Accountants and Tax advisors | Accountants London | Tax accountants London | Limited company accountants

Different types of businesses charge VAT at different rates and this means when you are buying goods and/or services, you reclaim at the rate and amount shown on the invoice. You may find that you cannot reclaim VAT on some of your largest expenses such as rent and insurance premiums. You need to look at the purchase invoice to work out what can you claim vat back on. You can only claim the amount of VAT as described on the invoice.

In addition, you can only recover input VAT in the furtherance of your business, that is, on expenses for a business purpose. An example of expenditure not for business would be personal expenditure or entertainment. So, for example, if you are taking out clients for a meal, you cannot reclaim the input VAT on this. Or, if you purchase a TV for your home, this is non-business related and input VAT cannot be claimed. There are several tax traps to be aware of so contact us for a free non-obligation chat.

You need to calculate your VAT position on a 3-month basis. This is best done using accounting software such as Sage or Xero. These software packages allow you to seamlessly send and receive invoices and have inbuilt ability to calculate your VAT position.
You will also be able to send an invoice to your customers. This will break down your sales income and output VAT. In addition, this acts as proof to HMRC, and your customer will use this invoice to reclaim input VAT. You also use the software to capture details of purchase invoices. It is imperative to input data into the system that matches the invoice (you cannot claim input VAT on pro-forma invoices). Once you have entered this information, you select your VAT period, and the software will calculate your VAT position and prepare the relevant tax form. Once you're happy, you can submit your VAT return to HMRC using the accounting software.

For most small businesses, VAT must be calculated every 3 months and reported 1 month and 7 days after the period end. So, for example, if your VAT quarter end is 31 March 2021, you will need to submit your VAT return by 7 May 2021. The payment must be made on the same day i.e., 7 May 2021 unless you have a direct debit in place in which case the payment will be deducted on 12 May 2021.

It is good practise to align the accounting year end to the VAT quarter end.

The simplest way is to set up a direct debit and 12 days after the VAT return due date, the money is debited from your account. By way of an example, If you VAT return quarter end is 31 March, you need to submit the VAT return by 7 May. The payment is taken out on or around the 12th.

You can keep VAT records on paper, electronically or as part of a software program (such as book-keeping software). Records must be accurate, complete and readable.You must keep VAT records for at least 6 years. If you've lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked 'duplicate'). HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

Get an instant quote

You can simply make a correction on your next VAT return If:

• the error is less then £10k, or
  
• 1% of your box 6 figure (up to a maximum of £50,000).
  

If the error is larger then it must be reported to HMRC on form VAT652 or you can contact the VAT error team directly. Contact us for VAT advice if you have an issue before contacting HMRC.

This happens if you do not submit a VAT return to HMRC and don't pay on time. The best thing to do is bring your VAT affairs up to date by submitting a VAT return and making the payments. Any surcharges/penalties arising can then be appealed and if there is a reasonable excuse, they be reduced to NIL. Contact us to discuss your personal situation.