• VAT Returns Services

    VAT RETURN SERVICES

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    VAT RETURNS SERVICE
    Professional Payroll & Accounting Solutions
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VAT RETURN SERVICES

If your business is big or small, we are here to help you with your VAT needs. We can advise you whether to register for VAT, and how much you should pay as it is variable, and work alongside you to help you make as many savings as possible.

Why Should I Register For VAT?

As with all taxes, if you underpay or pay late you may receive penalties and fines. If you do not get your VAT return in by the deadline or underpay you will default, and enter a 'surcharge period'.

This period can last up to 12 months. If you default again in this period the 'surcharge period' can be extended by another 12 months and the you may have to pay a fine, or surcharge on top of the VAT outstanding.

This can be avoided by paying your VAT on time, having no VAT to pay, or if in fact you are owed a VAT refund from HMRC.

Any surcharges applied to your VAT account will be a percentage of the VAT outstanding from the period in default. This surcharge rate will continue to increase should you continue to default on your VAT returns.

The table below shows any surcharges and the percentages you can incur.

Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more 2nd No surcharge 2% (no surcharge if this is less than £400) 3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400) 4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more) 5th 10% or £30 (whichever is more) 15% or £30 (whichever is more) 6 or more 15% or £30 (whichever is more) 15% or £30 (whichever is more)

HMRC may also apply penalty charges, this can be up to:

  • 100% of any tax over claimed or not stated if it can be shown to be a deliberate error to defraud HMRC.
  • 30% of an assessment if HMRC themselves makes an error and sends you one that is not high enough and you do not inform them within 30 days.
  • £400 if your VAT return is submitted in paper, unless you already have permission from HMRC not to do it online.

So as you can see it is important for you and your business to pay your VAT correctly.

When Should I Register My Business For VAT?

Business' must register for VAT once their annual turnover is in excess of the VAT threshold, this currently stands at £85,000 per annum.

At present the VAT threshold, which would allow you to apply for de-registration from VAT, stands at 83,000 per annum. This can change with each new budget.

If your business exceeds the threshold you need to be VAT registered and make VAT payments to HMRC. HMRC will inform you of when these payments must be made, yet for many business these payments are quarterly.

Is VAT Variable?

It really depends on what your business is doing which determines how much VAT you change. Again, this can change with every budget from successive governments. However, if your business is selling goods or services, you are most likely going to have to pay HMRC VAT.

VAT can vary depending on what you sell, our professional accountants are here to make sure you do not make any mistakes, and thus incur charges and penalties. Or indeed do not overpay, so our accountants should be able to save you money.

What Is Flat Rate VAT?

Paying VAT can become a huge task for many business'. If your business has a turnover of £150,000 or less the Flat Rate Scheme may be best for you. This may well change, however our accountants will ensure that you are kept up to date with any changes and find the best scheme for you.

The flat rate scheme allows business' to pay a fixed rate VAT return. This VAT return is worked out as a percentage of gross turnover, this percentage is then payable to HMRC, usually quarterly.

Small business' operating under the Flat Rate Business Scheme will still have to charge VAT as normal to their customers, issuing VAT receipts as standard. Under this scheme paying VAT to HMRC should be much easier, as your business will apply a percentage to the VAT inclusive value of your sales. This will then be paid to HMRC, usually quarterly.

Impact Of The Flat Rate VAT Scheme

The whole process should be more straightforward for small business'. As a small business you will have to apply a fixed percentage of VAT to your VAT inclusive sales and send the money to HMRC.

Whilst the whole process is simplified, there are other advantages to the Flat Rate Scheme. It can enable some small business' to save money by paying HMRC a lower rate of VAT, set at 20% currently, which can be added in charges to their customers.

An example of this could be a restaurant, all customer will pay 20% VAT which will be included in their bill. However under the Flat Rate Scheme the restaurant would only have to pay 12.5% VAT to HMRC. Therefore making the restaurant a saving.

However, under the Flat Rate Scheme, you pay a fixed amount on the revenue you take. Your companies outgoings cannot be offset against this, and as a company you will be paying VAT to other companies to buy in your stock. As discussed before VAT is variable, on luxury goods, and other items such as alcohol. Under the flat rate scheme this restaurant would not be able to offset these costs against what they have taken, so it may not in fact be the best scheme for the restaurant. Our accountants will work with you to ensure you get the best VAT scheme for your business.

Different Flat Rates Of VAT For Different Sectors

Absolutely, the rate of VAT a business pays under the flat rate scheme varies. This is dependent upon the business type, or the goods or services you provide.

For example, the VAT a restaurant pays under the flat rate scheme is 12.5%, yet for accountancy or bookkeeping it is 14.5%.

For a full list of the flat rates for different businesses click here.

How Do I Register My Business For The VAT Flat Rate Scheme?

For a business to apply for the Flat Rate Scheme certain eligibility criteria must be met:
  • Your business must be VAT registered. If your business' turnover is under the mandatory registration threshold of £83,000 you may choose to register voluntarily.
  • The turnover of your business must be £150,000 or less.
  • Your business must sell services or products that are taxable under the VAT scheme.
  • Your business can not have left the Flat Rate Scheme in the 12 months prior to your registering for the scheme.
  • Your business can not be part of a Capital Goods VAT Scheme or a margin.
  • Your business may not be allowed to be 'closely associated' with another business or company.
If your business meets these eligibility criteria it can apply for the Flat Rate Scheme, for more clarification on this please feel free to contact our accountants here.

Separating VAT From Other Monies Received

As accountants we often find that some clients do not separate their VAT money from the revenue received. We would advise our clients to be diligent about doing this, perhaps even setting up a separate bank account where they transfer the VAT money weekly or monthly.

In the past, when people haven't done this we have found that business have accidentally used the VAT money for other business purposes. This can lead to arrears with HMRC which can incur penalties. As payments to HMRC are usually quarterly then it is possible that there may not be enough money to pay HMRC. HMRC will pursue these payments as previously discussed which can incur penalties and charges. It is much better to not even view VAT as your money right from the off, and set it to one side so that you can meet your obligations to HMRC.

Accounts Package and Online VAT

It can be sensible to do your VAT returns yourself, especially if they are fairly straightforward. Our team can talk through your options with you and will also work with you to find the best option for you.

Using bookkeeping software can make this process even easier, and often it will work out your VAT for you electronically. However, these software packages can be expensive and even then mistakes can be made.

VAT can be a complicated area, for many business' outsourcing your VAT returns to professionals can make this whole process easier and accurate.

Our professional team of accountants and bookkeepers are on hand to help.

Should I Deregister For VAT?

Currently the threshold for mandatory enrollment in the VAT scheme is set at £85,000 per annum, if your business' turnover falls below this threshold it can be beneficial to de-register for VAT, although this is not always the case.

If you have queries regarding this process and whether it is beneficial for you to de-register for VAT contact our professional team, we are here to help.

VAT Inspections

VAT inspections can and do happen. It can happen at any time to any type of business.

Often you will receive hardly any notice from HMRC of an impending inspection, when it arrives, you must be fully cooperative with HMRC as they will look deeply into your records.

Even if you pay your VAT on time it and keep accurate records, they can still turn up for inspection.

Our clients feel much happier knowing that accountants have prepared their books for them and completed their VAT returns. Our accountants will be on hand to support you and advise you throughout this process and also if the inspection becomes an investigation.

Issues Arising With VAT

VAT calculation can be confusing. You can avoid these potential minefields by letting experts handle your VAT process and management thereof.

  • Sometimes VAT may only be recovered on the business side when goods and services are bought for either business or non-business purposes.
  • When entertaining clients or suppliers, the VAT here can not be reclaimed.
  • Discounts - if you allow a discount on any of your services or goods, errors can arise, because sometimes people calculate the VAT owed to HMRC on the original price, when actually it should have been less because of the discount applied.
  • Credit to customers - often it is the invoice that HMRC use to determine how much VAT is owed. It is possible that your customer may not have paid you yet or is refusing to pay. That money is still owed to HMRC as they assume that it will be.

Frequently Asked Questions

VAT means Value Added Tax, and it is a tax on consumption. If you sell goods or services VAT must be applied, included in your price, and sent to HMRC.

Rules surrounding VAT change not only on the goods but the country of origin, we strongly recommend if you are buying goods or services from outside of the UK then you seek advice.

If this is the case we highly recommend you seek advice as the rules can change.

Your business must register for VAT once it's turnover is at or exceeds £85,000 a year.

VAT can be reclaimed on many goods or services. However some of these goods or services are exempt from VAT. Non-UK VAT is non-reclaimable on your UK VAT return. If VAT has not been charged correctly, this is also not reclaimable.

Some items do not have VAT charged on them. For example:

  • All purchases from business or persons that are not VAT registered
  • Bank Charges
  • Insurance
  • Interest
  • Most books
  • Salaries
  • Stamps from the post office
  • Train tickets

When an item is 'zero-rated' they are still taxable under VAT, however the VAT rate is 0 per cent.

Lots of items are considered to be 'zero-rated', for example, books, children's clothing, magazines, cycle helmets, newspapers, industrial protective clothing such as hats and boots, leaflets and pamphlets, brochure printing, building services for disabled people, aircraft maintenance and repair.