves.
- Book Keeping
It is advisable that you maintain accurate and regularly updated VAT records. This will make it easier for you to complete your Value Added Tax returns. Remember to keep all invoices, receipts and other documentation in a central location for easy access.
- Keep your Value Added Tax Safe
Make sure that you store any Value Added Tax liabilities that you collect on behalf of the HMRC in a safe and secure place – if possible, keep it in a separate bank acc. together with any other taxes that you’ll be paying in the future like Corporation Tax if you are a limited entity.
- VAT online
From April of 2012, all businesses have been required to submit their quarterly Value Added Tax returns online.
- Direct Debit
As of April 2012, all VAT liabilities payments must be made electronically. Consider setting up a direct debit with the HMRC. This way, they’ll automatically deduct what is owed from your business acc.
- VAT penalties
Try and avoid being late with your Value Added Tax payments and returns. While there isn’t any surcharge for initial late submissions, the percentage they will charge on VAT liabilities that you owe them will increase in relation to the number of times you’ve been late.
- If in Doubt
If you are not sure about your Value Added Tax responsibilities, contact your professional advisor (usually an accountant) or the HMRC.