Preparation of VAT returns for small business
Step by step guidance for preparing your business VAT return:
Value added tax is a consumption tax that is charged on the sale of goods or services. The standard rate of VAT is 20%.
Output VAT is the amount of tax charged to customers on your own sale of goods or services.
Input VAT is the amount of tax that the business has paid to other suppliers on purchases.
The difference between output VAT and input VAT is either paid by the business to HMRC or is claimed as repayment.
You must register your business for VAT If business’ VAT taxable supplies will exceed £83,000 in the next 12 months. VAT returns by Weaccountax are usually prepared on quarterly basis.
How Many schemes of VAT?
Business can opt for one of the following three schemes to prepare the vat returns:
1. Annual accounting scheme:
To qualify for this scheme, your estimated VAT taxable turnover must not exceed £1.35 million in the next 12 months. In annual accounting scheme business will have to make advance payments towards VAT liability based on previous year VAT return provided by Weaccountax. At the end of the tax year a final balancing payment needs to be made if VAT is still outstanding.
2. Cash accounting scheme:
In cash accounting scheme, VAT is paid on the basis of cash received or paid. To join this scheme, your Vat taxable turnover must be £1.35 million or less in the next 12 month.
3. Flat Rate Scheme:
Within VAT flat rate scheme, fixed rate of VAT is paid to HMRC. Rate of VAT depends on the principle activity of the business. When you registered under flat rate scheme input VAT can’t be reclaimed on expenses unless you buy a capital asset of more than £2,000. To apply this scheme, your total VAT turnover must not exceed £150,000.
Does there are any Record keeping requirements?
If your business is VAT registered, you must:
· Keep record of all VAT transactions.
· Keep a Separate account showing summary of VAT
· Issue a valid VAT invoice
Valid VAT invoice:
· Must be issued on the name of the company
· VAT invoice must show the invoice date and amount of VAT charged
· VAT registration number of seller must be shown on the invoice.
Pro-forma invoices, delivery notes, confirmation orders and statements would not be considered valid for reclaiming the VAT on purchases.
You must keep records for at least 6 years. All invoices should be accurate and readable.
VAT returns can be prepared manually or by using online software.
How can I Submit VAT returns:
You must submit your VAT return online.
For submitting VAT return online, you need a VAT number and a VAT online account.
What are the Deadlines?
Online VAT account will assist you by telling when your VAT returns and payments will be due to HMRC.
Usually the deadline is same for both submitting the VAT return online & making payment to HMRC, which is 1 calendar month and 7 days after the end of the accounting period a