| > | | | | registered clients such as members of the public |
| Value added tax is the tax amount added to the | | | | would increase the amount being charged and |
| value of goods and services by a vat registered | | | | make the small business less competitive. |
| business when sold or transferred. Vat is not | | | | When a business moves from being non vat |
| charged by businesses that are not registered for | | | | registered to being vat registered changes may |
| vat. This guide covers the vat threshold, | | | | have to be made to the bookkeeping records |
| accounting for value added tax, registration and | | | | being maintained. Not normally a problem if |
| submitting the quarterly vat tax return online. | | | | accounting or bookkeeping software is being used |
| Vat registration and the threshold plus accounting | | | | provided the financial system employed can fulfil |
| for value added tax and submitting the quarterly | | | | the enhanced requirements being vat registered. |
| vat tax return online is essential knowledge. | | | | Once vat registered the sales invoices must show |
| When a business registers for vat it becomes | | | | the name and address of the business, |
| responsible for charging vat at the correct | | | | registration number, tax point which is the date |
| percentage on every sales invoice and transfer of | | | | the sale was made and the amount of vat being |
| goods and services and also maintaining accurate | | | | charged. An accounting record must be kept of all |
| financial accounting records of the vat charged | | | | sales invoices issued in a format that permits a |
| hat are subject to vat inspections. If the sales | | | | subsequent audit check when the customs and |
| turnover has breached the vat threshold that | | | | excise visit to conduct an audit check of the vat |
| business is liable for the vat on sales even if it has | | | | records. |
| not charged the customer. | | | | In relation to purchase invoices and reclaiming the |
| The vat charged to customers is called output | | | | vat input tax vat may only be reclaimed on those |
| tax and the vat on purchases is called input tax. | | | | invoices for which the business has a vat |
| When a business has registered for vat in addition | | | | purchase invoice. A valid vat purchase invoice |
| to maintaining records of sales and input tax it | | | | contains the vat number of the supplier who |
| must also keep accurate financial records of | | | | issued the invoice. A bookkeeping record is |
| purchases and input tax in order to calculate the | | | | required of all purchase invoices from suppliers |
| vat payment to be made. The amount of vat to | | | | clearly showing the output tax being reclaimed. |
| be paid each quarter is the difference between | | | | Valuew added tax returns are prepared quarterly |
| the sales output tax and the purchases input tax | | | | and sent before the end of the following month. |
| and is paid quarterly to HMRC. | | | | If registered for the online service vat returns |
| Specific types of business transactions are | | | | can be filed online. There are benefits to filing the |
| exempt from vat such as insurance and loans. If | | | | tax return online in that many businesses may |
| the business only supplies exempt items then the | | | | receive up to 7 days longer than normal to file |
| business cannot register for vat to reclaim the | | | | the vat return if the vat payment is being made |
| input tax paid on purchases. | | | | electronically. |
| Registering voluntarily for vat when the sales | | | | Penalties and interest may be imposed for |
| turnover is below the vat threshold is a financial | | | | submitting vat returns late and making late |
| planning decision that each small business should | | | | payments. When a vat return is not submitted on |
| consider. There are both advantages and | | | | time an assessment may be raised which has to |
| disadvantages to a voluntary registration and the | | | | be paid as a legal debt until such time as the |
| timing of the registration may also be a feature | | | | return is submitted and the amount due |
| to be taken into account. | | | | corrected. |
| The advantages include being able to reclaim the | | | | It is important to submit the vat return on time |
| vat input on purchases which is otherwise lost as | | | | even if there is a problem paying the full amount. |
| a financial cost to the business. However as a | | | | Failing to submit on time brings the business to |
| consequence of a voluntary vat registration that | | | | the attention of the tax authority that is more |
| business would also have to charge vat on all its | | | | likely to inspect and investigate persistent |
| sales invoices. | | | | offenders. A business can be expected to receive |
| If the majority of customers are already vat | | | | an inspection every three years however in the |
| registered themselves then registering does not | | | | worst case scenario of a delinquent vat registered |
| normally affect sales volume and can increase the | | | | business the customs and excise could inspect |
| credibility of the business. Charging vat to non vat | | | | every quarter. |