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VAT Returns

Every business with an annual turnover of £85,000 (2017/18 threshold) or more must register for VAT. That means completing the quarterly (or sometimes monthly) forms sent to you by HM Revenue & Customs and paying your VAT liability within one month. For most businesses this is a fairly simple procedure, but it does mean keeping adequate records so that your inputs and outputs are readily ascertainable. Our VAT page deals with the tax issues involved and the various schemes that may be available or applicable to your business. This page deals with VAT from an accounting point of view and the various issues that can arise in dealing with invoices and expense claims.

If you are preparing your accounts using an off-the-shelf software package such as Sage or Quickbooks, VAT returns can be dealt with at the click of a button. All you need to do is specify which date the VAT return should be made up to and the software will calculate all the entries. The only thing you then need to do (apart from filing it on-line and sending the money) is to click the Reconcile button, otherwise the same items will all come up again when you do your next VAT return.

More difficult is the problem of making sure that the items on the VAT reports are correct and complete. This will require an understanding of the VAT rules relating to both inputs and outputs and ensuring that all transactions are posted correctly. You also need to take account of reverse charges on EU goods and services as these are not picked up by most software packages. Normally these will not affect your net VAT liability as they are accounted for as both inputs and outputs but, if you are only partially recoverable due to the fact that you make exempt supplies, then a reverse charge item will increase your liability.

A common problem is input tax on goods or services from non-UK suppliers. A multi-national business such as Google will normally have a single point of EU registration in one country, in their case the Republic of Ireland. UK customers will not pay VAT on their services provided you have given them your VAT number. Their supplies will then be zero-rated and you will account for the VAT yourself under the reverse charge procedure. You need to be careful with such suppliers that you do not continue posting VAT on their fees (commonly picked up from credit card bills) once you have given them your VAT number.

No matter how careful you are, there are bound to be occasions when mistakes are made and the wrong amounts of input tax or output tax are reported on your VAT returns. Fortunately you are allowed to adjust for these on future returns provided they do not exceed £10,000 (or 1% of total outputs subject to a £50,000 limit). Anything larger should be reported on a Voluntary Declaration. Last but not least, you need to make sure that your VAT control account reconciles to your actual liability and that variances are not carried forward for so long that no one remembers what they are any more!

At Acumen, we can either complete your VAT returns for you or train your staff to do them properly, taking into account any specific issues affecting your particular business. Please give us a call if you require our assistance for anything to do with VAT.

Information Sheets VAT Tips
bulletpoint VAT codes
bulletpoint VAT on fuel
Expense claims
Don’t forget to pick up input tax on staff expenses such as hotel or garage bills - often these are overlooked.
Supplier invoices
You can claim VAT on supplier invoices even if it is not shown separately, but make sure there is a VAT number.
You can claim VAT back on petrol for company cars but make sure you pay output tax for private use according to the scale rates.
VAT control account
Make sure you reconcile your VAT control account each quarter – don’t leave your accountant to discover lots of variances at the year end.
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