If your taxable turnover exceeds £82,000, it is mandatory to register for VAT. However, if your turnover falls below this threshold, registration is voluntary. Taxable turnover relates to the sale of services or goods that are non-exempt from VAT. On the other hand, exempt items include health services, postage, and insurance.
When enlisting your business for VAT, have in mind your desired quarter end date. When your year-end date corresponds to your VAT quarter-end date it makes the work of your accountant much easier.
There are some VAT options to select from, picking the right option for your enterprise is crucial.
The cash accounting option might be the most helpful scheme if your clients delay for long periods before making payments. You only remit the VAT once the client clears your invoice, and recover VAT after you have submitted payments on your purchases.
The flat rate scheme is a basic scheme for enterprises whose turnover is under £150,000. Under this scheme, you pay a flat VAT percentage based on the sector your business is in. But, under this scheme, you are disallowed from recovering purchases VAT.
After VAT Registration
Henceforth, you must maintain accurate purchases and sales documents. If your business processes numerous transactions, it is valuable to use computerised accounting software. HMRC can conduct inspections to review your records and charge a penalty if your records are poorly maintained. It is compulsory to retain all your purchases and sales documents for at least 6 years.
You must make sure that each sales invoice has a unique serial number. Also, on every invoice you produce, you must indicate your VAT number.
You must maintain proof and a copy of every VAT return that you make. These will be required during an inspection.
When it comes to purchases, always ask for a VAT receipt for every purchase you plan to recover VAT on. Some enterprises are not registered for VAT, you can only reclaim VAT on purchases from businesses registered for VAT.
Also, entertainment expenses are disallowed for VAT reclaim, and there are special provisions for determining the VAT amount to recover on staff travel expenses and motor expenses.
Some expenses are beyond the scope of VAT, for example, employee salaries and HMRC payments for PAYE, Corporation Tax, VAT and NIC. These items should be excluded from your VAT return. Other payments that are excluded are loan repayments, rates, dividends paid, drawings and MOT costs.
Always keep up to date with tax news and laws with VATGlobal.
If you ship goods from countries outside the EU and utilise an agent to handle import duty, declarations and VAT payments, you will get a C79 every month. The C79 outlines the import VAT remitted for that month, which must be shown on your VAT return. These forms must be preserved as evidence to support your VAT recovery.
Transfer of goods between countries within the EU is easy, the VAT return provides specific sections for entering purchases and sales amounts.
