If your taxable turnover exceeds £85,000 you are required to register for VAT. If your turnover is less than this amount, you can voluntarily register for VAT. Sales relating to goods and services that are not VAT exempt are referred to as taxable turnover. Health services, postage, and insurance are some of the exempt supplies.
It’s important for you to think about the schedule of your VAT quarters before registering for VAT. Lining up the end of your VAT quarter to be on the same date as your year-end will make your accountant’s work much easier.
Since there are several VAT schemes available, you need to take the time to pick the perfect fit for your business:
- Standard VAT
- Flat Rate Scheme
- Cash Accounting Scheme
- Annual Accounting Scheme
The cash accounting scheme may be better suited to your cash flow if your customers take longer to pay invoices. In this scheme, you are only required to pay VAT after customers pay the invoices; while you reclaim VAT after you pay your suppliers.
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Businesses with an annual sales turnover under £150, 000 a simplified scheme, flat rate accounting, is a better match. You are only required to cover a flat Value Added Tax rate on the market sector you operate in. However, you do not qualify for any VAT reclaim.
After VAT registration
It’s upon you to maintain accurate purchases and sales records. Investing in a computerized might be worthwhile for you if you have a huge number of transactions to process. You may be charged with a penalty by the HMRC if they find that your records are lacking when they carry out a routine inspection at your business.
It’s upon you to ensure that each sales invoice you issue should have a unique number. Furthermore, each invoice should come with your VAT number.
You are also required to maintain VAT return copies and proof to back it up. In the event of an inspection, these documents will be checked according to VATGlobal.
If you have any purchases that you will be claiming VAT on, be sure to request for VAT receipts on them. However, you may not be able to claim VAT on some businesses as they might not be registered.
It’s worth noting that you have to abide by a set of special rules for determining the amount of VAT to be reclaimed on staff travel and motor vehicle expenditure, in addition to the fact that you cannot claim VAT entertainment-related expenses.
HMRC payments covering PAYE, Corporation Tax, NIC, and VAT as well as staff wages are all outside the scope of the VAT. As such, they should be excluded from your VAT return form. Other expenses that should not be in the VAT return include MOT costs, road tax, loan repayments, rates, dividends and drawings paid.
A C79 form will be sent to you on a monthly basis if you are involved in the importation of goods from a country outside the EU and hire the services of an agent when it comes to handling import duty, VAT payments, and declarations. The form captures the VAT paid on the imports, on a monthly basis, that should be included in the VAT return. These forms are used as proof during VAT reclaim and must, therefore, be maintained.
The VAT return form can be used to record purchase and sales figures when it comes to dealing with goods moving within the EU.